modeling global spillover of new product takeoff abstract this article examines the global spillover of foreign product introductions and takeoffs on a focal country s time to takeoff using a novel data set of penetration data for eight high tech products across 55 countries it shows how foreign clout the susceptibility to foreign influences and intercountry distances affect global spillover patterns the authors find that foreign takeoffs but not foreign introductions accelerate a focal country s time to takeoff the larger the country the higher its economic wealth and the more it exports the more clout it has in the global spillover process in contrast the poorer the country the more tourists it receives and the higher its population density the more susceptible it is to global spillover effects cross country spillover effects are stronger the closer the countries are to one another both geographically and economically but not necessarily in terms of culture the model the authors develop also quantifies the spillover between each co

operating flexibility global manufacturing and the option value of a multinational network the multinational corporation is a network of activities located in different countries the value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed we model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries a stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option the value of which is dependent upon the real exchange rate the model is extended to analyze hysteresis effects and within country growth options we show that the management of across border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing

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

financing renewable energy infrastructure formulation pricing and impact of a carbon revenue bond abstract renewable energy systems depend on large financial incentives to compete with conventional generation methods market based incentives including state level rec markets and international carbon markets have been proposed as solutions to increase renewable energy investment in this paper we introduce and formulate a carbon revenue bond a financing tool to complement environmental credit markets to encourage renewable energy investment to illustrate its use we value the bond by predicting future revenue using stochastic processes after analyzing historical price data three illustrative examples are presented for renewable energy development in three different markets europe australia and new jersey our findings reveal that the sale of a carbon revenue bond with a ten year maturity can finance a significant portion of a project s initial cost

qualitative and quantitative evidence on the true local welfare costs of forest conservation in madagascar are discrete choice experiments a valid ex ante tool summary protected areas may impose local welfare costs through the enforcement of use restrictions predicting their welfare impacts before their establishment could help with the design of compensation schemes discrete choice experiments dces are increasingly used for ex ante evaluations but their validity is largely untested in low income settings using a case study of a new redd reducing emissions from deforestation and forest degradation project in eastern madagascar we explore the validity of dces in two ways i whether the estimates of welfare costs derived from dce are affected by respondents prior experience of conservation ii whether dce results have high theoretical and content validity we surveyed households who have varying degrees of experience of restrictions to swidden agriculture we also qualitatively debriefed a sub sample of respondents to better understand their thought processes latent class analysis shows that dce outcomes vary with conservation experience households more experienced with forest protection are less willing to trade off rights to clear forest for swidden agriculture with any compensatory interventions whereas less experienced households highly favor support for alternative agricultural techniques and a secure right to clear one hectare of forest although the results show apparent non attendance to some attributes e g cash payments qualitative debriefings suggest that respondents infact do expect relatively low or no utility from the given attributes and hence have theoretically valid preferences similarly the dce has generally high content validity although dce can elicit current preferences in this context using ex ante dce to estimate the welfare costs of such a long term intervention requires caution we conclude that it is difficult to robustly estimate compensation in advance of an intervention there is therefore a need to rethink conservation approaches and the feasibility of achieving fair compensations for conservation imposed restrictions

option pricing with downward sloping demand curves the case of supply chain options this article investigates the role of option contracts in a supply chain when the demand curve is downward sloping we consider call put options that provide the retailer with the right to reorder return goods at a fixed price we show that the introduction of option contracts causes the wholesale price to increase and the volatility of the retail price to decrease in general options are not zero sum games conditions are derived under which the manufacturer prefers to use options when this happens the retailer is also better off if the uncertainty in the demand curve is low however if the uncertainty is sufficiently high then the introduction of option contracts alters the equilibrium prices in a way that hurts the retailer

does competition for capital discipline governments decentralization globalization and public policy competition among countries or regions within them to attract mobile capital is often thought to discipline their governments motivating them to invest more in infrastructure reduce waste and corruption and spend less on non productive public goods the result should be convergence on business friendly policies we argue that this requires an assumption units start out very similar that is often unrealistic if units are heterogeneous in natural resources geographical location inherited human capital or infrastructure capital mobility often weakens discipline on the poorlyendowed units this may help explain disappointing results of liberalizing capital flows within russia and sub saharan africa jel f36 h73 h87

political determinants of electricity provision in small island developing states abstract this paper approaches provision of affordable and reliable electricity in small island developing states sids as a case of public good provision it aims to contribute to our understanding of how regime type and the quality of implementing institutions within political systems affect the prerequisites for successful electrification in sids more specifically we analyse the independent and interdependent effects of level of democracy and control of corruption on per capita household electricity consumption in sids using data from 34 sids over the period 1996 2009 the results show that although the independent effects of level of democracy and control of corruption are sensitive to model specification these two factors do have an interdependent impact on per capita household electricity consumption democratization has positive effects on provision of electricity to the general population only when there is a certain level of corruption control in place the results imply a that it is important for policy actors to acknowledge the interaction between regime type and the quality of implementing institutions and b when planning electrification projects in sids it is necessary to have information about the social and political context in order to design the most effective projects

rawlsian pricing of access to public facilities a unidimensional illustration abstract we consider a setting where citizens using a public facility face an idiosyncratic private access cost and must also contribute to the costs of facility we show that if the population is uniformly spread over the real line the cost of a facility is independent of location and access costs are linear in distance the rawlsian access pricing is the unique cost sharing solution that satisfies the core property of secession proofness the latter amounts to the voluntary participation principle under which no group of citizens should be charged more than the cost incurred if it had acted on its own

operations research for green logistics an overview of aspects issues contributions and challenges the worldwide economic growth of the last century has given rise to a vast consumption of goods while globalization has led to large streams of goods all over the world the production transportation storage and consumption of all these goods however have created large environmental problems today global warming created by large scale emissions of greenhouse gasses is a top environmental concern governments action groups and companies are asking for measures to counter this threat operations research has a long tradition in improving operations and especially in reducing costs in this paper we present a review that highlights the contribution of operations research to green logistics which involves the integration of environmental aspects in logistics we give a sketch of the present and possible developments focussing on design planning and control in a supply chain for transportation inventory of products and facility decisions while doing this we also indicate several areas where environmental aspects could be included in or models for logistics

to what extent were economic factors important in the separation of the south of ireland from the united kingdom and what was the economic impact the impact of british rule casts a long shadow over irish history while nationalist historians tended to blame union with britain for all the economic ills of the 19th century o brien 1921 recent re evaluations of both historical and recent irish economic performance have been cause for a reappraisal of the economic relations between ireland and britain cullen 1969 kennedy and johnson 1996 the extent to which economic factors were important in ireland s withdrawal from the united kingdom will be examined in this paper a secondary aim is to assess the economic consequences of independence in the interwar period there were many economic reasons up to 1913 as to why ireland should separate uk policy was determined by majority voting and policies were suited to the needs of industrial workers in britain rather than agricultural workers in ireland this led to increased spending beyond the means of ireland which caused transition difficulties on independence finally the consequences of separation in the north and south of ireland are examined evidence suggests that separation led to short term economic difficulty in the longer run the south benefited from independence due to weakness in british institutions and the incentive structures created during the interwar period

a political economy theory of partial decentralization we revisit the classic problem of tax competition in the context of federal nations and derive a positive theory of partial decentralization a capital poor median voter chooses to use redistributive capital taxes to provide public goods the expectation of high capital taxes however results in a small capital stock which lowers returns to redistribution the median voter therefore wants to commit to a lower level of capital taxes she does so by setting a partial degree of decentralization in the constitution the equilibrium degree of decentralization balances the positive effect of tax competition on capital taxes with the loss in redistribution that results we show that the degree of decentralization is nonmonotonic in inequality increasing in the redistributive efficiency of public good provision and decreasing in capital productivity when public goods are heterogeneous in their capacity to transfer funds all voters agree that goods with high redistributive capacity should be decentralized

strategic investment under uncertainty a synthesis abstract investment is a central theme in economics finance and operational research traditionally the focus of analysis has been either on assessing the value of flexibility investment under uncertainty or on describing commitment effects in competitive settings industrial organization research contributions addressing the intersection of investment under uncertainty and industrial organization have become numerous in recent years in this paper we provide an overview aimed at categorizing and relating these research streams we highlight managerial insights concerning the nature of competitive advantage first versus second mover advantage the manner in which information is revealed firm heterogeneity capital increment size and the number of competing firms

transition costs in secessions with a brief application to scotland this article demonstrates that the costs incurred in the process of a region becoming a sovereign state can be large enough to outweigh the long term material benefits of independence transition costs consist of transaction costs fiscal costs and the cost of uncertainty their size depends crucially on whether the politics of the transition are cooperative game theory however shows that there are incentives for threats of non cooperation and for the exercise of such threats these considerations are applied briefly to the debate about scottish independence this includes a short analysis of how transition costs can be reduced a final section inquires about possible transition benefits which can consist of solidarity

switching costs price sensitivity and health plan choice we investigate the extent to which sensitivity to health plan premiums differs across individuals according to characteristics related to the cost of switching plans our results indicate substantial variation in price sensitivity related to expected health care costs younger healthier employees are between two and four times more sensitive to price than employees who are older and who have been recently hospitalized or diagnosed with cancer we also find evidence of status quo bias estimated premium elasticities are significantly higher for new hires than for incumbent employees simulations combining our results with actuarial data illustrate the cost implications of risk related differences in price elasticity

global production planning under exchange rate uncertainty motivated by an aggregate production planning problem in an actual global manufacturing network we examine the impact of exchange rate uncertainty on the choice of optimal production policies when the allocation decision can be deferred until the realization of exchange rates this leads to the formulation of the problem as a two stage recourse program whose optimal policy structure features two forms of flexibility denoted as operational hedging 1 production hedging where the firm deliberately produces less than the total demand and 2 allocation hedging where due to unfavorable exchange rates some markets are not served despite having unused production our characterization of the optimal policy structure leads to an economic valuation of production and allocation hedging we show that the prevalence of production hedging is moderated by the degree of correlation between exchange rates a comprehensive examination under the following four generalized settings provides the depth scope and relevancy that our proposed operational hedges play to facilitate aggregate planning 1 multiple periods 2 demand uncertainty 3 price setting or monopolistic pricing and 4 price setting under demand uncertainty we show that production and allocation hedging are robust for these generalizations and should be integrated into the overall aggregate planning strategy of a global manufacturing firm

optimal transition to renewable energy with threshold of irreversible pollution when cheap fossil energy is polluting and pollutant no longer absorbed beyond a certain concentration there is a moment when the introduction of a cleaner renewable energy although onerous is optimal with respect to inter temporal utility the cleaner technology is adopted either instantaneously or gradually at a controlled rate the problem of optimum under viability constraints is 6 dimensional under a continuous discrete dynamic controlled by energy consumption and investment into production of renewable energy viable optima are obtained either with gradual or with instantaneous adoption a longer time horizon increases the probability of adoption of renewable energy and the time for starting this adoption it also increases maximal utility and the probability to cross the threshold of irreversible pollution exploiting a renewable energy starts sooner when adoption is gradual rather than instantaneous the shorter the period remaining after adoption until the time horizon the higher the investment into renewable energy

financing flexibility the case of outsourcing abstract we investigate the relationship between the extent and timing of vertical flexibility and the financial choices of a firm by vertical flexibility we mean partial total and reversible outsourcing of a necessary input a firm simultaneously selects the vertical setting and the financial sources of investment in flexibility in particular debt and venture capital a loan may come from a lender that requires the payment of a fixed coupon over time and an option to buy out the firm in certain circumstances debt leads to the same level of flexibility of an unlevered firm yet investment occurs earlier the injection of venture capital reduces the quest for vertical flexibility and speeds up investment then there arises a fresh substitutability between a financial venture capital and a real variable vertical flexibility

valuing flexibility as a complex option this paper develops an approach for valuing flexible production systems using contingent claims pricing demand curves for our model s underlying assets output products may be downward sloping in contrast with the standard option pricing assumption also our marginal production exercise costs may be increasing in addition we allow for multiple products and a production capacity constraint these elements of the model result in complex exercise decisions for the contingent claims which comprise the production system s value we illustrate our approach by valuing a flexible system that produces two products which have profit margin functions with stochastic parameters

design of sustainable supply chains under the emission trading scheme increase in environmental concerns together with legislations are forcing industries to take a fresh look at the impact of their supply chain operations on the environment this paper introduces a mixed integer linear programming based framework for sustainable supply chain design that considers life cycle assessment lca principles in addition to the traditional material balance constraints at each node in the supply chain indeed the framework distinguishes between solid and liquid wastes as well as gaseous emissions due to various production processes and transportation systems the framework is used to evaluate the tradeoffs between economic and environmental objectives under various cost and operating strategies in the aluminum industry the results suggest that current legislation and emission trading schemes ets must be strengthened and harmonized at the global level in order to drive a meaningful environmental strategy moreover the model demonstrates that efficient carbon management strategies will help decision makers to achieve sustainability objectives in a cost effective manner

consumer rationality and the status quo received microeconomic theory presumes rational consumers maximize utility over all commodity bundles recent analysis however suggests that a consumer s status quo may limit economic rationality bias consumer decisions and induce serious errors in survey based valuations of public and private goods using regression and choice theoretic frameworks we investigate the existence of status quo effects in the consumer valuation of a particular unpriced product the reliability of residential electrical service such valuations have become important in electric utility resource planning and rate making we find substantial status quo effects which must be addressed in welfare comparisons regarding electric service reliability

economic theories of the break up and integration of nations abstract this paper surveys the recent political economy literature on the size distribution of nations the main themes of this literature are 1 a the spread of democracy leads to the creation of too many sovereign states 2 b the extent of factor mobility plays a key role in determining the incentives towards separation or integration 3 c economic integration through the development of international trade may require greater political integration to create and effectively maintain a level playing field in international trade at the same time economic integration by reducing the economic costs of separation increases the incentives towards political separation

the role of subnational politicians in distributive politics political bias in venezuela s land reform under chavez this article examines how the partisanship of empowered subnational politicians can affect within district benefit distribution i present a theory of the role of subnational politicians in distributive politics and then test this theory on a distributive venezuelan land reform initiative by leveraging unique individual level data on revealed voter preferences and the receipt of particularistic benefits using data from a list of millions of voters who signed petitions to recall former president chavez i match information on recent land grant applicants to petition signers to measure how political preferences affect the likelihood of applying for and receiving land and how state governors condition this relationship i find evidence for both strategic core voter targeting and blockage of benefits to opposition voters these effects however are modified by the political affiliation of governors the findings point to the importance of considering how intervening subnational politicians influence distr

the effect of uncertainty on investment timing in a real options model abstract this paper examines the effect of uncertainty on investment timing in a canonical real options model we show that the critical value of a project that triggers the exercise of the investment option exhibits a u shaped pattern against the volatility of the project this is due to the two countervailing risk and return factors in effect we further show that such a u shaped pattern is inherited by the expected time to exercise the investment option thus for relatively safe projects greater uncertainty shortens the expected exercise time and thus enhances investment this is in sharp contrast to the negative investment uncertainty relationship commonly found in the extant literature finally we show that the positive investment uncertainty relationship is more likely for high growth projects than for low growth projects

catalonia and spain at the crossroads financial and economic aspects in some large european countries in recent decades economic globalization has gone hand in hand with a powerful trend to political decentralization this has been the case in the united kingdom france italy and spain in spain and after years of apparent stability the relations between catalonia and spain are experiencing troubled times this paper examines particularly the main economic effects of both the staying together and the secession scenarios following the introduction the second section reviews some aspects of the relations between catalonia and spain the third and fourth sections analyse different scenarios with a particular focus on the main issues that the secession scenario raises the fifth section contains a concluding remark

the role of co opetition in low carbon manufacturing abstract low carbon manufacturing has become a strategic objective for many developed and developing economies this study examines the role of co opetition in achieving this objective we investigate the pricing and emissions reduction policies for two rival manufacturers with different emission reduction efficiencies under the cap and trade policy we assume that the product demand is price and emission sensitive based on non cooperative and cooperative games the optimal solutions for the two manufacturers are derived in the purely competitive and co opetitive market environments respectively through the discussion and numerical analysis we uncovered that in both pure competition and co opetition models the two manufacturers optimal prices depend on the unit price of carbon emission trading in addition higher emission reduction efficiency leads to lower optimal unit carbon emissions and higher profit in both the pure competition and co petition models interestingly compared to pure competition co opetition will lead to more profit and less total carbon emissions however the improvement in economic and environmental performance is based on higher product prices and unit carbon emissions

timing and eco nomic efficiency of climate friendly investments in supply chains abstract emission trading schemes such as the european union emissions trading system euets attempt to reconcile economic efficiency with ecological efficiency by creating financial incentives for companies to invest in climate friendly innovations using real options methodology we demonstrate that under uncertainty economic and ecological efficiency continue to be mutually exclusive this problem is even worse if a climate friendly project depends on investing in of a whole supply chain we model a sequential bargaining game in a supply chain where the parties negotiate over implementation of a carbon dioxide co2 saving investment project we show that the outcome of their bargaining is not economically efficient and even less ecologically efficient furthermore we show that a supply chain becomes less economically efficient and less ecologically efficient with every additional chain link finally we make recommendations for how managers or politicians can improve the situation and thereby increase economic as well as ecological efficiency and thus also the eco efficiency of supply chains

economic integration and fiscal devolution abstract in this paper we investigate how economic integration influences the political decision of integration and separation of jurisdictions in a model with imperfect capital mobility we consider that not only the redistributive policy itself but also the level of policy centralization is decided by a majority vote we find that the net benefit from integration is not monotonic with the level of world capital market integration and present a case where integration of two regions occurs only for intermediate levels of mobility this conclusion relies on the comparison of the regional majorities utility under the various regimes the benefits from integration arise from the elimination of tax competition across jurisdictions which allows for more income redistribution whereas the costs are linked to the diversity of preferences across regions namely that of the decisive voters we also show that a federal regime is better than complete centralization in keeping a nation united

diversity disparity and civil conflict in federal states both policy makers and scholars have turned their attention to federalism as a means for managing conflicts between central governments and subnational interests but both the theoretical literature and the empirical track record of federations make for opposing conclusions concerning federalism s ability to prevent civil conflict this paper argues that the existing literature falls short on two accounts first it lacks a systematic comparison of peaceful and conflict ridden cases across federal states second many studies seem to suggest that there is one optimal mix of decentralization and centralization while others acknowledge that there is no one size fits all federal solution but leave this without further theorizing our argument is that the peace preserving effect of specific federal traits fiscal decentralization fiscal transfers and political co partisanship are conditional on a society s income level and ethnic composition the argument is tested across 22 federal states from 1978 to 2000

modeling co2 emission allowance prices and derivatives evidence from the european trading scheme this paper studies the three main markets for emission allowances within the european union emissions trading scheme eu ets powernext nord pool and european climate exchange ecx the analysis suggests that the prohibition of banking of emission allowances between distinct phases of the eu ets has significant implications in terms of futures pricing motivated by these findings we develop an empirically and theoretically valid framework for the pricing and hedging of intra phase and inter phase futures and options on futures respectively

decentralization institutional ambiguity and mineral resource conflict in mindanao philippines based on an analytical framework that builds on theories of incremental institutional change this article interrogates the relationship between decentralization and mineral resource conflict in the philippines here efforts to decentralize control over mineral resource wealth have resulted in a highly ambiguous institutional arena wherein heterogeneous actor coalitions are attempting to influence trajectories of institutional change and the associated distribution of mineral wealth on the ground this institutional renegotiation produces a diverse range of conflicts emerging on top of these institutional struggles are local elected politicians which raises important concerns over elite capture of the decentralization process

the breakup of nations a political economy analysis this paper develops a model of the breakup or unification of nations in each nation the decision to separate is taken by majority voting a basic trade off between the efficiency gains of unification and the costs in terms of loss of control on political decisions is highlighted the model emphasizes political conflicts over redistribution policies the main results of the paper are i when income distributions vary across regions and the efficiency gains from unification are small separation occurs in equilibrium and ii when all factors of production are perfectly mobile all incentives for separation disappear i introduction following the demise of communism the entire map of europe from the atlantic coast to the urals is being redrawn and issues of separation unification and the redrawing of borders are yet again at the forefront of european concerns many of the issues raised by this process are primarily of a political cultural or linguistic nature however there are also economic considerations that bear on this problem the objective of this paper is to analyze some important economic and political determinants of the process of unification and separation of democratic nations the starting point of our analysis is to suppose that from an economic efficiency point of view separation of nations is never desirable a unified nation is always more efficient since free trade among regions is guaranteed duplication costs in defense and law enforcement are avoided and local public goods provision such as transportation and communication networks or common standards can be coordinated furthermore any benefits of decentralization that might be obtained in a world with several nations may also be achieved within a unified nation by replicating the administrative structure of the world with several

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

a stochastic model for risk management in global supply chain networks abstract with the increasing emphasis on supply chain vulnerabilities effective mathematical tools for analyzing and understanding appropriate supply chain risk management are now attracting much attention this paper presents a stochastic model of the multi stage global supply chain network problem incorporating a set of related risks namely supply demand exchange and disruption we provide a new solution methodology using the moreau yosida regularization and design an algorithm for treating the multi stage global supply chain network problem with profit maximization and risk minimization objectives

economic integration and political disintegration in a world of trade restrictions large countries enjoy economic benefits because political boundaries determine the size of the market under free trade and global markets even relatively small cultural linguistic or ethnic groups can benefit from forming small homogeneous political jurisdictions this paper provides a formal model of the relationship between openness and the equilibrium number and size of countries and successfully tests two implications of the model firstly the economic benefits of country size are mediated by the degree of openness to trade secondly the history of nation state creations and secessions is influenced by the trade regime

optimal exercise of jointly held real options a nash bargaining approach with value diversion this paper provides a two stage decision framework in which two or more parties exercise a jointly held real option we show that a single party s timing decision is always socially efficient if it precedes bargaining on the terms of sharing however if the sharing rule is agreed before the exercise timing decision is made then socially optimal timing is attained only if there is a cash payment element in the division of surplus if the party that chooses the exercise timing can divert value from the project then the first best outcome may not be possible at all and the second best outcome may be implemented using a contract that is generally not optimal in the former cases our framework contributes to the understanding of a range of empirical regularities in corporate and entrepreneurial finance

oil field unitization contractual failure in the presence of imperfect information an empirical analysis of the impact of transaction costs on contracting shows that imperfect in formation can seriously limit the effectiveness of private contracting the case under study is the widespread failure of private crude oil producing firms to use us oil fields to reduce rent dissipation rent dissipation follows as multiple firms compete for migratory oil in common oil pools unitization is the obvious private contractual solution to rent dissipation the authors argue that despite large net gains from unitization imperfect information and information asymmetries among the negotiating parties regarding lease values prevents consensus on unit shares as a result contracts are often not completed or only fragmented units are completed 9 references 1 figure 4 tables

divided we stand united we fall the hume north jones mechanism for the rise of europe the great divergence in incomes between europe and the rest of the world occurred relatively recently why was it that western europe once a backward outpost on the fringes of the eurasian continent able to dominate in terms of income and technology the previously successful eastern economies several mechanisms have been identi ed to account for the rise of europe this paper formalizes one important mechanism the intellectual origins of which can be traced back to hume and weber and which was fully though informally articulated by e l jones this mechanism emphasizes the contrast between the european states system and the eastern empires political competition for a mobile tax base in a states system forces rulers to expropriate less from their subjects and to supply relatively more public services by effectively limiting the exit options of the ruled an empire rewards its ruler with a captive tax base that can be subjected to relatively higher levels of expropriation without a similar rise in public services provided the states system thus encourages higher levels of capital accumulation while the empire stises it the successes of the eastern empires in their consolidation phase are due to the competition they initially faced from neighboring states since europe escaped such consolidation the process of accumulation there never faced the impediments its eastern counterparts did the paper thus also provides a structural explanation for the emergence of institutions in europe that led to relatively secure property rights

impact of product pricing and timing of investment decisions on supply chain co opetition abstract in supply chain co opetition firms simultaneously compete and co operate in order to maximize their profits we consider the nature of co opetition between two firms the product supplier invests in the technology to improve quality and the purchasing firm buyer invests in selling effort to develop the market for the product before uncertainty in demand is resolved we consider three different decision making structures and discuss the optimal configuration from each firm s perspective in case 1 the supplier invests in product quality and sets the wholesale price for the product the buyer then exerts selling effort to develop the market and following demand potential realization sets the resale price in case 2 the supplier invests in product quality followed by the buyer s investment in selling effort then after demand potential is observed the supplier sets the wholesale price and the buyer sets the resale price finally in case 3 both firms simultaneously invest in product quality and selling effort respectively subsequently observing the demand potential the supplier sets the wholesale price and the buyer sets the resale price we compare all configuration options from both the perspective of the supplier and the buyer and show that the level of investment by the firms depends on the nature of competition between them and the level of uncertainty in demand our analysis reveals that although configuration 1 results in the highest profits for the integrated channel there is no clear dominating preference on system configuration from the perspective of both parties the incentives of the co opetition partners and the investment levels are mainly governed by the cost structure and the level of uncertainty in demand we examine and discuss the relation between system parameters and the incentives in desiging the supply contract structure

the investment strategies for a dynamic supply chain under stochastic demands abstract a successful supply chain management scm should aim to maximize the net present value of joint profits along the supply chain however the volatile market conditions cause the future cash flows along the supply chain more difficult to anticipate to obtain higher supply chain value the supplier and the retailer should cooperatively determine the optimal entry time this paper proposes a two stage dynamic optimization model by using a real option approach and then performs the sensitivity analyses for the option value and the investment threshold the impacts of some critical factors including the growth rate and the volatility of demand shock sunk cost and relating operational costs cost rates fix costs holding costs of inventory and shipping costs are investigated

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

decentralization fueling the fire or dampening the flames of ethnic conflict and secessionism political decentralization is widely believed to reduce ethnic conflict and secessionism in the world today yet decentralization is more successful in reducing conflict and secessionism in some countries than in others in this article i explore why this difference occurs i demonstrate using a statistical analysis of thirty democracies from 1985 to 2000 that decentralization may decrease ethnic conflict and secessionism directly by bringing the government closer to the people and increasing opportunities to participate in government but that decentralization increases ethnic conflict and secessionism indirectly by encouraging the growth of regional parties regional parties increase ethnic conflict and secessionism by reinforcing ethnic and regional identities producing legislation that favors certain groups over others and mobilizing groups to engage in ethnic conflict and secessionism earlier versions of this article were presented at harvard university and the center for the study of democratic politics at princeton university the author would like to thank sandra alfonso leon james alt micah altman barry friedman shigeo hirano simon hug gary king rose rozaghian tulia falleti and two anonymous reviewers for their very helpful comments

european co2 prices and carbon capture investments we assess the option to install a carbon capture and storage ccs unit in a coal fired power plant operating in a carbon constrained environment we consider two sources of risk namely the price of emission allowance and the price of the electricity output first we analyse the performance of the eu market for co2 emission allowances specifically we focus on the contracts maturing in the kyoto protocol s first commitment period 2008 to 2012 and calibrate the underlying parameters of the allowance price process then we refer to the spanish wholesale electricity market and calibrate the parameters of the electricity price process we use a two dimensional binomial lattice to derive the optimal investment rule in particular we obtain the trigger allowance prices above which it is optimal to install the capture unit immediately we further analyse the effect of changes in several variables on these critical prices among them allowance price volatility and a hypothetical government subsidy we conclude that at current permit prices immediate installation does not seem justified from a financial point of view this need not be the case though if carbon market parameters change dramatically carbon capture technology undergoes significant improvements and or a specific governmental policy to promote these units is adopted

scotland and small country independence the assessment this paper reviews some of the issues consequent on the formation of new states through secession while its particular focus relates to the potential withdrawal of scotland from the united kingdom it discusses preference heterogeneity as a potential cause of the break up of states relating that to recent developments in the economics of identity it examines some macroeconomic issues particularly debt and currency and reflects on how these might influence secession it examines alternatives fiscal decentralization to secession and considers the strategies that those arguing for and against secession may deploy it also explains the structure of this issue explaining how the different contributions come together

experiences with individual transferable quotas an overview i introduction rights based management in fisheries is based on the allocation and enforcement of property rights in the form of access and use rights individual transferable quotas itqs allocate the total allowable catch among fishers in the form of individual harvesting rights in contrast to traditional regulations itqs operate on the principle that incentives rather than controls should be used to manage a fishery theoretically if itqs command a positive price fishers will take into account a share of the externality imposed on others provided that they are perceived as an exclusive and durable property right it can be shown analytically that itqs will not maximize the net return in a fishery given the existence of stock or congestion externalities but they should lead to a superior outcome compared to open access boyce 1992 this paper addresses the question of whether itqs have achieved the benefits often attributed to them il experiences with itqs itq programmes have been implemented in a number of fisheries in several countries including canada iceland australia and new zealand these programmes are evaluated to determine whether itqs have led to changes in employment and harvesting shares a reduction in fishing effort or an increase in profitability 1 reduction in fishing effort one of the expected benefits of itqs is that they can reduce the excess capital employed in a fishery depending upon the fishery and the potential opportunities in alternative activities the removal of excess harvesting capacity may involve an adjustment period of several years grafton 1994 provides a listing of the changes in vessel numbers in selected rights based

institutions and behavior experimental evidence on the effects of democracy a novel experiment is used to show that the effect of a policy on the level of cooperation is greater when it is chosen democratically by the subjects than when it is exogenously imposed in contrast to the previous literature our experimental design allows us to control for selection effects e g those who choose the policy may be affected differently by it our finding implies that democratic institutions may affect behavior directly in addition to having effects through the choice of policies our findings have implications for the generalizability of the results of randomized policy interventions

the size of countries does it matter borders are a man made institution and as such their shape cannot be taken as part of the physical landscape the size of countries is endogenous to politico economic forces this paper discusses recent efforts by economists to study three related questions what determines the evolution of the size of countries does size matter for economic success given the trend toward decentralization and of creation of supernational unions such as the eu is the meaning of national borders evolving jel h10

property rights and choice the case of the fishery formal property rights are typically established after considerable waste has occurred despite the effectiveness of such schemes in addressing the inefficiencies of common pool resources adoption can be contentious because of the assignment of wealth and political influence that accompany the transition to exclusive property rights this paper studies how the early involvement of harvesters in policy implementation designed to address the commons inefficiency may foster perceived legitimacy and lessen political opposition to the establishment of individual property rights we demonstrate that it is optimal for a manager facing industry strife and reform delay to allow firms to self select into the property rights regime the strategic interaction of harvesters leads to an equilibrium characterized by the global adoption of property rights thus by providing harvesters with a choice between management systems policy makers can reduce the transaction costs associated with the need to create political consensus while ensuring an outcome similar to the top down implementation of market based management evidence is provided from a recent policy change in maryland fisheries in which the provision of a choice resulted in the overwhelming adoption of individual transferable quotas and the end of the race to fish

off shore enhanced oil recovery in the north sea the impact of price uncertainty on the investment decisions although co2 capture and storage ccs is considered a key solution for co2 emission mitigation it is currently not economically feasible co2 enhanced oil recovery can play a significant role in stimulating ccs deployment because co2 is used to extract additional quantities of oil this study analyzes the investment decision of both a carbon emitting source and an oil company separately by adopting a real options approach it is shown that when uncertainty is integrated in the economic analysis co2 and oil price threshold levels at which investments in co2 capture and enhanced oil recovery will take place are higher than when a net present value approach is adopted we also demonstrate that a tax on co2 instead of an emission trading system results in a lower investment threshold level for the investment in the co2 capture unit furthermore we determine a minimum co2 selling price between the two firms and show that co2 eor has the potential to pull ccs into the market by providing an additional revenue on the capture plant however when co2 permit prices are above an identifiable level the eu ets does not necessarily result in the adoption of ccs and stimulates oil production

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

inequality and insurgency maldistribution of land in agrarian societies is commonly thought to be an important precondition of mass political violence and revolution others argue that because of the difficulty of mobilizing rural populations for political protest land maldistribution is irrelevant except as part of an inegalitarian distribution of income nationwide these rival inequality hypotheses have significant implications with respect to the kinds of reforms likely to reduce the potential for insurgency in a society they are tested using the most comprehensive cross national compilation of data currently available on land inequality landlessness and income inequality support is found for the argument that attributes the greater causal import to income inequality moreover the effect of income inequality on political violence is found to hold in the context of a causal model that takes into account the repressiveness of the regime governmental acts of coercion intensity of separatism and level of economic development

strategic commitment versus postponement in a two tier supply chain abstract in this paper the trade off between strategic commitment and operational flexibility is examined as it arises in a supply chain when a supplier offers competing buyers opportunities to make early purchase commitments for a product with a short life cycle traditionally the use of incentives for early purchase commitments for short life cycle products has been justified on the basis of a supplier s production lead times or capacity constraints an alternative explanation has been proposed by offering early purchasing opportunities a supplier can influence the form of competition in the downstream market using a single period model it has been shown that below a threshold level of demand uncertainty the supplier can benefit from providing adequate pricing incentives to entice downstream buyers to commit to purchase quantities before demand information is revealed moreover such early purchasing opportunities can benefit the supplier as well as the buyers even in the absence of production lead times or capacity constraints

analysis on china s eco innovations regulation context intertemporal change and regional differences abstract eco innovation is recognized as a determinant of success or failure of environmental protection efforts in the long run this paper attempts to examine china s eco innovation gains in response to the energy saving and emissions reduction eser policy enforced during 2006 2010 we first construct an integrated analysis framework to evaluate the changes of energy and environmental performance used as the proxy of eco innovation and then the intertemporal change of china s eco innovation gains as well as the regional differences is investigated the results indicate that china had accelerated its process of eco innovations during 2006 2010 when a series of eser policies were enforced the developments and wide adoptions of advanced energy saving and environmentally friendly technologies serve as the primary driving forces while upgrading management skills and organizational designs contribute relatively little furthermore the realizing paths of cross region eco innovations in china are obviously discrepant

beyond the fiction of federalism macroeconomic management in multitiered systems recent research on federalism is extremely divided while some tout the benefits of market preserving federalism others point to the fragmentation and incoherence of policy in federal states this research bridges the divide by analyzing the political and fiscal structures that are likely to account for the highly divergent economic experiences of federal systems around the world to test these propositions the authors use an original data set to conduct analyses of budget balance and inflation in fifteen federations around the world from 1978 through 1996 the empirical research suggests that the level of fiscal decentralization the nature of intergovernmental finance and vertical partisan relations all influence macroeconomic outcomes the findings have broad implications for the widespread move toward greater decentralization and for the theoretical literatures on federalism and macroeconomics

togetheror separately issues on the costs and benefits of political and fiscal unions abstract around the world one observes a tendency toward political separatism the economic literature generally but not always emphasizes several benefits of large fiscal and therefore political jurisdictions in this paper we discuss several politico economic arguments which reconcile this tension between normative economic models and empirical observations

unpacking the effect of decentralized governance on routine violence lessons from indonesia summary we study the effect of decentralization on routine violence in indonesia we unpack decentralization along multiple dimensions and consider the individual effects of local elections the creation of new administrative units fiscal transfers and local public service delivery we use comprehensive data from indonesia s national violence monitoring system nvms a new dataset that records the incidence and impact of violence in indonesia we use these data to examine the relationship between the different dimensions of decentralization and different types of local violence in indonesian districts during 2001 10 our analyses suggest that there is a positive association between local service delivery and at least some forms of violence we argue that the positive effect of service delivery on violence is due to newly generated distributive conflicts among local ethnic groups around the control over and access to services by comparison district splitting and the introduction of direct elections of district heads are negatively associated with some forms of violence there is little evidence that fiscal transfers in general mitigate conflict

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

contracting problems and regulation the case of the fishery the inefficiencies of common property fisheries are of continuing concern to economists the early work by scott gordon 1954 and anthony scott 1955 outlined the problem and later studies by james crutchfield and giulio pontecorvo 1969 and frederick bell 1972 provided empirical estimates of the losses that result those studies were followed by the dynamic models of colin clark 1976 and james quirk and vernon smith 1970 of optimal harvest rates and the use of corrective taxes or quotas to achieve them but in spite of a large and growing literature and the persuasiveness of the outlined efficiency criteria most fisheries retain common property aspects with overcapitalization and excessive labor input why those conditions persist and the failure of the regulatory response to them are the issues addressed in this paper we examine a number of fisheries but focus on the texas shrimp industry which is one of the nation s most valuable fisheries for a single species and which shares the common property characteristics observed elsewhere it is considered overcapitalized and catch per unit of effort is falling 2 examination of the fishery reveals the many margins along which rent dissipation occurs and the nature of the regulations necessary for controlling fishing effort to avoid those losses the regulatory environment in texas is complicated by conflict within the fishery between inshore and offshore fishermen the latter assert that bay shrimping reduces the number of shrimp that successfully migrate to the gulf the inshore fishery is highlighted by another issue the recent resettlement of some 30 45 000 vietnamese refugees including many fishermen along the texas coast marine advisory service paul starr their entry has been met by hostility and violence from existing shrimpers who recognize that they are in an environment characterized by the absence of property rights bay shrimpers have lobbied the texas legislature for broad limits on new entrants yet ironically the sale of additional boats by individual shrimpers to the vietnamese has facilitated entry of the refugees into the fishery regulations in the texas shrimp and other fisheries are incomplete leaving many options for rent dissipation uncontrolled because of high contracting costs among fishermen and political factors that mold government actions contracting costs are high among heterogeneous fishermen who vary principally with regard to fishing skill 3 montana state university and texas a m university respectively we benefitted from comments by terry anderson raymond c battalio gardner brown oscar burt micha gisser wade griffin john r moroney anthony d scott peter temin and participants in workshops at texas a m university and the university of washington research assistance was provided by scott barnhart and phil mizzi funding was provided by sea grant texas a m university throughout this paper we use the terms common property and open access interchangeably here the terms describe a situation where no property rights group or individual exist s for the resource 2catch per unit of effort in the inshore texas gulf and federal gulf waters is presented for 1963 77 by w l griffin c g tydlacka and w e grant they show catch per unit of effort generally falling in inshore and offshore waters while catch per unit of effort fluctuates from year to year it falls from approximately 360 kg shrimp per unit of effort to 220 kg from 1963 to 1977 the common property nature of the fishery is reflected in the following statistics since 1975 the number of vessels has grown by 23 percent nelson swartz for fish houses the record of entry is similar between 1970 a d 1977 the number of firms grew from 259 to 287 though during that period many left the industry as others entered the number of fish houses was calculated from license data supplied by the texas parks and wildlife department the record of entry by fish houses suggests that monopsony as discussed by colin clark and gordon munro is absent in the fishery 3there may be minor differences in labor leisure choices and capital but our statistical evidence and discussions with fishermen indicate that catch variations are largely due to skill government regulations in the texas bays restrict capital and our empirical evidence shows boats to be relatively homogeneous

resource rent in individual quota fisheries traditional fisheries management schemes generate incentives for vessels to maximize catch resulting in rent dissipation and overcapacity individual vessel quota management schemes change the incentives to maximize profit and have the potential to generate resource rent and reduce capacity an interesting question is whether it is the changed incentives due to individual quota or the capacity reduction due to transferability of individual quota that is most important in generating rent in this study a cost function approach is used to model and measure rent generated and potential rent in a fishery managed with individual vessel quotas

valuing operational flexibility under exchange rate risk in this paper we develop a stochastic dynamic programming formulation for the valuation of global manufacturing strategy options with switching costs overall we adopt a hierarchical approach first exchange rates are modeled as stochastic diffusion processes that exhibit intercountry correlation second the firm s global manufacturing strategy determines options for alternative product designs as well as supply chain network designs product options introduce international supply flexibility supply chain network options determine the firm s manufacturing flexibility through production capacity and supply chain network linkages third switching costs determine the cost of operational hedging i e the costs associated with reducing downside risks overall the firm maximizes its expected discounted global after tax value through the exercise of product and supply chain network options and or through exploitation of operational flexibility contingent on exchange rate realizations in this environment the firm must trade off fixed operating costs switching costs and the economic benefits derived from exploiting differentials in factor costs and corporate tax rates a multinomial approximation of correlated exchange rate processes is proposed that leads to a consistent and tractable lattice model for this compound option valuation problem we then demonstrate how the global manufacturing strategy planning model framework can be utilized to analyze financial and operational hedging strategies

constitutional change and inequality in scotland what scope does a sub national economy have to affect the level of inequality does a policy menu consistent with the theories of fiscal federalism provide for an ability to affect inequality measures or does this ability require the powers of a nation state in this paper we discuss these questions in the context of the debate around the scottish independence referendum in which inequality has played a prominent role and ask whether independence further devolution or simply different policies under the current constitutional framework are capable of helping scotland make the transition to a less unequal income distribution we provide a series of estimates of the impact of different policy choices upon inequality in scotland and discuss inequality reduction in the context of different constitutional options

time to build option value and investment decisions abstract investment decisions and outlays are often made sequentially for example the rate at which construction proceeds is usually flexible and can be adjusted with the arrival of new information traditional discounted cash flow methods which treat the pattern of investment as fixed ignore this flexibility and understate the value of the project this paper uses contingent claims analysis to derive optimal decision rules and to value such investments we determine the effects of time to build opportunity cost and uncertainty on the investment decision for reasonable parameter values we show how a simple npv rule can lead to gross errors

improving forecasts of state failure this article offers the first independent scholarly evaluation of the claims forecasts and causal inferences of the state failure task force and its efforts to forecast when states will fail state failure refers to the collapse of the authority of the central government to impose order as in civil wars revolutionary wars genocides politicides and adverse or disruptive regime transitions states that sponsor terrorism or allow it to be organized within their borders are all failed states this task force set up at the behest of vice president gore in 1994 has been led by a group of distinguished academics working as consultants to the u s cia state failure task force reports and publications have received attention in the media in academia and from public decision makers the article identifies several methodological errors in the task force work that cause its reported forecast probabilities of conflict to be too large its causal inferences to be biased in unpredictable directions and its claims of forecasting performance to be exaggerated however the article also finds that the task force has amassed the best and most carefully collected data on state failure to date and the required corrections provided in this article although very large in effect are easy to implement the article also demonstrates how to improve forecasting performance to levels significantly greater than even corrected versions of its models although the matter is still a highly uncertain endeavor the authors are nevertheless able to offer the first accurate forecasts of state failure along with procedures and results that may be of practical use in informing foreign policy decision making the article also describes a number of strong empirical regularities that may help in ascertaining the causes of state failure

price dynamics in the european union emissions trading system and evaluation of its ability to boost emission related investment decisions abstract the price of permits in the european union emissions trading system eu ets has historically been highly sensitive and prone to jumps we consider different stochastic processes to model the price of permits and show that the variance gamma vg model provides the best fit for the price distribution among a selection of infinite activity processes using this result as a starting point we assess the effects of the eu ets in delivering low carbon investments at the firm level by modeling a price taker electricity producer subject to the eu ets jurisdiction we compute via least squares monte carlo the value of the real option the greenhouse gas emitter has consisting in the opportunity to switch from its current high carbon technology to a cleaner one we use a vg specification for carbon prices and a mean reverting brennan schwartz process for the price of fuel moreover we further analyze the investment decision problem in case of a co 2 price stabilization mechanism in the form of a price floor by explicitly computing the expected value of the investment project by means of fourier methods our results show that the introduction of the price stabilization mechanism significantly affects the timing of the investment decision and supports emission related investments