economic deregulation days of reckoning for microeconomists economic deregulation of american industry is one of the most important experiments in economic policy of our time 1 in 1977 17 percent of u s gnp was produced by fully regulated industries 2 by 1988 following ten years of partial and complete economic deregulation of large parts of the transportation communications energy and financial industries that total had been cut significantly to 6 6 percent of gnp 3 the political forces behind the decision to change the market conditions under which roughly 600 billion of u s output is produced were strong and varied but according to political scientists martha derthick and paul quirk 1985 p 36 deregulation would never have occurred if economists especially microeconomists had not generally supported it through their research 4 in retrospect it is fair to ask were microeconomists able to develop a theoretical and empirical framework to explain regulation and its effects and to form predictions of deregulation s effects were they able to predict the actual effects of deregulation this paper surveys the evidence to address these questions and of

institutional determinants of power sector reform in pakistan the electricity supply sector in pakistan has performed poorly in recent years reforms were introduced in the mid 1990s to improve the sector but progressed slowly with no significant impacts on pre reform performance this study uses new institutional economics as a theoretical basis to elucidate reasons for the failure of power sector reforms in pakistan to make improvements interviews with 23 experts using q methodology generated 215 statements that were used as a q concourse of these 51 statements were selected for the q sample and ranked by 34 respondents depending on their importance analysis revealed four important discourses on the determinants of power sector reform failure in pakistan these included weak governance structure country and sectoral endowments inefficient regulator and unspecified political institutions or unfriendly political contexts the study recommends establishment of institutions that support a market based power supply sector and improvements to the contractual arrangements between stakeholders to reduce opportunistic behaviour

existence of free entry equilibrium in aggregative games with asymmetric agents in this paper we examine a free entry aggregative game where agents can be asymmetric we show the existence of a pure strategy subgame perfect equilibrium of this game the proof is a constructive one and therefore we provide a method to derive a subgame perfect equilibrium within a reasonable time

natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

privatization in latin america lessons for transitional europe abstract latin american economies are predominately private with functioning financial systems substantial purchasing power and widespread understanding of how markets work nevertheless transitional and latin american privatizers share similar problems poor performing state firms varied commitment to privatization technical difficulties and adverse macroeconomic conditions five lessons from latin america are particularly relevant for transitional economies a privatization can help foster competition b governments can build competent institutions for privatization despite weak capacity c labor can benefit without majority control d transparency and share distributions help win public support and e selling profitable efficient firms can benefit the economy

competition marginal cost tariffs and spot pricing in the chilean electric power sector abstract setting up competitiveness and privatizing the power sector has been an important goal of chilean energy policy since 1974 the new organization of the electric sector includes deconcentration of generating and distributing companies a new marginal cost and spot pricing system coordination of generating companies through an economic load dispatching centre eldc and a scheme for sharing transmission lines this paper describes why and how those tasks were carried out in chile

innovation and growth supply and demand factors in the recent us expansion it is widely held that the social economic context of the us characterised by labour market flexibility and deregulation of product and capital markets lies at the basis of the innovative capacity displayed by the country s productive system in the 1990s thus accounting for the growth differential with europe starting from a different interpre tative model of innovation and growth the paper focuses on both supply institutional and technological and demand factors it is argued that when their interaction is taken into account there is no strong evidence that more deregulated labour and product markets are among the factors allowing for us growth in accordance with the view that there is no single road to innovation and growth this leaves room for the exploration and implementation of policies that might reconcile innovation and growth with safeguards such as those provided by europe s social institutions

electricity consumption and economic growth exploring panel specific differences abstract in this paper we examine the long and short run dynamics between electricity consumption and economic activities using panel data of per capita electricity consumption and per capita gdp of 160 countries for the period of 1980 2010 accounting for the degree of electricity dependence and the level of urbanization furthermore in order to capture the differences in this relationship the full sample is divided into various subsamples based on countries income levels regional locations and oecd memberships this framework is argued and found to be appropriate since the causal links and inferences arising therefrom differ considerably among the subsamples which led us to conclude that the electricity growth nexus is highly sensitive to regional differences countries income levels urbanization rates and supply risks

incentives in principal agent relationships this article identifies some of the major issues that have been examined in the literature on incentives the article begins by discussing the frictions that lie at the heart of incentive problems next the principal s optimal response to these frictions is explored taking as given the characteristics of the agents with whom the principal interacts in a nonrepeated setting the design of individualized contracts contests and tournaments is analyzed then the principal s task of selecting the best agent is addressed and repeated agency relationships are considered

toward an economic model of the japanese firm i owe a great deal to professor moses abramovitz who suggested that i write this article i appreciate his constant encouragement and guidance which aided me throughout its preparation i am also indebted to three anonymous referees of the journal and to professors ryutaro komiya and michael riordan for their critical comments and helpful suggestions needless to say i am solely responsible for the views expressed in this paper

aggregate comparative statics abstract in aggregative games each player s payoff depends on her own actions and an aggregate of the actions of all the players many common games in industrial organization political economy public economics and macroeconomics can be cast as aggregative games this paper provides a general and tractable framework for comparative static results in aggregative games we focus on two classes of games 1 aggregative games with strategic substitutes and 2 nice aggregative games where payoff functions are continuous and concave in own strategies we provide simple sufficient conditions under which positive shocks to individual players increase their own actions and have monotone effects on the aggregate the results are illustrated with applications to public good provision contests cournot competition and technology choices in oligopoly

broken dreams unmet expectations of investors in the philippine electricity restructuring and privatization abstract over the last three decades privatization and restructuring of electricity sectors has been a hot topic the expectation was that prices would fall due to increased competition and that generators would become more innovative and efficient however the enthusiasm for deregulation wavered after events such as the debacle in california the fall of enron and the setbacks of ontario in the philippines comprehensive legislation was passed in 2001 but the implementation has been rather slow and controversial this paper looked at the allegation of politicizing power rates and found a logical alternative to the perceived conspiracy angle based on market data it is highly probable that depressed market rates was a result of coping mechanisms of new players trying to adjust to the restructured industry

electricity privatization the case of india abstract privatization is resorted to by developing country governments mainly to augment resource mobilization either on their own initiative or under the dictat of the world bank and less as a recipe for efficiency improvement the present paper discusses the electricity privatization in india as a case study and outlines the practical problems faced when the theoretical issues of privatization come up against the messiness of the real world such as high cost of private power compared to the low cost of public power and the goal conflicts of public and private utilities it suggests a different model to make privatization feasible

power sector reform in south asia why slow and limited so far although south asian developing countries had initiated some form of electric power sector reform in the 1990s often under external lending agency pressures not much progress has been made so far and there is hardly any noteworthy example of a successful reform in the region this paper provides a brief review of power sector reform efforts in five south asian countries and uses an institutional economics framework to identify the factors shaping the success of power sector reforms four factors namely instability of rule makers poor overall acceptance slow adaptation and poor transition management are identified and their effect on the reform process of south asia are analysed the paper finds that political instability has affected the power sector reform of the region making hard decisions difficult to take slow progress of reform has also affected the sector viability as signs of adverse effects on the power sector investment and performance are already visible

on the uniqueness of nash equilibria abstract although the use of nash equilibria in economic models has been increasing little attention has been paid to the uniqueness of these equilibria this paper presents relatively weak conditions that are sufficient for the existence of a globally unique nash equilibrium

privatization in rent seeking societies abstract four latin american countries have devoted particular attention though not equal action to privatization policies the implementation of which has shed considerable light on the dynamics of rent seeking societies the fact that democratization in some form is also underway in each of the four has intensified the interplay of forces that shape the implementation of privatization programs the experiences of mexico and chile in particular demonstrate how important it may be to privatize the private sector by reforming macroeconomic policies and opening the economy to external competition before or at least concurrently with tackling the privatization of the public sector the obstructive force of rent seeking behavior is shown most clearly in the argentine case while the brazilian experience is useful along with that of mexico as a reminder that rent seeking dynamics are not necessarily incompatible with structural transformation and high rates of growth

market reforms technocrats and institutional innovation abstract successful market reform projects require significant revision of government agencies institutional arrangements and policy making procedures in part to provide reformers autonomy from countervailing pressures this paper examines how such innovations facilitated reforms in mexico and argentina it finds executive leadership helped facilitate institutional change but that technocrat policymakers played more crucial roles than previously documented through rule changing instrument creating and strategizing behaviors they helped engineer their own autonomy and gained control of the policy agenda by changing the organization of decision making and the position they occupied in the bureaucracy these findings hold across distinct policy arenas and political systems

a cross country analysis of electricity market reforms potential contribution of new institutional economics abstract the paper explores whether the question of why some countries are able to implement more extensive reforms is closely related to the question of why some countries have better institutions than others we analyze this question by using an empirical econometric model based on poisson regression with cross section data covering 51 states in the us 13 provinces in canada and 51 other countries in the course of the study we check the validity of three important arguments of new institutional economics nie for the power market liberalization process the first argument is the path dependency to test its impact on the reform progress we try to explain whether the background of the chairperson of the regulatory agency when reforms started or that of the governor minister responsible for energy policy at that time has an impact on the subsequent reform progress the second argument is the impact of democracy as an institution on the reform progress we look at the effect of two important indicators of democracy i e civil liberties and political rights on the reform progress the final argument of nie is about transaction costs we concentrate on the level of corruption in a country as one of the key factors that determine transaction costs and try to explore its impact on the reforms the results show that the backgrounds of the chairperson and the minister governor the level of democracy and corruption in a country are significantly correlated with how far reforms have gone in that country the negative relationship between reform progress and civil liberties may indicate that reforms may be limited in democratic countries with strong civil society institutions such as trade unions or other organized structures in the society that may consider reforms as harmful to their self interest

impact of reform and privatization on consumers a case study of power sector reform in orissa india abstract orissa is the first state in india to have undergone reform in the power sector with the government withdrawing its control the model of this reform is known as the wb orissa model the goal of this paper is to examine the impact of this reform on consumers of electricity which has been measured using multiple regression models the variables represent the parameters that consumers are most interested in and the regression coefficients represent the weights of the corresponding variables the data were collected using a survey methodology the impact of reform was found to be mixed some groups of consumers saw benefits while others felt a negative impact a focus group study was conducted to identify the variables of interest to consumers of electricity the model was used to estimate consumer benefit and was validated using primary data and structural equation modeling the study revealed beneficial aspects of reform and areas with no benefits

a firm level analysis of outage loss differentials and self generation evidence from african business enterprises abstract this study examines the outage loss differential between firms that engage in backup generation and those that do not unmitigated outage losses were estimated to be us 2 01 23 92 per kwh for firms engaging in self generation and range from us 1 54 to 32 46 per kwh for firms without self generation we also find that firms engaging in self generation would have suffered additional 1 183 outage losses had they not invested in self generation on the other hand firms without self generation would have reduced their outage losses by around 6 46 if they had engaged in self generation further analyses however reveal that although engagement in self generation reduced outage losses a firm engaging in self generation may still suffer a greater unmitigated outage loss relative to a firm without a backup generator the relative outage losses depend on the relative vulnerability of the operations of the two sets of firms to power interruption and the relative generating capacity of a self generating firm to its own required electricity loads policy reforms that allow firms whose operations are highly vulnerable to outages to make a binding contract with utilities in order to get preferential supply are recommended

government intervention in production and incentives theory a review of recent contributions national science foundation the commissariat general du plan and the center for energy policy research at m i t

wind versus coal comparing the local economic impacts of energy resource development in appalachia abstract two energy development scenarios were compared for the coal river mountain in raleigh county west virginia 1 mountaintop mining mtm of coal and 2 wind energy plus underground mining of coal economic impact computations over the life of each energy development scenario were made on a county basis for output of goods and services the number of jobs created and local earnings externality costs were assigned monetary values for coal mining and subtracted from earnings premature mortality within the general population due to additional coal mining accounted for 96 of these external cost computations the results showed that economic output over the life of each scenario was twice as high for mtm mining as wind energy plus underground coal mining over the short term employment and earnings were higher for mtm mining but towards the end of the scenario cumulative employment and earnings became higher under scenario 2 when local externality costs were subtracted from local earnings mtm coal production had an overall negative net social impact on the citizens of raleigh county the external costs of mtm coal production provide an explanation of the existence of a resource curse and the conflicting results of output versus income provide insights into why coal producing counties are underdeveloped

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

getting reforms done in inhospitable institutional environments untying a gordian knot in india s power distribution sector when grand institutional reforms based on idealized models are stalled by the poor institutional environments and difficult politics which often surround large infrastructure systems in developing countries partial reforms whose design and implementation take into account the different interests of the key stakeholders can provide valuable and immediate benefits while moving these systems from low towards higher level equilibria strategically negotiated experimentally partial and purposefully hybrid these reforms are based on careful stakeholder analysis and strategic coalition building that avoid rigid positions based on idealized models our findings are based on a study of power sector reforms in india where we performed a micro level and in depth analysis of a partial and innovative experiment which has allowed private sector participation in electricity distribution within a hostile institutional environment

electricity privatization revisited a commentary on the case for new initiatives in india abstract normally privatization is resorted to by different economies for different reasons resource mobilization introducing efficiency by promoting competition and for achieving commercial orientation often these are assumed to be independent objectives the indian experience is showing that they are quite interdependent and unless all the three objectives are tackled simultaneously privatization will not succeed specifically the poor financial performance of the state electricity boards and their lack of commercial orientation is applying a brake on investment in the power sector by foreign ipps similarly the government s approach to privatization without promoting competition through the so called memorandum of understanding is leading to high cost solutions and acrimonious public debates demanding transparency in decision making and review of those already made

how investor portfolios shape regulatory outcomes privatized infrastructure after crises summary many developing countries privatized utilities during the 1990s their weak institutional environments however make them prone to crises that generate incentives for governments to renege on contractual commitments to investors to understand variation in post crisis regulatory outcomes in such contexts scholars must consider investors prior choices regarding portfolio structure investors facing high reputational costs from exit are more likely to remain following expropriation and those holding diverse assets in their contract jurisdiction to secure compensation these factors account for significant unexplained within sector and subnational variation for which we provide qualitative and quantitative evidence from argentina s water and electricity sectors following the 2001 crisis

the economics and politics of regulation this article provides a critical survey of the literature on the economics and politics of regulation after some conceptual clarifications the article surveys the evolution of perspectives on regulation during the post second world war period emphasizing especially the interactions between intellectual changes and real world economic and political developments it then looks at some themes that are neglected in the current literature the inevitability of regulation the need to create and not simply regulate markets distributional issues dynamic considerations and the politics of regulation and suggests that incorporating these themes more closely into the discussion will improve our understanding in this area copyright 1997 by oxford university press

the disinterest in deregulation in the analysis of the costs of monopoly power the usual experiment is to convert a competitive industry into a monopoly and observe the consequent change in consumer s surplus modern contributions have emphasized the deadweight cost of monopoly arnold harberger 1954 and the possibility of an associated rent seeking cost of monopoly gordon tullock 1967 the harberger cost of course refers to the lost consumer s surplus triangle the tullock cost concerns the role of competition for monopoly returns taken together and assuming that the competition for monopoly rents is perfect the total cost of monopoly power is a trapezoid the rectangle of monopoly profits plus the triangle of lost consumer s surplus richard posner 1975 in this paper we approach the monopoly problem in a different spirit we compare three states of the world competition regulation and deregulation in this setting we ask what happens if a monopoly is eliminated through deregulation our analysis suggests that because under most conditions tullock costs cannot be recouped the returns to deregulation are lower than previously thought rent seeking expenditures in the past leave the economy permanently poorer even if competition is restored to the industry in contrast the returns to preventing monopoly in the first place are relatively high in our model an insight afforded by the analysis is an explanation of the persistence of laws and regulations which appear to serve no interest in this regard the example of railroad regulation in the united states comes to mind the standard explanation for such regulation is either that voters and government decision makers are ignorant of basic economics or that a small interest group like railroad firms wins rents at the expense of uninformed or economically rational consumers of rail services who do not find it cost effective to seek deregulation we offer another and perhaps more plausible explanation for the persistence of regulation and the apathy of consumers about the costs of regulation namely the costs of such regulations are for the most part the original rent seeking expenditures that lead to the regulation in the first place and these costs are sunk abolishing so called uneconomic laws does nothing to recover these losses hence there is little political support from any quarter to return to the status quo ante in fact as we shall show such a deregulatory program can easily impose more costs than it is worth there are numerous examples of this point including tariffs and quotas of all sorts subsidies to farmers the postal monopoly organized labor s antitrust exemption the licensing of doctors and so forth the traditional explanations of these monopoly rights namely ignorance of economic common sense and special interest groups are neither sufficient nor necessary since the primary costs of these laws are rent seeking expenditures which are made prior to their passage there is simply little to be gained by changing them now gains would accrue in the form of reduced harberger costs costs would be borne in passing and implementing the deregulatory program it is not that the potential gainers from deregulation are large in number diffuse heterogeneous and face high organizational costs rather they do not exist to any degree interpreted in this light efforts by political action groups such as the right to work foundation stand to be a drain on society s resources they cannot produce anything unless they prevent further monopolization through regulation we do not of course mccormick and shughart clemson university clemson sc 29631 tollison center for the study of public choice george mason university fairfax va 22030 thanks go to james buchanan rex cottle and gordon tullock for helpful comments the usual caveat applies

good bye financial repression hello financial crash some unintended consequences of financial liberalization in latin america are analyzed in this paper intrinsic imperfectious in financial markets and the policy dilemmas they pose are reviewed first the stylized facts of southern cone experiments in financial liberization are then presented alternative ways of organlzing domestic capital markets under latin american conditions are discussed and an eclectic reform mongering program is proposed

south korean and taiwanese development and the new institutional economics the publication of books by both alice amsden and robert wade provide an opportune moment to reflect on the study of east asian development after an initial surge of interest beginning in the 1970s the field has reached a plateau and scholars recently have cast a wide net in searching for ways to extend the field in assessing the state of the art regarding the economic development of the east asian newly industrialized countries nics this review will treat three themes first i will argue that the focus on states versus markets is becoming stale and that much of the scholarly interest lies in the politics behind the economics second i argue that political scientists have underexplored the historical origins of korean and taiwanese capitalism and that such attention promises to strengthen both theories and explanations of development third i argue that the international system has been more important in promoting development in east asia than accounts in the first wave have recognized the purpose of this review is to assess the field reveal

public versus regulated private enterprise a comparison of public enterprise with regulated private enterprise shows that the efficiencies of privatization stem from the insulation it brings from arbitrary political and self serving influences the critical insulation springs from the costliness of interventions when there is a regulatory compact in place that protects private property from expropriation while it also corrects for market failures that same insulation means that public enteprise is a better form of organization for activities that call for a response to public interest exigencies which cannot be specified in advance or reliably adjudicated after the fact the analysis emphasizes that an appropriate regulatory compact requires institutional support international organizations that seek to implement privatization should consider promoting credible regulatory commitment by requiring countries to execute explicit regulatory compacts and by bringing to bear the weight of their continuing relationship as a means of motivating the countries to conform to such strictures

the institutions and governance of economic development and reform why are the ambitions of economic development practitioners and reformers so often disappointed one answer is that development policymakers and reformers are congenital optimists another answer is that good plans are regularly defeated by those who occupy strategic positions an intermediate answer is that institutions are important yet are persistently neglected in the planning process the article takes a bottom up microanalytical approach to economic development and reform it examines the governance of contract investment and private ordering through the lens of transaction cost economizing and it assesses the efficacy of the de facto as against the de jure institutional environment with respect to credible commitments in effect institutional economists are cast in the role of archaeologists of economic reform and development with the task of unpacking the lessons of the past to inform choices and programs for the future

employment trends in the u s electricity sector 2008 2012 abstract between 2008 2012 electricity generated gwh from coal the longtime dominant fuel for electric power in the us declined 24 while electricity generated from natural gas wind and solar grew by 39 154 and 400 respectively these shifts had major effects on domestic employment in those sectors of the coal natural gas wind and solar industries involved in operations and maintenance o m activities for electricity generation using an economic input output model we estimate that the coal industry lost more than 49 000 jobs 12 nationally over the five year period while in the natural gas solar and wind industries employment increased by nearly 175 000 jobs 21 we also combine published ratios for jobs per unit of fuel production and per megawatt of power plant capacity with site specific data on fuel production and power plant retirements additions and capacity changes to estimate and map direct job changes at the county level the maps show that job increases in the natural gas solar and wind industries generally did not occur where there were significant job losses in the coal industry particularly in west virginia and kentucky

market imperfections labor management and earnings differentials in a developing country theory and evidence from yugoslavia in this paper we evaluate empirically the relative importance of two explanations of yugoslav interindustry income differentials one explanation proposed initially by vanek and jovicic 1975 stresses capital market imperfections which permit capital rents to be appropriated as workers incomes the second explanation points to labor allocation problems under self management we first present a critique of the vanek jovicic original formulation and then respecify the problem to permit simultaneous evaluation of the two schools of thought results based on two data sets suggest that labor allocation factors and monopoly power rather than capital rents are the main source of yugoslav earnings dispersion

the transaction costs driving captive power generation evidence from india the 2003 indian electricity act incentivizes captive power production through open access in an attempt to harness all sources of generation yet we observe that only some firms self generate while others do not in this paper we give a transaction cost explanation for such divergent behavior using a primary survey of 107 firms from india we construct a distinct variable to measure the transaction specificity of electricity use the make or buy decision is then econometrically tested using probit model results are highly responsive to transaction specificity and the likelihood of captive power generation is positively related to it at the industrial level this explains why food and chemical firms are more likely to make their own electricity since the burden of poor grid supply is highest on smaller sized and high transaction specific firms the grid access policies need to account for firm level characteristics if government wants to incentivize captive power generation

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

stackelberg equilibria in managerial delegation games abstract managerial compensation packages do not only influence managers behavior but also have an impact on competing firms in a managerial delegation game investigating the latter aspect it is shown that the inherent prisoner s dilemma situation can be resolved without changing the normally studied setup or timing in the first stage owners choose an incentive function for their managers in the second stage they choose the weights assigned to that function besides profits and in the third stage managers play a cournot game solving this continuous optimization problem with the implicit function theorem shows that choosing an incentive from the set of multiplicative incentives i e any generalized affine transformation of the product of both firms quantities which includes e g relative profit ensures that the stackelberg outcome is among the set of equilibrium outcomes furthermore it is the unique outcome if the rival owner opts for one of the well known incentives like sales revenue or market share the general approach used allows demonstrating that with no other linear incentive a stackelberg outcome results and that incentives like profit to cost ratio should be avoided selecting a multiplicative incentive is a dominant strategy of the game

energy consumption carbon emissions and economic growth nexus in bangladesh cointegration and dynamic causality analysis abstract the paper investigates the possible existence of dynamic causality between energy consumption electricity consumption carbon emissions and economic growth in bangladesh first we have tested cointegration relationships using the johansen bi variate cointegration model this is complemented with an analysis of an auto regressive distributed lag model to examine the results robustness then the granger short run the long run and strong causality are tested with a vector error correction modelling framework the results indicate that uni directional causality exists from energy consumption to economic growth both in the short and the long run while a bi directional long run causality exists between electricity consumption and economic growth but no causal relationship exists in short run the strong causality results indicate bi directional causality for both the cases a uni directional causality runs from energy consumption to co 2 emission for the short run but feedback causality exists in the long run co 2 granger causes economic growth both in the short and in the long run an important policy implication is that energy electricity as well can be considered as an important factor for the economic growth in bangladesh moreover as higher energy consumption also means higher pollution in the long run policy makers should stimulate alternative energy sources for meeting up the increasing energy demand

2 the institutional structure of production 1 prize lecture to the memory of alfred nobel december 9 1991 this abstract was borrowed from another version of this item

total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 1978 this article total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 78 was reprinted with permission from the december 1982 issue of the economic journal this article proposes a methodology that decomposes total factor productivity change into two distinct elements technological progress and changes in technical efficiency technological progress is defined as the change in the best practice production frontier all other productivity change is attributed to technical efficiency change the article provides a theoretical framework for decomposing total factor productivity growth as well as a specification and estimation of the deterministic frontier production function it employs a programming technique to estimate a flexible functional form of the production frontier the paper then applies this technique to empirical data from yugoslavia of the period from 1965 to 1978 it concludes that for yugoslavia improvements to technical efficiency comprise the dominant contribution to total factor productivity change this agrees with accumulating evidence that in many developing economies productivity gain due to technological mastery of imported technology is substantial

resource abundance and economic growth in the united states abstract it is a common assumption that regions within the same country converge to approximately the same steady state income levels the so called absolute convergence hypothesis focuses on initial income levels to account for the variability in income growth among regions empirical data seem to support the absolute convergence hypothesis for us states but the data also show that natural resource abundance is a significant negative determinant of growth we find that natural resource abundance decreases investment schooling openness and r d expenditure and increases corruption and we show that these effects can fully explain the negative effect of natural resource abundance on growth

regulation institutions and commitment in telecommunications a comparative analysis of five country studies within any system of utility regulation there is a tension between the ability to commit to a stable set of rules and the ability to respond flexibly to changing circumstances countries differ in their institutional endowments and hence in the ways in which they can resolve this tension a first group of countries can design regulatory systems that afford the regulator substantial formal discretion to respond to changing circumstances and can use process to restrain arbitrary action a second group of countries can restrain arbitrary action only by calling on specific substantive rules and may have to sacrifice some flexibility to achieve credible commitment a third group may lack the domestic institutions to put in place a credible and workable regulatory system of any kind

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

international investment agreements and services markets locking in market failure summary bilateral investment treaties bits and investment chapters in preferential trade agreements have become popular measures to guarantee investor friendly policies while they reassure multinational firms they also constrain host country authorities in regulating markets to stimulate competition these problems are widespread in service industries characterized by significant economies of scale this paper presents case studies of the difficulties the chilean regulatory authorities faced in regulating the financial services telecom and energy industries it concludes that able regulators are necessary but that international agreements need to also leave enough policy space

markets market failures and development a central question in development economics is how can we account for differences in the levels of income and the rates of growth between the developed and less developed economies in the 1950s and 1960s there was a standard answer to this question the poor are just like the rich except they are poorer they have less human and nonhuman capital there was an immediate prescription for this diagnosis increase the resources of ldcs either by transferring capital to them either direct aid or education or by encouraging them to save more today these answers seem less convincing that they did two decades ago if the problem were primarily a shortage of physical capital the return to capital should be much higher in ldcs than in developed countries and the natural avarice of capitalists would lead to a flow of capital from the more developed to the less developed economies see howard pack 1984 and my 1988 paper if the problem were primarily a shortage of human capital then the educated in ldcs should receive a higher absolute as well as relative income than the educated in more developed economies how then can we account for high levels of unemployment among the educated and the migration of the educated from ldcs to more developed economies moreover the predictions of the standard neoclassical growth model of a convergence of growth rates in per capita income with permanent differences in per capita consumption being explained by differences in savings rates and reproduction rates do not seem to have been borne out these observations suggest that the ldcs differ from the developed countries in at least some other important respects and this view is corroborated by those studies which have looked at the productivity of similar plants operating in developed and less developed economies see pack 1984 1987 the difference can be attributed perhaps tautologically to differences in economic organization to how individuals factors of production interact and to the institutions which mediate those interactions among the most important of these institutions are markets it is by now well recognized that there are many instances of market failures in more developed economies see bruce greenwald and myself 1986 in some cases market failures may be ameliorated by nonmarket institutions if for instance capital markets do not function well perfectly if only because of costly and imperfect information nonmarket institutions internal capital markets within large conglomerates may develop market failure is more prevalent in ldcs and the nonmarket institutions that ameliorate its consequences are at least in many instances less successful in doing so the objective of this paper is to explore the causes and consequences of these market failures and the failure of private nonmarket solutions and to suggest possible roles for government intervention tdiscussants anne 0 krueger duke university stanley fischer world bank

entry barriers and economic welfare the relationship between economic welfare and the number of firms in a quasi cournot market is examined in the first place we presuppose the existence of a strong first best government that can enforce the marginal cost principle to the firms along with regulating the number of firms it is shown that there exist excessive number of firms at the free entry quasicournot equilibrium vis a vis the first best welfare maximizing number of firms the thrust of this result essentially survives even if we replace a utopian first best government by a secondbest government that leaves the firms to pursue their respective profit maximization freely and engages solely in regulating the number of firms it can be shown that the excess entry prevails again in this second best world recent studies in the theoretical industrial organization literature have uncovered several instances which cast serious doubt on the reasonableness of a widespread belief that increasing competition will increase welfare stiglitz 1981 p 184 it has been shown that there are cases which are not altogether unreasonable where social welfare will be increased by strengthening rather than weakening the protection of incumbent firms from the threat of potential entry this is in sharp contrast with the traditional belief 2 what is not known however is how robust these pathologies in fact are we intend to settle this problem by proving two excess entry theorems in the quasi cournot parametric conjectural variations homogeneous oligopoly model seade 1980a b in the first place we presuppose the existence of a strong first best government that could costlessly enforce the marginal cost pricing principle by firms in an oligopolistic market and regulate entry in pursuit of first best social welfare optimization it is shown that the number of firms at the free entry equilibrium exceeds the first best welfare optimizing number of firms the result has already been noted by von weizsacker 1980a b and others in terms of numerical examples our theorem 1 asserts that this phenomenon always holds true for the family of quasi cournot models at hand an implication of this result is that the existence of entry barriers which protect incumbent firms from potential competitors is not necessarily welfare decreasing in sharp contrast with the traditional belief a problem remains with theorem 1 however in that an omnipotent first best government does not exist in reality and the first best ideal is unrealizable in the actual economy therefore even if the intervention by a first best government with a view to restricting the number of firms within an industry may be welfare improving it does

does basic services privatisation benefit the urban poor some evidence from water supply privatisation in thailand access to safe water and sanitation has been a development priority for decades this is also included in the millennium development goal targets meanwhile privatisation of water supply continues to be a subject of intense debate particularly as to its effects on the urban poor the arguments for and against often reflect the intellectual divide between socialist ideals and neo liberal pragmatism key issues are access quality and price this paper reports findings from an investigation of thailand s first water supply privatisation scheme implemented in 1998 household level data for the poor defined by community and income status show a significant improvement in access to piped water despite an increase in the connection cost and monthly charges the associated benefits from access include improved water quality and service a promising plus is the prospect of improvement in tenure status for the households living in informal settlements

crisis and policymaking in latin america the case of chile s 1998 99 electricity crisis summary this article studies the effect of sectoral crises on policy reform by emphasizing the conflictive incentives generated by public demands for a solution on the one hand the crisis provides the opportunity for bypassing veto points for technical innovation on the other hand if simultaneous with increasing electoral competition it reduces the time horizons of policymakers and their propensity to adopt reforms of uncertain effects for them our research traces these on the chilean 1998 99 electricity crisis and assesses their impact on policy change through a comparative analysis of reform contents this article shows how electoral effects prevailed in the context of upcoming competitive elections suggesting the importance of introducing electoral competition in the study of crises effects on policymaking in the region our research strategy for tracing incentives and opportunities generated by crises can travel to other cases to further our understanding of crises effects on policymaking

fully aggregative games abstract a game is fully aggregative if payoffs and marginal payoffs depend only on a player s own strategy and a function of the strategy profile which is common to all players we characterize the form which this function must take in such a game and show that the game will be strategically equivalent to another game in which the function is the simple sum of strategies

regulation of privatized utilities the chilean experience abstract the privatization of chile s public utilities has led to substantial new investment and improvements in internal efficiency however the limited information available to regulators combined with their insufficient technical capacity have combined to prevent efficiency increases being fully passed on to consumers in price reductions in fact drastic price cuts have occurred only where competition has emerged so achieving competition wherever possible should be the main policy goal competition can be enhanced by either modifying existing regulations as happened in long distance telecommunications or by a more active antitrust policy to achieve this the regulatory institutions clearly need strengthening

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

economic policy institutions and entrepreneurship economists have debated the issue of state intervention in the economic process in capitalist economies intensively for decades often however without considering the effects of state intervention on entrepreneurship in this paper we undertake a critical analysis of the institutionalist theory of state intervention developed by ha joon chang he identifies two key roles for the state in facilitating structural change namely firstly to pronounce a vision for the future state entrepreneurship and secondly management of conflicts which arise during the process of structural change we also examine how well the swedish model of state intervention fits into chang s model as well as possible drawbacks with the swedish model not least in terms of reducing the incentives for entrepreneurship thirdly we examine the possibility that because of radical changes in its economic and political environment the swedish model has become less successful in carrying out the two key roles outlined by dr chang in the last three decades finally we discuss the implications of these changes for the chang style interventionalist state is there any room left for structural change management by the state in the global era if so what are the appropriate measures and policy levels for this type of intervention and in particular how can proper institutions and incentives for entrepreneurship be used to facilitate the structural change process

efficiency assessment and benchmarking of thermal power plants in india abstract per capita consumption 1 of electricity in india is many folds lesser than canada usa australia japan chaina and world average even though total energy shortage 2 and peaking shortage 3 were recorded as 11 2 and 11 85 respectively in 2008 09 reflecting non availability of sufficient supply of electricity performance improvement of very small amount can lead to large contribution in financial terms which can be utilized for capacity addition to reduce demand supply gap coal fired thermal power plants are main sources of electricity in india in this paper relative technical efficiency of 60 coal fired power plants has been evaluated and compared using ccr and bcc models of data envelopment analysis target benchmark of input variables has also been evaluated performance comparison includes small versus medium versus large power plants and also state owned versus central owned versus private owned result indicates poor performance of few power plants due to over use of input resources finding reveals that efficiency of small power plants is lower in comparison to medium and large category and also performance of state owned power plants is comparatively lower than central and privately owned study also suggests different measures to improve technical efficiency of the plants

the dynamic efficiency of regulatory constitutions in this article we model regulation as a repeated game between a utility facing a random sequence of demands and a regulator tempted to underreward past investment rate of return regulation designed with a constitutional commitment to an adequate rate of return on capital prudently invested is able to support an efficient investment program as a subgame perfect nash equilibrium for a larger set of parameter values than rate of return regulation without such a commitment furthermore rate of return regulation is superior to price regulation according to the same criterion assuming that the regulator is unable to make state contingent transfer payments

power sector reform in orissa an ex post analysis of the causal factors abstract from the early 1990s dramatic changes have been taking place in the structure of electricity supply industry esi worldwide the primary reasons for electricity sector reform has however been different for industrialised and developing countries the objective of this paper is to study and identify various factors leading to power sector reform in developing countries the restructuring of orissa state electricity board in india was used as a case study in identifying the various factors the factors that result in implementation of restructuring are a contextual factors they are the primary drivers for initiating reform the performance of the utility and the conditionalities of the lending agencies are contextual factors b trigger factor it is the determining factor that creates a compelling necessity to undergo restructuring the inability of the government to continue to support the utility acts as the trigger factor c facilitating factors they act as facilitators for initiating reform support of the government absence of a powerful lobby and the support of the top management are facilitating factors

subsidy policy and the enlargement of choice abstract development is the enlargement of people s choices optimal subsidy policy is intended to create the right incentives for each of the value chain participants this paper contends that the interest subsidy offered by the indian federal ministry of new and renewable energy for solar thermal systems through mainstream banking channels is superior in intent and outcome compared to the capital subsidy as currently offered for solar pv systems routed through government controlled delivery channels the interest subsidy enhances innovation improves service delivery and expands the range of product available to consumers enjoying a wide range of endowments thus leading to more inclusive development the simple monopoly model developed by atkinson atkinson ab capabilities exclusion and the supply of goods in basu k pattanaik p suzumura k editor choice welfare and development oxford university press 1995 is applied to the context of solar home systems to demonstrate price reduction and choice expansion in a liberalized market facilitated by an interest subsidy scheme

reforming small electricity systems under political instability the case of nepal this paper assesses the issues and options in reforming small electricity sector systems in general while citing nepal as a specific case political instability and increasing electricity demand are two major complicating factors in power sector reform of small systems such as that of nepal lessons from international experience suggest that measures such as cost reflecting pricing restructuring and independent regulation are important for the success of reforms in small systems the creation of an independent regulatory authority is more important than unbundling of the sector in the present context of nepal accounting separation of the main activities may be a pragmatic restructuring approach given the present political and market condition as the systems gradually grow larger vertical separation of the system and horizontal splitting of the generation segment and competition in organised wholesale market followed by privatisation remains an option in the long run