bluuebunny/crossref_metadata_2025 huggingface dataset:
Raising the standard: a challenge to Lord MacLaurin
Authors: Blundell John
Published: March 2003

Lord MacLaurin's committee on the structure of cricket recommended a three‐conference championship with play‐offs. The English Cricket Board, however, decided to retain the existing 18‐step‘ladder’, with some incentives and penalties for top and bottom teams. This paper proposes a scheme under which there would be three regional conferences with the top teams going through to play‐offs. Among the benefits would be much improved incentives since the majority of teams would be in the running for play‐off places for most of the season.
Economic policies: still shackled by post‐war euphoria?
Authors: Sherman Sir Alfred
Published: March 2003

This country's economic and social policies remain dominated by the war‐time consensus: Keynes and Beveridge and the full‐employment White Paper, and belief that the state is best qualified to‘run the economy.’The so‐called monetarist and Thatcher revolutions failed to re‐shape policy‐making. Dependence on the rate of interest to suppress inflation, the staple of successive governments’macroeconomic policy, represents a neo‐Keynesian survival and is a major source of our distempers. It needs reconsideration ab initio.
The American for‐profit university: a model for the information economy
Authors: Sperling John
Published: March 2003

Within the context of ‘the engine of globalisation,’ Sperling explores the rigidities and inefficiencies in ‘traditional’ American higher education institutions. He points to the ways in which the for‐profit university can overcome these problems, while at the same time being a net contributor to the tax system. In particular, he suggests that it is the profit motive that makes the University of Phoenix responsive to its its customers, and technologically innovative.
Implementing road‐use pricing by stealth
Authors: Hills Peter
Published: March 2003

The recent White Paper indicates the start of serious attention to the use of road‐use pricing, while the hard edge of the argument is to be found in the Treasury's Comprehensive Spending Review. What has yet to be examined is the problem of equipping the nation's vehicles with the necessary devices, effective for the purpose over the whole country. This could be done by replacing the paper ‘tax disc’ with a standardised electronic tag ‐ carrying stored credit‐units ‐ which could provide for road‐use payments as and where they come to be introduced.
Architecture and freedom
Authors: Gillis John
Published: March 2003

The degree of freedom or coercion in society affects the ability to build buildings and to create architecture of distinction. This paper explores the ways in which modern democratic societies have reduced classic property rights, and thus reduced an owner or developer's ability to build as he judges best for his own needs or his customers. A brief description is given of free market alternatives to existing statist regulatory approaches to property and land‐use regulation.
From demand management to monetary control, sustainable budgets and supply‐side policy
Authors: Minford Patrick
Published: March 2003

The monetarist revolution displaced Keynesian management in the 1970s and early 1980s. But because of the shift in thinking to rational expectations, the idea that information is used efficiently in forming beliefs about the economy, monetarism has evolved into a general policy preoccupation with proper budgeting and the supply side as well as with monetary‐policy rules that will both control inflation and help to stabilize the economy.
Ripping off Aunt Agatha: a decade of the Financial Services Act
Authors: Hinchliffe Jimmy M.
Published: March 2003

The new Financial Services Authority will put the public interest first. These were the words of the Chancellor, Gordon Brown, when announcing that the Financial Services Act 1988 was to be overhauled and self regulation was to be abandoned. This paper argues that the regime put in place by the Act in 1988, has manifestly failed to deliver the protection that was promised to ‘Aunt Agatha.’ It argues that regulatory failure is ubiquitous and that the cause of this failure is that regulatory agencies are invariably captured by the people that they are supposed to be regulating. Finally, it presents an alternative to state regulation, by highlighting the considerable protections offered by the common law, by self regulation and, most importantly by a free, competitive and open market.
National governments under the discipline of global forces
Authors: Migué Jean‐Luc
Published: March 2003

Globalisation, in particular the increasing multinationalisation of businesses, has forced government suppliers into direct (in the form of parallel governments) or indirect (in the form of free trade) competition. However, the growth of supranational organisations such as the EU threatens the power of exit which is so vital to competition: overlapping government functions create waste and encourage further the growth of centralisation.
The future of NATO: a defence economics perspective
Authors: Hartley Keith
Published: March 2003

This paper analyses the future direction of NATO and suggests some of the possible problems it will face. Most notably, the questions of how to share the burden of the cost of NATO action among its members and what is the optimal size of the organisation in the future, are addressed. One possible way forward is the creation of a NATO free trade area.
Is Privately‐provided Electronic Money Next?
Authors: England Catherine
Published: March 2003

To survive, any new electronic money will need to provide some advantage to its users, such as lower transaction costs, increased privacy, a greater ability to avoid taxes, or a more stable value than its government‐provided competitors. Any successful new money will have to overcome substantial barriers to entry, however. These barriers to entry occur primarily in the form of the costs of switching to a different means of payment and require an understanding of the role played by ‘network economics.’ Unless a substantial number of the individuals and businesses with whom a person trades use the same money, any new means of payment will have little value. A temptation facing government regulators will be to extend and expand regulations to apply to new means of payment and forms of money. A more productive role of governments is to attempt to protect their own money‐creation franchises by minimising the advantages offered by privately‐provided alternatives. Governments should enforce contracts and punish fraud while remaining vigilant with respect to inflation, keep tax rates low and protect the privacy of their citizens.
Oppression Net
Authors: Ellison Chris
Published: March 2003

In its early days the Internet was thought to be resistant to regulation and censorship. However, the technology of the Internet has developed in a climate of moral responsibility. The support for self‐regulation has taken the initiative from the state and placed it firmly in the grasp of the industry itself. As a result, unprecedented levels of material have been removed from the Net. The dynamic for self‐regulation now frequently outstrips government proposals both in extent and effectiveness.
McJob, McCheque, McWonderful
Authors: Blundell John
Published: March 2003

‘McJob’ is sometimes used in a pejorative sense. But an examination of the job‐creating ability of McDonald's, its policies towards its employees (including an emphasis on education and training) and its provision of the first rung on the employment ladder for many people suggests that this form of job should be regarded much more positively
The failure of CAP reform: a public choice analysis1
Authors: Elliott Matthew , Heath Allister
Published: March 2003

This paper uses public choice theories to explain why agricultural subsidies were centralised and why this hinders reform. It shows that the Commission is not responsible for the expansion of the CAP by arguing that budget‐maximising behaviour is irrational in the circumstances and that bureau shaping explains its stance on reform. The input process and the success of agricultural groups vis‐à‐vis consumer and taxpayer groups is explained using both the pluralist and Olsonian account of interest group politics. The conclusion analyses the latest difficulties in achieving reform at Berlin and the prospects for reform.
Should governments fund science?
Authors: Kealey Terence , Al‐Ubaydli Omar
Published: March 2003

Empirical evidence shows the flaws in the ‘linear model’ of economic growth ‐ in which government funds pure science which leads to applied science and enhanced economic growth. Adam Smith's model ‐ in which academic science flows out of applied science ‐ is nearer the mark. Governent funding of science cannot be justified on economic grounds and indeed tends to crowd out private funding.
Managing knowledge: changing ways of wealth creation
Authors: Ganguly Ashok S.
Published: March 2003

R&D will have to be at the core of enterprises which expect to prosper in the new economy. Investors now realise there is a link between R&D investment and long‐term growth, so share prices are boosted for companies which know how to extract value from R&D spending. The IT and pharmaceutical industries are probably the leaders in new ways of managing knowledge more effectively.
Interest rates are low but are annuities expensive?
Authors: Booth Philip , Wood Geoffrey E.
Published: March 2003

It is often claimed that annuities are now ‘expensive’. That claim is at least partly based on money illusion. Careful analysis shows that the current prices of annuities are largely the result of a decline in inflation expectations which has brought about a change in the income stream for annuities.
The verdict on the minimum wage: guilty on all counts
Authors: Bartlett Bruce
Published: March 2003

Some recent research in the US has challenged the long‐held view among economists that raising the minimum wage reduces employment. However, most economists continue to hold to the orthodox view, which continues to be confirmed in academic journals. Furthermore, research continues to find other negative effects from the minimum wage that are sufficient to oppose it even if there is no loss of employment.
Competing with the Public Sector in Broadcasting
Authors: Elstein David
Published: March 2003

There are two public sector broadcasters in the UK: the BBC and Channel 4. In their different ways, their behaviour attracts criticism from the private sector. However, this critique is unfocused and potentially counter‐productive. A more efficient – or privatised – public sector would create greater, not lesser, problems for the private sector. The allegations of abuse of privilege and unfair competition may be justified, but the private sector needs a coherent alternative rationale for public funding of broadcasting before it can expect to win a public and political debate.
The demand for and supply of assurance
Authors: Klein Daniel B.
Published: March 2003

Consumers want products and services that are safe and of good quality. Corresponding to such demand is the demand for assurance, before the fact, that the quality and safety will be as promised. his demand for assurance creates opportunities for entrepreneurs to profit by providing assurance ‐ and they do so in a wide and largely unappreciated variety of ways. The essential dialectic of the free enterprise system does apply to assurance. Governments’quality and safety restrictions on the freedom of contract, known to be so costly, are, therefore, unredeemed and should be repealed.
Reforming value added tax
Authors: Bannock Graham
Published: March 2003

The research reviewed in this paper establishes that the VAT system generates heavy administrative burdens for small firms in Europe despite various measures taken to alleviate them. A possible solution would be to abolish VAT charges between registered traders which would, in effect, convert the tax into a sales tax. The conclusion is that such a change would necessitate modification of the 6th Directive on VAT. The other alternative might be to compensate small firms for their work as unpaid tax collectors.
Franchise and the transport market: a new threat from Brussels
Authors: Hibbs John
Published: March 2003

Contrary to the general liberalisation of transport policy that has followed in the European Union for some years now, a proposal is circulating in the Council and Parliament that would reverse all the gains that have been achieved from deregulation of bus and train services. It would return effective decisions to‘competent authorities’and it would drive out competent managers as they lost the freedom to manage.
UK universities and the state: A Faustian bargain?
Authors: Dickson Tony
Published: March 2003

The universities are now ‘one of the last semi‐nationalised sectors of the British economy, ’ used by government as an instrument of social policy. This situation represents a ‘Faustian bargain ’ which threatens both the quality and the prosperity of universities. One solution would be privatisation of some universities through public flotation. These universities could then contract with government to take state‐funded students. Two objections are that the scheme would promote elitism and that it would encourage greater inequality between universities, but the relevant question is whether it would offer an improvement on the present regime.
Bypassing Barnett: The comprehensive spending review and public expenditure in Wales
Authors: Bristow Gillian
Published: March 2003

Under UK devolution, public expenditure is distributed to the devolved administrations by means of the population‐based Barnett formula. However, in the July 2000 Comprehensive Spending Review (CSR) the Treasury bypassed the operation of the Barnett formula to determine public expenditure levels in Wales. This was necessary in order to enable Wales to access European Objective 1 funds for economic regeneration. In so doing, the UK government has set a precedent which is destined to accelerate demands for a thorough and independent review of regional public expenditure needs.
LET'S END, NOT MEND, SOCIAL SECURITY
Authors: Block Walter , Lorch David , Midkiff Bobby , Reed Keith
Published: March 2003

Social Security is a paternalist measure, supposedly forcing people to save for their old‐age years, based on the assumption that they are not far‐seeing enough to do so on their own behalf. It is only ‘supposed’, since the funds mulcted from each generation go not to finance their own retirements, but those of their predecessors. As in the case of all coercive schemes, this one cannot be shown to improve the lot of anyone (with the exception of those who do the imposing). Specifically, this measure has negative implications for family bonds, as it substitutes the state for a function previously carried out by the extended family.
WHEN IS BRITAIN'S TAX ‐ FREEDOM DAY ?
Authors: Smith David B.
Published: March 2003

The concept of the nation's ‘tax‐freedom day’ is a brilliantly simple expository device and always attracts media attention when it is announced. However, the calculation of tax‐freedom day is more difficult than it appears at first sight, because of the problems involved in defining, let alone measuring, both a nation's taxes and its income. Equally plausible measures of tax‐freedom day can differ by several weeks. However, the underlying concept remains one of the most vivid ways available of bringing home to ordinary citizens the costs of today's welfare state.
IS THE TRANSITION TO THE MARKET TOO IMPORTANT TO BE LEFT TO THE MARKET?
Authors: Boettke Peter J. , Leeson Peter T.
Published: March 2003

Most models of Central and Eastern European transition fail to appreciate the de facto organising principles that governed life in the Soviet‐type system. Concentration has instead been focused on the de jure pronouncements of what constituted these systems. It is this misidentification, we contend, that has caused the major problems for economists devising strategies for reform. Proper appreciation of the de facto realities underlying Soviet‐type economies sheds light on the crucial role that market forces must be allowed to play in the process of transition.
Britain, Butter, and European Integration, 1957–1964
Authors: Singleton John , Robertson Paul L.
Published: March 2003

Access to the British butter market was an important issue during British negotiations with continental Europe in the early 1960s. Commonwealth producers enjoyed preferential treatment under the terms of the Ottawa Agreement, and butter exports were of particular importance to New Zealand. This article explains how Britain attempted to safeguard New Zealand's trade while conforming to Europe's agricultural policy. When British/European negotiations collapsed in 1963, attention switched to the need to make dairy concessions to Denmark in order to speed up tariff reductions in EFTA. Commonwealth butter suppliers faced an increasingly uncertain future, and New Zealanders lived to regret their economic dependence on the British market.
Between the gift and the market: the economy of regard
Authors: Offer Avner
Published: March 2003

‘The great transformation’ from customary exchange to impersonal markets is incomplete. Reciprocal exchange pervades modern societies. It takes the form of ‘gifts’, reciprocated without certainty. Reciprocity is driven by the pursuit of ‘regard’. Money is avoided in regard exchanges, because it is impersonal. Instead, regard signals are embodied in goods, in services, or in time (attention). The personalization of gifts authenticates the signal. Reciprocal exchange persists in family formation, in intergenerational transfers, in labour markets, in agriculture, the professions, in marketing, entrepreneurship, and also in corruption and crime. Reciprocal exchange is constrained by time and psychic energy, but is likely to persist as a preferred source of regard.
Landed interest, local government, and the labour market in England, 1750‐1850
Authors: Khun Song Byung
Published: March 2003

abstract
The growth and distribution of English friendly societies in the early nineteenth century
Authors: Gorsky Martin
Published: March 2003

abstract
Modelling British Interest Rate Adjustment: An Error Correction Approach
Authors: Hefferman Shelagh A.
Published: March 2003

An error correction model is used to capture the dynamics of British retail deposit and loan rate responses to changes in the central bank’s base rate. The test is conducted using a monthly series of interest rates for four generic retail banking products over the period 1986–93. The adjustment process is found to vary considerably between and within banks and products. The results suggest that this market continues to exhibit many features of imperfect competition, and that adjustment differences could affect the speed of the money transmission mechanism.
Efficient Ways to Finance Human Capital Investments
Authors: Moen Espen R.
Published: March 2003

Standard theory predicts that if wages are determined by bargaining workers underinvest in human capital, as they bear all the investment costs yet receive only a share less than one of the return. I show that this result depends on the way the investments are financed. I introduce contingent loans, which do not accumulate interest if the borrower is unemployed. When the investments are financed by such loans, the interest payments are regarded as a (negative) part of the surplus the agents bargain over. As a result, a worker pays the same share of the interest as he receives of the return.
Private Income Transfers and Market Incentives
Authors: Chami Ralph
Published: March 2003

The paper introduces labour supply considerations and labour earnings uncertainty into a parent–child framework in the presence of ‘merit goods’. I investigate the implications of various parental bequest rules on the effort decisions of the offspring, where the parent cannot perfectly observe her child’s market activities. The asymmetry in information and preferences gives rise to a moral hazard problem, and as a result the parent may not fully insure her child because the source of risk is not entirely exogenous. In this case, optimal parental transfers are shown to be state‐contingent. Moreover, the child’s effort is higher in the case with a merit good and parental transfers than in the case without a merit good.

Goods are not only economic commodities but vehicles and instruments for realities of another order: influence, power, sympathy, status, emotion; and the skillful game of exchange consists of a complex totality of maneuvers, conscious or unconscious, in order to gain security and to fortify one’s self against risks incurred through alliances and rivalry.

Levi‐Strauss, The Principle of Reciprocity
Asset Portfolios and Credit Rationing: Evidence from Kenya
Authors: Adam Christopher S.
Published: March 2003

This paper presents a model of the private sector’s demand for financial and real assets in Kenya for the period 1973–90. The private sector is assumed to hold its wealth in terms of five assets but is quantity‐rationed in the credit market. The model is estimated as a co‐integrated demand system, based on the almost‐ideal demand system of Deaton and Muellbauer (1980). The model highlights the role of real asset accumulation in offering a hedge against inflation and the role of credit rationing in the composition of wealth.
Income Inequality among Female Heads of Households: Racial Inequality Reconsidered
Authors: Zandvakili Sourushe
Published: March 2003

This paper investigates the factors that might have influenced earnings inequality among female heads of households over an extended period. The study used the generalized entropy measures of inequality in short‐run as well as long‐run income for the period 1978–86. The results suggest that short‐run inequality has generally increased. These fluctuations are due partially to the existence of transitory components which distort our view. The measured long‐run inequality shows a decline in the early years because of the smoothing of the transitory components. Race in conjunction with age, education and marital status is used to investigate their effects. Race and education are shown to be the most influential factors. The mobility profiles show the existence of permanent inequality among female heads of households.
The Dupuit–Marshall Theory of Competitive Equilibrium
Authors: Ekelund Jr Robert , Hébert Robert F.
Published: March 2003

Working with the classical expressions of demand, supply and market adjustments, the French engineer Jules Dupuit developed a model of competitive market adjustments in different time dimensions that anticipated Marshall’s ‘period analysis’ on all important points. Dupuit’s attempt to handle the complexity of economic phenomena in a scientific fashion, by utilizing the ceteris paribus method, and the integration of this method with the ‘facts’ of production in a ‘typical’ industry, generated a huge payoff for subsequent generations of economists. The payoff was enhanced by Marshall’s refinements, and realized by Marshall’s teaching, which took root in so many able students and disciples.
Inflation Contracts and Inflation Targets under Uncertainty: Why We Might Need Conservative Central Bankers
Authors: Muscatelli V. Anton
Published: March 2003

This paper compares the relative effectiveness of inflation contracts and inflation targets in the presence of uncertainty regarding the central bank’s preferences and the underlying output target. The model explains why discretion may be superior to a delegation solution. We also show that there might be the need to combine inflation targets and contracts with the appointment of a Rogoff‐type ‘conservative’ central banker if contracts and targets cannot be made state‐contingent, and that less flexible inflation targets may be appropriate with uncertain central bank preferences.
Educational Mobility: The Effect on Efficiency and Distribution
Authors: Eeckhout Jan
Published: March 2003

Within a microeconomic framework, educational mobility and inequality are studied. The labour market is characterized by imperfectly substitutable skills and production occurs in monopolistically competitive industries that exhibit local non‐convexities. Education allows for upward mobility. It is shown that multiple mobility equilibria exist in the stage game. In addition, for some skill levels, Pareto improvements are possible through adjustment policies. In the repeated game, a sufficient condition is derived for polarization, in which case the economy exhibits a low growth path. A higher growth path can be achieved through intertemporal redistribution. Without adjustment, inequality will increase continuously.
Interrelated Factor Demands from Dynamic Cost Functions: An Application to the Non‐energy Business Sector of the UK Economy
Authors: Allen Chris , Urga Giovanni
Published: March 2003

In this paper we propose a dynamic cost function which allows us consistently to derive a set of dynamic interrelated factor demand equations in the general error correction form introduced by Anderson and Blundell (1982). This paper expands results recently published in Urga (1996). It shows that the derivation of an effective underlying cost function allows us to identify the full set of parameters of the underlying process. This does not happen in the standard Anderson–Blundell formulation. We report an empirical exercise, used to model the so‐called ‘supply side’ of the London Busines School large‐scale economic model, where we estimate both the set of factor demands and the underlying dynamic cost function for the non‐energy business sector of the UK economy.
Transitional and Steady‐state Costs of Disinflattion When Growth is Endogenou
Authors: Einarsson Tor , Marquis Milton H.
Published: March 2003

In a monetary version of the Uzawa (1965)–Lucas (1988) model of endogenous growth, this paper illustrates how a credible policy of rapid disinflation can induce temporary declines in employment and output, with the former exhibiting a significant degree of persistance; however, these temporary declines in employment and output are not associated with any nominal rigidities in the economy, and therefore do not represent dead‐weight losses thhat occur along the transitio path, but are instead a part of an optimal response to the policy change. The measured welfare benefits of disinflation are seen to be higher when the transition path is taken into account.
Gender Segregation in the Academic Staff of Universities in Great Britain, 1980/81–1993/94
Authors: Rich Judith
Published: March 2003

This paper analyses gender segregation within the academic staff of universities in Great Britain over the period 1980/81–1993/94. It finds that the level of gender segregation increased, as measured by the Karmel–Maclachlan index, IP. Using a decomposition procedure, it is possible to identify the composition effect, which is the contribution of a change in the gender ratio of individual academic levels to the overall change in the level of segregation. This was found to have decreased over the 12 years, indicating that each grade of appointment became less segregated. However, the decline in segregation at each level of academic employment was six times greater in US institutes of higher education. The small extent of improvement in Great Britain focuses attention on the perceived lack of effectiveness of equal employment opportunity policy and programmes within the university sector identified by both the Commission for Racial Equality and the Hansard Society.
Efficiency Gaps, Love of Variety and International Trade
Authors: Montagna Catia
Published: March 2003

We develop a general equilibrium monopolistic competition model of trade with technical heterogeneity among firms and countries. With free entry, technical asymmetries between firms result in the endogenous determination of the equilibrium average efficiency of the industry. We show that trade reduces (increases) the minimum efficiency required to survive in the more (less) efficient country. This has important welfare implications: (1) Contrary to the constant elasticity of substitution homogeneous‐firms model, trade affects welfare even when there is no love of variety. (2) There are circumstances in which trade liberalization leads to a loss of consumer welfare.
Optimal At‐will Labour Contracts
Authors: Nosal Ed
Published: March 2003

An at‐will employment rule allows parties to sever their employment relationship for ‘a good reason, a bad reason or no reason at all’[Schawb, S. (1993) Life‐cycle justice: accommodating just cause and employment at will. Michigan Law Review, 92, 8‐‐62]. A specific performance employment rule allows any party to force the other party to perform as specified in the contract. Although the theory of labour contracting generally assumes enforcement by specific performance, in practice, the vast majority of non‐union employment relationships are mediated by an at‐will rule. When employment contracts are enforced by an at‐will rule, I show that the ‘standard’ counter‐intuitive predictions generated by standard labour contracting models disappear.
Social Insurance and the Public Budget
Authors: Andersen Torben M. , Dogonowski Robert R.
Published: March 2003

Restraints on the public budget may limit the ability of the public sector to use financial markets for the diversification of shocks. This interferes with the role of the public budget as a buffer which may provide insurance by stabilizing income and thereby private consumption. We consider this insurance or stabilizing role of public budgets and show why pro‐cyclical budgets and a progressive taxation system may be optimal even when tax distortions are taken into account. Balanced budget restrictions interfere with this insurance effect, and they do not necessarily imply that a lower level of public consumption is optimal.
Liquidity Constraints and Firms’ Investment Return Behaviour
Authors: Basu Parantap , Guariglia Alessandra
Published: March 2003

We construct a production‐based model, which compares the investment return behaviour of liquidity‐constrained firms with that of unconstrained firms. The key testable implication that emerges from the model is that the investment returns of the constrained firms are predictable, while those of the unconstrained firms are not. We test this implication indirectly, verifying whether the capital stock and investment returns of the latter firms lead those of the former, and directly, via the estimation of an Euler equation. Our results are consistent with the model’s prediction.
The Explanatory Power of Game Theory in International Politics: Syrian–Israeli Crisis Interactions, 1951–87
Authors: Guttman Joel M.
Published: March 2003

The present paper assesses the usefulness of game theory in explaining crisis interactions between Israel and Syria. We begin with the simplest game‐theoretic tool for analyzing strategic situations: the one‐shot 2×2 game. By analyzing the various episodes of the protracted Syrian‐‐Israeli conflict as one‐shot 2×2 games, we avoid the multiplicity of equilibria of the infinitely repeated game and the difficulty of specifying an endpoint of a finitely repeated game. The pure strategy Nash equilibria of these one‐shot games are treated as theoretical predictions and are compared with the observed outcomes.
Economic Performance and Leadership Accountability: An Econometric Analysis
Authors: Gallego M. E.
Published: March 2003

Logit models of leadership duration test whether different agents are responsible for constitutional and unconstitutional transfers of power. Lagged values of per capita real investment have a significantly negative impact on unconstitutional transitions. This suggests that the elites of less developed countries determine the timing of unconstitutional transfers as they are the ones with investment capabilities. Lagged values of per capita real consumption are associated with the well‐being of an average citizen. However, consumption exerts an unexpected positive influence on constitutional transitions when political regime differences are not taken into account. This significant effect disappears with the inclusion of parliamentary and presidential regime dummies.
Foreign Investment and Endogenous Protection with Protectionist Quid Pro Quo
Authors: Hillman Arye L. , Ursprung Heinrich W.
Published: March 2003

The literature on quid pro quo foreign direct investment describes how unwarranted investment may be undertaken because of the endogeneity of trade policy. The quid pro quo is that foreign producers, who are exporters to the host economy, invest in return for a liberal trade policy. We describe converse circumstances. The nexus between foreign investment and endogeneity of trade policy is implicit (not explicit as in quid pro quo investment), and a government with socially correct objectives (perhaps imposed by international‐agency conditionality) wishes (i) to privatize a domestic firm by sale to a foreign investor who can provide technology improvement for domestic production and (ii) to pursue a liberal trade policy. The government is electorally constrained by needs of political popularity. The outcome is that efficient private investments may not be undertaken—in contrast with the quid pro quo case where inefficient investments are undertaken. While our model is general, the conditions we describe appear to be in particular present in post‐socialist economies. Our model offers a contributing explanation for the slow pace of progress in many such economies, which rely on foreign technological transfer to improve the technology and product quality of post‐socialist industry, but fail to receive the requisite foreign investment despite governments' good intentions.
Russia’s Tax Crisis: Explaining Falling Revenues in a Transitional Economy
Authors: Reisman D.
Published: March 2003

Market reforms in Russia have been threatened in recent years by a continuing, dramatic decline in tax revenues. This article analyzes the fiscal data in search of an explanation. While part of the drop in collections can be attributed to rate changes and transitional macroeconomic dislocation, a sizable residual reflects a progressively worsening tax administration. This, in turn, is traced to perverse incentives in the system by which tax revenues are shared between central, regional, and local governments in Russia’s evolving federal system. As in other contexts, divided property rights reduce owners’ motivation to invest in a jointly‐owned asset.
New Deal or Same Old Shuffle? The Distribution of New Deal Dollars Across Alabama
Authors: Couch J. F. , Williams P. M.
Published: March 2003

This paper examines the distribution of New Deal expenditures within the state of Alabama. Previous literature ignored within‐state politics of distribution, focusing on the larger issue of distribution between states. Using previously unexploited county‐level data, our results indicate that those counties whose residents enjoyed higher incomes received larger appropriations than residents of lower‐income counties. In addition, evidence is presented that suggests that Alabama’s politicians’ desire for re‐election helped to shape how dollars were allocated within the state.
Strategic Political Participation and Redistribution
Authors: Aidt Toke Skovsgaard
Published: March 2003

The purpose of this paper is to study formation of support and opposition to redistribution. We analyze a society with two groups of citizens and a government. The government distributes income from one group to the other in response to political pressure. The interaction between the groups is modeled as a two‐stage game. In stage 1, the groups decide if they want to be politically active. In stage 2, the active group or groups seek influence on the direction and size of the transfer. We demonstrate that supporters of redistribution are always politically active but that opposition is often absent. Moreover, when opposition is absent there is a strong tendency for underdissipation of the transfer, while political competition typically leads to overdissipation.
Can Growth Ease Class Conflict?
Authors: Somanathan E.
Published: March 2003

This paper proposes a theory that links labor supply to wage growth and economic growth, and the conflict of interest between capital and labor. During the early stages of industrialization of a country, “surplus” labor drawn from the traditional sector of the economy is available to the modern capitalist sector at a constant or only slowly rising wage. As industrialization proceeds, this labor surplus vanishes, leading to wages rising in tandem with the growth of output. As long as there is surplus labor, workers in the modern capitalist sector, who are organized, have little interest in growth as it does not raise wages. The effect of growth is external to them, simply drawing more workers into the capitalist sector and enabling the entrants to receive rents. So capitalist‐sector workers would like to redistribute income regardless of the adverse effect on growth. Once the economy grows enough for the subsistence sector to vanish, further growth raises wages. Hence, this change in the structure of the economy leads to a reduction in the intensity of the labor–capital conflict.

The dual economy model implies that growth rates rise over time and fall after the exhaustion of the labor surplus which is consistent with the stylized fact of economic growth.
Factor or Industry Cleavages in Trade Policy? An Empirical Analysis of the Stolper–Samuelson Theorem
Authors: Beaulieu Eugene
Published: March 2003

If factors of production are mobile between industries, the Stolper–Samuelson Theorem predicts that cleavages over trade policy will form along factor lines. Conversely, if factors are immobile, cleavages will form along industry lines. These two hypotheses are empirically examined using micro‐data from a survey conducted during the 1988 Canadian federal election—a de facto referendum on free trade. Factors of production are found to be important determinants of preferences on trade policy. However, the industry of employment also helps determine preferences on trade policy. These results are consistent with partial factor mobility.
On the Political Economy of Temporary Stabilization Programs
Authors: Alfaro Laura
Published: March 2003

This paper provides a political economy explanation for temporary exchange‐rate‐based stabilization programs by focusing on the distributional effects of real exchange‐rate appreciation. I propose an economy in which agents are endowed with either tradable or non‐tradable goods. Under a cash‐in‐advance assumption, a temporary reduction in the devaluation rate induces a consumption boom accompanied by real appreciation, which hurts the owners of tradable goods. The owners of non‐tradables have to weigh two opposing effects: an increase in the present value of non‐tradable goods wealth and a negative intertemporal substitution effect. For reasonable parameter values, owners of non‐tradables are better off.
The early stages of reform in Polish manufacturing
Authors: Barbone Luca , Marchetti Domenico J. , Paternostro Stefano
Published: March 2003

This paper argues that a significant adjustment process has taken place in Polish industry in the early stages of the market‐oriented reforms. We analyse comprehensive data on two‐digit and three‐digit manufacturing industries, disaggregated by firm ownership and size. By focusing on a decomposition of labour productivity growth, we obtain results which suggest that structural determinants of the recovery have outweighed cyclical ones. With regard to firm ownership and economic performance, we find that the productive response of state enterprises has been markedly different from that of private firms, with the latter outperforming the former. Finally, our results indicate that size matters, at least among private firms, and our results provide mild evidence of increasing returns.

JEL classification: D21, E63, P21.
Research Note: The slow growth of foreign direct investment in the Soviet Union successor states
Authors: Meyer Klaus E. , Pind Christina
Published: March 2003

This note reviews the statistical evidence on foreign direct investment (FDI) in the countries of the former Soviet Union taking into account data from both host countries and countries of origin. The main characteristics of this FDI and its variation among the successor states of the Soviet Union are established. The contribution of FDI to economic transition is so far limited to some sectors and regions, and unlikely to accelerate in the near future.

JEL classification: F21, F23, P31.
Stress test for reforms: Transition and East Asian ‘contagion’
Authors: Fries Steven , Raiser Martin , Stern Nicholas
Published: March 2003

Contagion from East Asia imposed a severe 'stress test' on the market‐orientedreforms of transition economies. We find that the portfolio reallocations of investors differentiated sharply among these economies at the height of the East Asian turmoil, appearing clearly in the relative movements in interest rates and share prices. Those countries that appeared more vulnerable to contagion had large public or private sector imbalances and low reserve cover of short‐term debt. The analysis, however, goes beyond macroeconomic and financial imbalances to link these weak fundamentals to inadequate structural and institutional reforms. We find that flaws in public finances together with weak enterprises and financial institutions were key underlying factors in the vulnerability to East Asian contagion. They were also key causes of the Russian crisis, which initiated a new round of contagion driven primarily by high exposures to Russian trade.
New forms of labour contract and labour flexibility in Russia
Authors: Clarke Simon , Borisov Vadim
Published: March 2003

This paper assesses the claims that employment in the new Russian private sector relies heavily on informal and unregistered labour agreements and that the violation of existing labour law by new private employers is driven by their need for more flexible working arrangements.

The paper shows that these claims are unsupported on every count. The new private sector does not rely heavily on informal or illegal forms of employment and there is no evidence that it uses labour more flexibly, in any of the usual senses of the term, than the traditional sectors of the economy. The conclusion is that there is no economic justification for the systematic violation of the existing labour legislation. It is suggested, therefore, that enforcement of the existing law is a precondition for its effective reform in those areas in which it might be a barrier to restructuring.
Unemployment durations of job losers in a labour market in transition
Authors: Lubyova Martina , Van Ours Jan C.
Published: March 2003

Slovakia is one of the Central European countries in transformation from a centralized command system to a decentralized market economy. This paper studies the labour market position of Slovak job losers. Using data from labour force surveys we analyse exit rates out of unemployment. We find that male, young, higher educated job losers in districts with low unemployment rates have substantially shorter unemployment durations than their counterparts. There is evidence that for some job losers it is very hard to find a new job.
Outsiders in economic integration
Authors: Manzocchi Stefano , Ottaviano Gianmarco I. P.
Published: March 2003

We use a spatial model of endogenous growth to investigate the likely impact of discriminatory integration between two advanced insider countries on their own welfare as well as on the welfare of an outsider transition economy. A first point is that, since convergence in per capita income levels depends on relative market access and local market size, piece‐wise integration causes insider‐outsider divergence. Nonetheless, outsiders can gain in absolute terms if integration fosters the global growth rate. We also show that exclusion from a regional agreement and on‐going transition have unpredictable joint effects on the structural adjustment, which might even exhibit a swinging behaviour. Such swings may imply large adjustment costs, which can be reduced by careful integration design. With this respect, the asymmetric phasing‐out of trade barriers built into the Europe Agreements seems to work in the right direction. Finally, we point out that the predictions of the model in terms of direct investment and terms‐of‐trade dynamics are broadly consistent with some actual developments in transition economies.
Investment and poverty: The role of the International Financial Institutions: The Jacques de Larosière Lecture
Authors: Stern Nicholas
Published: March 2003

The European Bank for Reconstruction and Development (EBRD) is a unique institution with an inspiring and challenging mandate. I look back on the six years I spent with you as a most productive and cheerful period of my working life. And it is a great honour to give a lecture bearing the name of Jacques de Larosière. Like many of you, I learned enormously from him and owe him an immense debt. And even as bankers, we must recognize that there are some debts that it is a privilege to bear. Jacques is a very special figure in the international community. He is someone who, through his outstanding abilities, personality, dedication and charm, has changed the shape of development and progress in the global economy of the last fifty years. Giving this lecture in his name means a great deal to me, and I would like to thank Jean Lemierre and the Executive Committee of the EBRD for the invitation.
Distributive implications of member level income aggregation within the household: An approximation through mobility indices
Authors: Ruiz‐Castillo Javier , Sastre Mercedes
Published: March 2003

This paper adapts the ethical index of income mobility first suggested by Chakravarty, Dutta and Weymark (1985) to assess the contribution of wives, husbands, and other adults' member level income to husband‐wife households' income mobility according to two of the criteria discussed in the literature. For any partition of the population, a source's contribution is seen to be decomposable into within‐group and between‐group income mobility indices plus a term capturing sub‐group differences in income shares. The approach is applied to a sample of husband‐wife households where both spouses are present, extracted from the 1990–91 Encuesta de Presupuestos Familiares, the Spanish household budget survey. While the husbands' income contribution is large and positive, the contribution of wives and other adults is practically equal to zero. When mean income differences are eliminated, all member contributions to husband‐wife households' income mobility are substantially reduced.

JEL classification: D31, D33.
The distributional impact of unification and the 1992–93 recession on West German households
Authors: Bishop John A. , Formby John P. , Zeager Lester A.
Published: March 2003

The 1992–93 recession in the western states of Germany has been attributed, in substantial measure, to the macroeconomic consequences of policies to finance unification. Studies of the costs of unification have not attempted to measure the burden of the recession. We estimate a dynamic, panel model of household incomes using data from the German Socio‐Economic Panel (GSOEP) and use it to forecast what these incomes would have been in 1992–94 without a recession. Using a ratio of actual to forecast incomes, we compare the relative burden of the recession across households. Our findings suggest that western households below the median income bore the brunt of the combined impact of unification and the recession of 1992–93.

JEL classification: P3, D3, E3.