transfer pricing double taxation and the cost of capital the effects of double taxation are analysed when a multinational enterprise can shift profits by transfer pricing behaviour it is shown that the well known hartman sinn neutrality result may not hold in this case surprisingly an increase in the taxation of foreign dividends may lead to a lower cost of capital for the foreign subsidiary i introduction in recent years there has been growing awareness that multinational firms can evade a large portion of their statutory tax burden by manipulating transfer prices in cross border transactions one reason for shifting profits between jurisdictions using transfer pricing is the differences in corporate tax rates by underpricing intra company sales and overpricing intracompany purchases a subsidiary located in a high tax country can increase the multinational s overall profit since the parent s gain in after tax profit is higher than the subsidiary s net of tax loss a second reason for setting

growth miracles and failures in a markov switching classification model of growth abstract in this paper economic growth is interpreted as a sequence of transitions between distinct growth regimes that countries visit with different frequencies countries featuring similar growth dynamics are endogenously grouped into three different clusters the first cluster comprises successful countries that are characterized by lengthy periods of high or very high growth moderately successful countries in the second cluster experience both periods of reasonable growth and periods of stagnation whereas failing countries in the third cluster suffer from highly volatile growth rates with frequent episodes of crisis successful countries are characterized by better initial conditions policies and institutions compared to the other countries neither initial conditions nor institutions distinguish moderately successful from failing countries what makes them different is policy in the form of investments into infrastructure and human capital trade liberalization and limited policy volatility

the political dynamics of economic growth summary we argue that an understanding of the political drivers of economic growth needs an explanation of the political dynamics around the transition from one growth phase to another and that the political drivers of early stage growth accelerations are different from that of growth maintenance informal institutions are likely to play a role in growth acceleration while formal institutions of credible commitment the provisioning of public goods and the overcoming of co ordination failures will be more important in growth maintenance we present empirical evidence drawn from country case studies and cross country econometric analysis that provides support to our theoretical propositions

the balassa samuelson effect in romania the role of regulated prices abstract due to the balassa samuelson effect the candidate countries to the european monetary union face a possible conflict between the effects of tradable productivity increase on inflation and on the appreciation of the real exchange rate on one hand and the maastricht criteria regarding inflation and exchange rate stability on the other hand a restrictive monetary policy could succeed in reaching inflation criteria but only with the cost of slowing down real convergence this paper deals with the balassa samuelson effect in romania the main conclusion of the paper is that in the period 1998 2006 the average annual rate of inflation generated by the balassa samuelson effect in romania was on average 0 6 in the case of the classical model due to the existence of government regulated prices mostly non tradable goods accounting for as much as 21 of the cpi basket in romania the price of non tradables has increased by less than in the case those prices were market prices if we include these regulated prices in non tradable which is named by us extended model the impact of balassa samuelson on inflation could have been on average 2 46 therefore the balassa samuelson effect is expected to result into higher inflation with future price liberalization for non tradables

exact and heuristic solutions of the global supply chain problem with transfer pricing we examine the example of a multinational corporation that attempts to maximize its global after tax profits by determining the flow of goods the transfer prices and the transportation cost allocation between each of its subsidiaries vidal and goetschalckx vidal c j goetschalckx m 2001 a global supply chain model with transfer pricing and transportation cost allocation european journal of operational research 129 1 134 158 proposed a bilinear model of this problem and solved it by an alternate heuristic we propose a reformulation of this model reducing the number of bilinear terms and accelerating considerably the exact solution we also present three other solution methods an implementation of variable neighborhood search vns designed for any bilinear model an implementation of vns specifically designed for the problem considered here and an exact method based on a branch and cut algorithm the solution methods are tested on artificial instances these results show that our implementation of vns outperforms the two other heuristics the exact method found the optimal solution of all small instances and of 26 of medium instances

inflation uncertainty and growth in a cash in advance economy abstract this paper analyzes the effects of inflation variability on economic growth in a model where money is introduced via a cash in advance constraint in this setting we find that inflation adversely affects long run growth even when the cash in advance constraint applies only to consumption at the same time we find that inflation and growth are positively related in the short run furthermore variability increases average growth through a precautionary savings motive since inflation and inflation variability tend to be highly correlated the presence of uncertainty attenuates the negative long run relationship between inflation and real growth it also provides a partial rationale for the apparent lack of robustness in cross country regressions of growth and inflation

entry strategies for multinational enterprises and host countries abstract a multinational enterprise mne has a number of investment strategies to enter into a foreign market such as foreign direct investment fdi joint venture jv exclusive licensing el and others in contrast a host government also has the choice to introduce a suitable entry strategy into its local market with the objective of maximizing its tax revenue or national social welfare in this paper we explore the optimal strategies for not only a mne but also a host country

inflation output growth and nominal and real uncertainty empirical evidence for the g7 abstract we use univariate garch models of inflation and output growth and monthly data for the g7 covering the 1957 2000 period to test for the causal effect of real and nominal macroeconomic uncertainty on inflation and output growth and the effect of inflation on inflation uncertainty our evidence supports a number of important conclusions first inflation is a positive determinant of uncertainty about inflation second output growth uncertainty is a positive determinant of the output growth rate third there is mixed evidence regarding the effect of inflation uncertainty on inflation and output growth hence uncertainty about the inflation rate is not necessarily detrimental to economic growth finally there is not much evidence supporting the hypothesis that output uncertainty raises inflation

government impartiality and sustained growth in sub saharan africa many studies suggest that one of the main reasons for africa s dismal growth performance over most of the 20th century is its degree of ethnic fragmentation yet there is still insufficient knowledge about whether ethnic diversity necessarily entails large economic costs or whether the implications of diversity depend inter alia on the government s approach toward the ethnic question we note that economic growth tends to increase average incomes but it also affects the income distribution then if growth is accompanied by growing economic inequality the perception of the impartiality of the government toward different ethnic groups is likely to be important for whether growth can be sustained or whether sparks of growth will evaporate because of rising political divisions and internal conflicts in this paper we study whether the degree of ethnic impartiality in the government s policies is related to the emergence of sustained growth in sub saharan africa irrespective of the actual content of the policies we measure perceptions about the impartiality of the government with survey data from the afrobarometer covering 20 countries starting in the late 1990 s our main definition of sustained growth is when there is a gdp per capita growth rate of at least 2 for at least five consecutive years our empirical results suggest that countries whose governments are perceived as impartial are more likely to experience sustained growth we conclude that in order to ensure economic development it is not only important to choose the right policies but also to implement these policies in a fair manner

bureaucracy and growth a cross national analysis of the effects of weberian state structures on economic growth the role of bureaucratic authority structures in facilitating economic growth has been a sociological concern since max weber s classic contributions almost 100 years ago using a recent and original data set we examine the characteristics of core state economic agencies and the growth records of a sample of 35 developing countries for the 1970 1990 period our weberianness scale offers a simple measure of the degree to which these agencies employ meritocratic recruitment and offer predictable rewarding long term careers we find that these weberian characteristics significantly enhance prospects for economic growth even when we control for initial levels of gdp per capita and human capital our results imply that weberianness should be included as a factor in general models of economic growth they also suggest the need for more attention by policymakers to building better bureaucracies and more research by social scientists on variations in how state bureaucracies are organized

what makes growth sustained abstract we identify structural breaks in economic growth in 140 countries and use these to define growth spells periods of high growth preceded by an upbreak and ending either with a downbreak or with the end of the sample growth spells tend to be shorter in african and latin american countries than elsewhere we find evidence that growth duration is positively related to the degree of equality of the income distribution democratic institutions export orientation with higher propensities to export manufactures greater openness to fdi and avoidance of exchange rate overvaluation favorable for duration and macroeconomic stability

the double marginalization problem of transfer pricing theory and experiment in this paper we find that the idea of using optional two part tariffs as a basis for tariff renegotiations in a bilaterally monopoly setting is a solution to the double marginalization problem that theoretically 1 creates a stable equilibrium 2 at the overall efficient level 3 without the presence of a central management through experimental testing we find that the efficiency of this mechanism is significantly higher than the efficiency of simple direct negotiation both under symmetrically and asymmetrically distributed information

bad loans to good friends money politics and the developmental state in south korea why has the literature on asian development not addressed the issue of money politics in south korea how can we reconcile the view of an efficient developmental state in south korea before 1997 with reports of massive corruption and inefficiency in that same country in 1998 and 1999 politics is central to the answer in this study i make two arguments first money politics was extensive in south korea both during and after the high growth era second political not economic considerations dominated policymaking this study explains both past and present and compares the patterns of money politics in the early post independence era with those that arose after the democratic transition in 1987 while during the park era a balance of power between businessmen and politicians kept corruption from spinning out of control the transition to democracy altered the basic business state relationship allowing business to exert greater influence over policy decisions the political hypothesis advanced in this study suggests a new direction for our research about the developmental state

strategic transfer pricing most research into cost systems has focused on their motivational implications this paper takes a different approach by developing a model where two oligopolistic firms strategically select their cost based transfer prices duopoly models frequently assume that firms game on their choice of prices product prices however are ultimately based on the firms transfer prices that communicate manufacturing costs to marketing departments it is for this reason that transfer prices will have a strategic component to them we derive implications for cost system choice and transfer pricing including showing that firms may cross subsidize their products a result consistent with the empirical evidence

financial development financial fragility and growth the authors study the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity on the one hand the empirical growth literature finds a positive effect of financial depth as measured by for instance private domestic credit and liquid liabilities for example levine loayza and beck 2000 on the other hand the banking and currency crisis literature finds that monetary aggregates such as domestic credit are among the best predictors of crises and their related economic downturns for example kaminski and reinhart 1999 the authors account for these contrasting effects based on the distinction between the short and long run impacts of financial intermediation working with a panel of cross country and time series observations they estimate an encompassing model of short and long run effects using the pooled mean group estimator developed by pesaran shin and smith 1999 their conclusion from this analysis is that a positive long run relationship between financial intermediation and output growth coexists with a mostly negative short run relationship the authors further develop an explanation for these contrasting effects by relating them to recent theoretical models by linking the estimated short run effects to measures of financial fragility namely banking crises and financial volatility and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions

from riches to rags and back institutional change financial development and economic growth in argentina since 1890 abstractargentina is the only country in the world that in 1900 was developed and in 2000 was developing although economic historians have identified and explored various possible explanations chiefly institutions political instability financial development inflation trade openness and international financial integration no study so far has attempted a comprehensive quantitative assessment of their relative importance this article tries to fill this gap using the power arch framework and annual data since 1896 to study the effects of these factors in terms of both growth and growth volatility the results highlight two main factors to understand the remarkable growth trajectory of argentina over the very long run financial development and institutions formal and informal political instability and stress the importance of differences in their short vis a vis long run behaviour

trade multinationals and transfer pricing regulations recent years have seen the introduction of profit comparisons by national tax authorities to cope with multinationals profit shifting activities the authors argue that a country that switches from price related transfer pricing rules to profit related measures can reduce imports without changing firms transfer prices the trade effect makes the change of transfer pricing rules a potential instrument of protectionism and strategic trade policy

incentive compatible regulation of a foreign owned subsidiary abstract transfer prices are administered charges for intra firm transfers of factors of production for a multinational firm transfer prices for international transfers provide the means to redistribute costs and increase global profits given variations in national tax and profit repatriation policies local regulation of a subsidiary may thus be necessary to limit the welfare costs of strategic transfer pricing prusa journal of international economics 1990 28 155 172 characterizes the welfare maximizing regulations for a monopoly subsidiary that induce the firm to report transfer prices truthfully we show however that it can be more efficient to implement regulations that encourage the firm to misrepresent its true transfer costs

cost based transfer pricing under r d risk aversion in an integrated supply chain abstract this paper examines the economic role of transfer pricing for a vertically integrated supply chain when a risk averse production division manager faces uncertainty on the outcomes from r d investment in particular we compare two representative cost based transfer pricing methods full cost and variable cost pricing we construct an economic model based on the assumption that r d investment reduces the expected fixed costs of a production factor as well as the variable production costs we show that a firm s profit under full cost transfer pricing is greater than that under variable cost transfer pricing under certainty contrary to this benchmark result variable cost pricing becomes more profitable than full cost pricing when the risk averse manager bears relatively high risk

a game theoretic approach to transfer pricing in a vertically integrated supply chain we study the problem of setting transfer prices in a vertically integrated supply chain in which the divisions share technology and transactions costs we develop a cooperative game that provides transfer prices for the intermediate products in the supply chain this model is applied both when the market prices for these products are known and also when their valuations differ we provide a solution that is fair and acceptable to all divisions in the perfect information case the shapley value generates the transfer prices while in the asymmetric case we obtain transfer prices from the solution to a linear program

who is afraid of political instability abstract an unstable macroeconomic environment is often regarded as detrimental to economic growth among the sources contributing to such instability much of the blame has been assigned to political issues this paper empirically tests for a causal and negative long run relation between political instability and economic growth but finds no evidence of such a relationship sensitivity analysis indicates that there is a contemporaneous negative relationship but also that in the long run and ignoring institutional factors the group of african countries plays the determining role

a general unconstrained model for transfer pricing in multinational supply chains multinational supply chains operate in more than one country or tax jurisdiction and face decision problems concerned with trade flows of resources products and services transfer prices and allocation of transport costs between their divisions these decisions must consider for the sake of optimality corporate and governmental parameters such as the payment of dividends and royalties ownership of and control over subsidiaries income taxes differentials duties and quotas etc in this paper we generalize and extend the theory of the multinational firm to the case of multinational supply chains we propose a model that is more general and comprehensive than the previous ones proposed in the literature to be more specific our model integrates many of the previous research factors and includes new ones such as transport costs and duty drawbacks which are critical for supply chains that operate under international trade regulations under the maximization of the repatriated earnings objective we study the optimality conditions of the corporate decision variables to derive managerial guidelines and to determine how decisions regarding trade quantities transfer prices and transport cost allocations affect the amount of taxes to be paid to host governments as well as the total after tax repatriated earnings of the corporation

state renewable energy tax incentives monetary values correlations policy questions abstract most states have enacted tax incentive programmes to accelerate renewable energy use independent of federal efforts the monetary value of each state s incentives to purchasers of solar water wind energy or photovoltaic cell systems is calculated to compare state programmes while the value of the incentives varies dramatically the amounts appear unrelated to state energy and non energy characteristics the variations in state commitments and their independence from state energy conditions raise several policy questions that need to be addressed as the states assume the major role in renewable energy commercialization

the taxing task of taxing transnationals financial and real investment flexibility tax competition and superior economic information by transnationals both create a rationale for corporate income taxation and limit the effectiveness of such taxation while these factors have led to a variety of transnational tax policies such as deferral double taxation apportionment and trade rules very few of these institutional features have been integrated into tax competition and agency models in this paper i show how the integration of investment flexibility tax competition and agency issues is crucial to our understanding of corporate tax policies

growth volatility and political instability non linear time series evidence for argentina 1896 2000 abstract we investigate the growth volatility political instability relationship in a power arch framework for argentina 1896 2000 main finding is that while informal political instability e g assassinations has a direct negative effect on economic growth formal instability has an indirect impact through growth volatility

an incentive compatible approach to the transfer pricing problem abstract this paper offers an alternative approach to regulating certain types of transfer pricing if the multinational enterprise s transfer price decision is not regulated it will manipulate the transfer price in order to maximize net global profit traditional approaches argue for ad hoc penalty schedules to mitigate manipulative transfer pricing in contrast this paper offers an incentive compatible approach which explicitly incorporates the informational asymmetries that encourage misreports the model has the desirous feature that the optimal regulatory policy has self enforcing properties that is the firm will find it profit maximizing to report true costs

fair transfer price and inventory holding policies in two enterprise supply chains abstract a key issue in supply chain optimisation involving multiple enterprises is the determination of policies that optimise the performance of the supply chain as a whole while ensuring adequate rewards for each participant in this paper we present a mathematical programming formulation for fair optimised profit distribution between echelons in a general multi enterprise supply chain the proposed formulation is based on an approach applying the nash bargaining solution for finding optimal multi partner profit levels subject to given minimum echelon profit requirements the overall problem is first formulated as a mixed integer non linear programming minlp model a spatial and binary variable branch and bound algorithm is then applied to the above problem based on exact and approximate linearisations of the bilinear terms involved in the model while at each node of the search tree a mixed integer linear programming milp problem is solved the solution comprises inter firm transfer prices production and inventory levels flows of products between echelons and sales profiles the applicability of the proposed approach is demonstrated by a number of illustrative examples based on industrial processes

a global supply chain model with transfer pricing and transportation cost allocation abstract we present a model for the optimization of a global supply that maximizes the after tax profits of a multinational corporation and that includes transfer prices and the allocation of transportation costs as explicit decision variables the resulting mathematical formulation is a non convex optimization problem with a linear objective function a set of linear constraints and a set of bilinear constraints we develop a heuristic solution algorithm that applies successive linear programming based on the reformulation and the relaxation of the original problem our computational experiments investigate the impact of using different starting points the algorithm produces feasible solutions with very small gaps between the solutions and their upper bound ub

taxes tariffs and the global corporation in this paper we develop some simple models of optimal tax and tariff policy in the presence of global corporations that operate in an imperfectly competitive environment the models emphasize two important differences in the practical application of tax and tariff policy tax but not tariff policy can apply to offshore output and tariff but not tax policy can be industryspecific recognizing that multinationals production decisions are endogenous to the tax and tariff policies they face we investigate how a government should tax or subsidize domestically owned firms and how government should set trade policy

empirics of hills plateaus mountains and plains a markov switching approach to growth abstract most economic growth research has been aimed at explaining cross country differences in average growth rates however it is well known that growth experiences differ over time within a country almost as much as they differ among countries this paper builds on pritchett s 2000 pritchett lant understanding patterns of economic growth searching for hills among plateaus mountains and plains world bank economic review may 2000 14 2 221 250 observation that the growth process can be thought of as transitions between different growth regimes and proposes a framework for systematic analysis of such regimes and the dynamics of the transitions i estimate a markov switching regression to characterize four distinct growth regimes and transitions between them the results show that countries switch among regimes of stable growth miracle catch up stagnation and crisis with the transition probabilities determined by the quality of institutions better institutions appear to improve long run growth by making episodes of fast growth more persistent low average growth rates in countries with weak institutions are a result of these countries spending more time in stagnation regimes rather then being incapable of fast growth at all weak institutions do not rule out growth takeoffs but limit their sustainability the approach directs attention to shifts in growth performance and highlights the fact that identical average growth rates can mask very distinct growth paths

an operational profit sharing and transfer pricing model for network manufacturing companies abstract new age companies are forging partnerships with other firms to market products that have been assembled through manufacturing activities distributed at different locations these locations belong to more than one company and the product passes through these different sites during its manufacturing stages this manufacturing collaboration is known as network manufacturing according to the network philosophy companies form alliances to manufacture a product and share in its operating profits this paper proposes a framework and methodology for profit sharing and transfer pricing between network companies we propose a paradigm that enables maximization of operating profits by the manufacturing network in its larger supply chain suggesting a departure from the model that maximizes profits for the individual company within the sphere of its own supply chain

strategic upfront marketing channel integration as an entry barrier abstract this paper investigates an organizational design problem concerning whether duopolistic firms competing in a product market should vertically integrate or separate their marketing channels in a dynamic noncooperative game setting previous operational research models have shown that the separation of the marketing channel with the adoption of a two part tariff contract is the dominant strategy compared with integration for each firm if the two firms face retail price competition and thereby constitutes the subgame perfect nash equilibrium spne contrary to this previous insight this paper demonstrates that if exogenous parameters that characterize fixed costs product substitutability and a demand function fall into a specific region marketing channel integration dominates the separation strategy when one of the two firms is the incumbent firm while the other is a potential entrant in other words the well known result in the price setting game can be reversed when we take entry threats into consideration specifically we show that upfront vertical integration of the marketing channel enables the incumbent to deter the entry of the potential competitor and to monopolize the market in the spne this result has operational implications for a firm confronting the threat of potential rivals entering the market in that the firm can use this apparently inferior strategy as a commitment device which creates a virtual entry barrier

two to tangle financial development political instability and economic growth in argentina abstract this paper studies the impact of financial liberalization on economic growth it contributes to this literature by using an innovative econometric methodology and a unique data set of historical series it presents power arch estimates for argentina for the period from 1896 to 2000 the main results show that the long run effect of financial liberalization on economic growth is positive while the short run effect is negative albeit substantially smaller interestingly we find that financial development affects growth only directly that is not through growth volatility

alternative energy development in the usa the effectiveness of state government incentives abstract this paper presents a rationale for government incentives to alternative energy development in the usa the effectiveness of the major incentives now in use by state governments is tested empirically by using active solar residential hot water installations data for the usa the results suggest that state income tax credits and increases in conventional fuel ie natural gas prices through taxation or other means appear to be having the expected effect of increasing the number of solar collectors installed from these data property tax exemptions do not appear to be effective in promoting alternative energy development the data on sales tax exemptions and grant or loan programmes are inconclusive untested incentives including direct regulation and saved energy and non targeted incentives provide opportunities for further research

how deep are the roots of economic development the empirical literature on economic growth and development has moved from the study of proximate determinants to the analysis of ever deeper more fundamental factors rooted in long term history a growing body of new empirical work focuses on the measurement and estimation of the effects of historical variables on contemporary income by explicitly taking into account the ancestral composition of current populations the evidence suggests that economic development is affected by traits that have been transmitted across generations over the very long run this article surveys this new literature and provides a framework to discuss different channels through which intergenerationally transmitted characteristics may impact economic development biologically via genetic or epigenetic transmission and culturally via behavioral or symbolic transmission an important issue is whether historically transmitted traits have affected development through their direct impact on productivity or have operated indirectly as barriers to the diffusion of productivityenhancing innovations across populations jel j11 o33 o47 z13

transfer pricing rules and corporate tax competition abstract a multinational parent sells a non marketed commodity to a foreign subsidiary that uses the product as an input to produce a product it then sells the subsidiary is controlled by a local managing partner whose compensation consists of a lump sum payment plus a share of the subsidiary s profit the parent chooses an optimal transfer price taking into account incentives for the subsidiary s managing partner and taxes home and host governments impose corporate income taxes on the parent and subsidiary s respective profits subject to a transfer pricing rule e g cost plus price method or comparable profit method a nash equilibrium is derived for effective tax rates chosen by home and host governments we then examine harmonization and suggest that tax rates would be reduced

intrafirm trade arm s length transfer pricing rule and coordination failure abstract this paper demonstrates that uniform imposition of the arm s length principle on transfer pricing leads to coordination failure among countries in terms of economic welfare if the countries trade products in the form of intrafirm transactions by multinational firms mnfs to highlight this implication we first show that imposition of the arm s length principle on an mnf induces it to transfer a product among subordinate divisions at marginal cost i e the competitive price which is consistent with the purpose of the principle nonetheless if regulators in each country impose the principle on mnfs all of the following economic welfare measures decrease compared with the situation where the principle is not imposed 1 consumer welfare in each of the trading countries 2 profit of each mnf and thus 3 total world economic welfare this result indicates that it is possible that enforcement of the principle has no positive effect at all in the world because economic welfare of all economic agents deteriorates when the principle is imposed a numerical analysis demonstrates that this possibility arises in a broad range of circumstances even including the situation where a giant economic world power and a small underdeveloped country mutually trade products in these circumstances an agreement among trading countries that no country imposes the arm s length principle may encourage pareto improvement of the world economy

optimal subsidies to new energy sources abstract this paper broadens previous discussion on the conditions for subsidizing new energy sources several arguments for and against subsidizing new energy sources such as solar energy and synthetic fuels are reviewed and critiqued emphasis is given to vintage subsidies to conventional energy sources net energy analysis and a variety of production externalities a theorem for determining optimal subsidies to new energy sources is developed based on a general theorem proposed by baumol and bradford 2 finally two equity issues are also considered

to lobby or to partner investigating the shifting political strategies of biopharmaceutical industry associations in innovation systems of south africa and india the role of industry associations in shaping policy through various lobbying activities is well established in most cases while such activities are deemed essential from an industry perspective they also carry negative connotations connected to narrow rent seeking and the pursuit of elites interests which run counter to the public good and discourage competition and subsequent innovation as such industry associations have long been excluded from discussions regarding the relational dynamics and evolution of innovation systems in contrast this paper builds upon more recent work that places industry associations as key intermediary actors that facilitate knowledge exchange and institutional capacity building particularly in the context of developing countries where limited institutional capacities and substantial knowledge gaps can limit both innovation and development employing a qualitative cross national comparison this paper examines the changing roles and activities of biopharmaceutical industry associations in the development of the south african and indian pharmaceutical industries with a particular focus on government industry relations for doing so the paper captures developments during three main periods through which both the south african and indian biopharmaceutical industries have similarly evolved although within different national contexts 1 pre liberalization 2 expanding pluralism and 3 increasing partnership we argue that in south africa and india particular historical trajectories and lack of institutional capacities are shifting industry associations away from ineffective lobbying to a new political approach that emphasizes partnering with government in the pursuit of not only narrow industry objectives but also broader development aims

the role of economic theory in modelling the long run this argues for a closer link between the modelling of the long run relations in applied economics and the intertemporal equilibrium notion from economic theory this abstract was borrowed from another version of this item

managing new and differentiated remanufactured products we study a firm that makes new products in the first period and uses returned cores to make remanufactured products along with new products in future periods the remanufactured product is differentiated from the new product so the firm needs to choose differentiated prices we analyze the monopoly environment in two period multi period three four and five and infinite planning horizons and characterize the optimal remanufacturing and pricing strategy for the firm in the process we identify remanufacturing savings thresholds that determine the production and pricing strategy for the firm among other results we find counter to intuition that in a finite horizon multi period setting the optimal policy is not necessarily monotone in remanufacturing savings

civil wars and economic growth spatial dispersion this article quantifies the impact of civil wars on economic growth at home and in nearby countries three alternative measures of nearness contiguity length of contiguous borders and distance of closest approach are used to capture the spatial dispersion of civil war consequences we present short run panel estimates at five year intervals and long run 1961 95 panel estimates for the world generally the distance measures novel to this study and not contiguity provides the most accurate measure of the diffusion of the negative economic consequences of civil wars on other countries unlike earlier studies we also investigate the temporal influence of civil wars on growth at home and in nearby countries both the duration and the timing of civil wars have an economic impact

a mechanism design approach to transfer pricing by the multinational firm abstract this paper is about how multinationals choose transfer prices and optimal production levels in the presence of differential corporate income tax rates and local ownership requirements a key featrure of the model is that there is an asymmetric information problem between a parent and its foreign subsidiary we examine the interaction between ownership structure corporate taxes and bargaining power transfer prices induce underproduction compared to the full information case when the parent has the bargaining ability when bargaining is controlled by the subsidiary overproduction obtains the model is used to illustrate how governmental objectives can be accomplished without direct regulation of the transfer price

health nutrition and economic development the relationship between health and economic development is explored focusing on nutrition based health indicators the spotlight is placed on the inter related feedbacks between the influence of health on productivity on one hand and the influence of income on health status on the other disentangling causality in these relationships has preoccupied much of the literature we evaluate different empirical strategies that have been adopted and assess the results there is now a body of evidence based on careful empirical studies that demonstrates a causal relationship between health and labor productivity there is also evidence that at least among the very poor additional income is spent on improved nutrition there are two issues that have received little attention although we argue they are likely to be very important first measurement of health is discussed in detail evidence is presented on how taking into account differences in the extent of measurement error is critical for interpreting the impact of health on wages the same theme emerges in studies of the effect of income on health specifically calorie intake the key role of non linearities in these relationships is highlighted and we demonstrate that a good deal of the variation in estimates of income elasticities of demand for calories can be ascribed to the role of measurement and functional form authors

a note on price and quality competition between asymmetric firms abstract this paper analyzes the impact of asymmetry between firms on the outcome of price and quality competition from a microeconomic viewpoint consumers purchase a product based on not only its price but also its quality level therefore two firms compete in determining their prices and quality levels to maximize their profits the asymmetry arises from the difference in consumers loyalty to each firm that asymmetry then determines a character of differentiation between firms our purpose is to show how asymmetry influences competition under varying consumers price and quality sensitivity in doing so we extend earlier work in the area of price and quality competition we show that in both the moderately quality sensitive and price sensitive markets higher consumers sensitivity as well as lower consumers loyalty to any firm leads to intense competition resulting in a decrease of both firms equilibrium profits on the other hand in highly quality sensitive market asymmetry compels the smaller firm to change its competitive strategy in general this is more beneficial to the larger firm as the smaller firm s profit tends to decline in the worst case the smaller firm is driven out of business under equilibrium

optimal transfer pricing schemes for work averse division managers with private information abstract this paper models a decentralized firm under information asymmetry and effort disutility on the part of managers we assume that managers choose efforts before observing some private information however after the effort choice managers receive private information on their cost parameters which they report to the headquarters there exist many situations in which managers need to take efforts before obtaining private information for example the regular maintenance effort on the machine the effort on rd 2 under certain demand conditions managers cannot receive any information rent benefit for their private information even if they have the option to renege on the contract after obtaining their private information

the effect of health on economic growth a production function approach abstract we estimate a production function model of aggregate economic growth including two variables that microeconomists have identified as fundamental components of human capital work experience and health our main result is that good health has a positive sizable and statistically significant effect on aggregate output even when we control for experience of the workforce we argue that the life expectancy effect in growth regressions appears to be a real labor productivity effect and is not the result of life expectancy acting as a proxy for worker experience

trade openness and volatility abstract this paper examines the mechanisms through which output volatility is related to trade openness using an industry level panel data set of manufacturing production and trade the main results are threefold first sectors more open to international trade are more volatile second trade is accompanied by increased specialization these two forces imply increased aggregate volatility third sectors that are more open to trade are less correlated with the rest of the economy an effect that acts to reduce overall volatility the point estimates indicate that each of the three effects has an appreciable impact on aggregate volatility added together they imply that the relationship between trade openness and overall volatility is positive and economically significant

solar subsidies and economic efficiency abstract in this paper the case for subsidies for solar energy to counter inefficient pricing practices of electric utilities hidden subsidies to non solar fuels and tax law biases are examined the conclusion reached for two of three regions in the usa in the case of solar energy replacing electricity for hot water heating is that far from offsetting biases against solar energy current subsidies reinforce pre existing biases in favour of the use of solar energy systems

multinational firms and government revenues abstract underinvoicing of intrafirm exports by a multinational firm mnf can increase the exporting country s revenue overinvoicing can increase the importing country s revenue when its tariff rate is higher than its profit tax rate and both countries revenues may change in the same direction transfer pricing increases the mnf s global tax burden unambiguously when the home profit tax rate is not smaller than the foreign and the mnf overinvoices and can increase it in other cases this last result arises when increase in the level of intrafirm trade which accompanies transfer pricing and or non wholly owned subsidiary are considered

regulation of multinational firms with two active governments a common agency approach abstract when a government agency imposes cost based taxes regulations on a multinational with private cost information it may initiate countervailing regulations by another of the governments with which the multinational interacts we analyze the problem of optimal regulation of a multinational under incomplete cost information via trade taxes by multiple governments as a problem of common agency with adverse selection by focusing on the game played by the competing governments we characterize the equilibrium trade taxes and show that the non cooperative behavior of the governments not only reduces aggregate national welfare but also reduces firm profits

the multinational firm with arm s length transfer price limits abstract a multinational firm faced with arm s length limitations on its transfer prices is examined where the limitations are determined by the firm s marginal cost and intracountry prices such a firm is shown to manipulate its production and sales in order to gain a more desirable transfer price comparative static results develop policy implications not found in simpler models which often assume the firm to be constrained by arm s length limits but to be unaware of the effects of its actions on the limits

a market driven transfer price for distributed products using mathematical programming a distributed product has its manufacturing activities distributed among many locations these locations could belong to one or more firms in a manufacturing network often components needed to manufacture a distributed product move through different nodes in the network and sometimes across international borders hence a transfer price is needed for the purpose of estimating duties and drawbacks being aware of the fact that transfer price can be used to manipulate taxable profits many countries have instituted rules concerning transfer price estimation for example in the united sates the internal revenue service irs says that the right price is the market value but for many components it is difficult to find a free market similar products may exist in the market but they may have different attributes in such cases it is important to be able to estimate the market driven transfer price given other similar products in the open market we develop a method using a mathematical programming model and providing companies an opportunity to work proactively with the irs in a cooperative manner in order to avoid costly audit and litigation this way companies avoid penalties and also gain certainty regarding tax liability an example illustrating the method is presented

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

offshoring and outsourcing in a global supply chain impact of the arm s length regulation on transfer pricing abstract we consider the structure of a global supply chain for operational decisions in a multinational firm mnf with tax considerations the mnf consists of two divisions one for production and the other for retailing while the retail division of the mnf and the market for its product is located in a domestic country the production division may be located in either the domestic high tax country or a foreign low tax country when the two divisions of a mnf are co located in the domestic country the firm enjoys the benefit of a centralized operational decision on the order quantity to maximize its total profit although there is no tax saving opportunity on the other hand a mnf can enjoy a tax saving benefit when offshoring its production division to a low tax country although its operational decision on the order quantity is decentralized which is harmful to the supply chain profit due to double marginalization the mnf may further pursue the low procurement cost of its retail division by allowing the retail division to search for an outsourcing opportunity from an outside supplier however outsourcing can hurt the profit of the mnf from the loss of the production division due to competition with outside suppliers we analyze the trade offs in the mnf s optimal choice of supply chain structure in addition we incorporate a regulation on the mnf s internal transaction by tax authorities which is commonly called the arm s length regulation we study how the mnf s choice of the operational structure of its supply chain changes in consideration of this regulation our results suggest that tax considerations deserve attention from managers when designing the supply chain structure

transfer pricing and decentralized dynamic lot sizing in multistage multiproduct production processes abstract this paper presents the use of a transfer pricing system to coordinate business units in a wagner whitin type model for a decentralized lot sizing problem in a dynamic multistage multiproduct environment the paper includes two major proofs 1 a transfer pricing system enabling optimal decentralized lot sizing is characterized the transfer pricing system can be interpreted as a generalization of the reciprocal method or step down allocation method in cost location accounting and 2 based on a wagner whitin type theorem and the kakutani fixed point theorem it is shown that such a transfer pricing system exists

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association