Profit taxation and capital accumulation in a dynamic oligopoly model

We illustrate a differential oligopoly game using the capital accumulation dynamics à la Ramsey. We evaluate the effects of profit taxation, proving that there exists a tax rate yielding the same steady state social welfare as under social planning. Contrary to the static approach, our dynamic analysis shows that, in general, profit taxation affects firms’ decisions concerning capital accumulation and sales. In particular, it has pro-competitive effects provided that the extent of delegation is large enough (and conversely).     

Generalized neo‐additive capacities and updating

This paper shows that, for Choquet expected utility preferences, the axioms consquentialism, state independence and conditional certainty equivalent consistency under updating characterise a family of capacities, which we call Generalized Neo‐Additive Capacities (GNAC). This family contains as special cases, among others, neo‐additive capacities as introduced by Chateauneuf, Eichberger, and Grant, Hurwicz capacities, and ? ‐contaminations. Moreover, we will show that the convex version of a GNAC is the only capacity for which the core of the full Bayesian updates of a capacity, introduced by Jaffray, equals the set of Bayesian updates of the probability distributions in the core of the original capacity.     

Wage and employment effects in the EU of international trade with the emerging economies

The paper investigates whether significant HOS effects are present in the EU from trade liberalization with the emerging economies. Regarding wage inequality, there is only evidence of a trade-induced technological change, but biased towards thelower-skilled-labor-intensive sectors. Relative wages in the EU member states are not affected differently. Trade liberalization under ‘European assumptions’, however, could affect primarily relative factor demand. A flexible cost function approach shows that import competition from the emerging economies influenced relative labor demand in favor of the higher skilled, implying an intrasectoral rather than an intersectoral specialization in skill-intensive activities. JEL no. F11, F14     

Model Uncertainty,Political Learning,and Institutions: A Broader View on Mancur Olson's Theory of Institutional Sclerosis

In his Rise and Decline of Nations, Mancur Olson argues that politically stable countries suffer from declining growth rates caused by the growing influence of distributional coalitions that accumulate over time. The empirical literature supports the notion of a negative relationship between a country's duration of political stability and its growth rates but finds only weak support for a negative influence of distributional coalitions on growth. This paper sketches a simple model of party competition under model uncertainty, which may explain this mixed empirical picture. It shows that politically stable democracies are less well equipped to adjust to shifts in their economic environment than democracies with a shorter history of political stability. In a further step, the paper relates the major theme of this theory and Olson's theory to the more recent literature on institutions and growth. Directions for further research are discussed.     

Sequential formation of alliances in survival contests

We consider a sequential formation of alliances à la Bloch (1996) and Okada (1996), followed by a two‐stage contest in which alliances first compete with each other, and then the members in the winning alliance compete again for an indivisible prize. In contrast to Konishi and Pan (2019a), which adopted an open‐membership game as the alliance formation process, alliances are allowed to limit their memberships (excludable alliances). We show that if members’ efforts are strongly complementary to each other, there will be exactly two asymmetric alliances: the larger alliance is formed first and then the remaining players form the smaller one. This result contrasts with the one under open membership, where moderate complementarity is necessary to support a two‐alliance structure. It is also in stark contrast with Bloch, Sánchez‐Pagés, and Soubeyran (2006), which shows that a grand coalition is formed in the same game if the prize is divisible and a binding contract can be used to avoid further conflicts after an alliance wins the prize.     

Pestilence,poverty, and provision: re‐evaluating the role of the popolani in early modern Venice

The labouring classes of early modern Venice, the popolani, made up nearly 90 per cent of the city's population. To this point the relevant historiography has focused almost exclusively on their professional and civic role. It is the core contention of this article that the contribution of the popolani to the Venetian economy and society far exceeded their documented professional and civic function. Using as a case study the homogeneous group of the shipbuilders and sailors of Venice and drawing on newly discovered primary sources from the Venetian State Archives, this article shows the distinct contributions of the popolani to the city's economy and society through their charity to those in need. This took the form of sizeable dotal and charitable donations within and beyond the family. In one of the first attempts to explore the philanthropy of the Venetian workforce, this article challenges the existing scholarly view that charity was the sole responsibility of the government and the nobility in early modern Venice. It further shows that marriage was not merely a financial union for the popolani; it was a sanctuary for lasting companionship. Ultimately, the article offers a fresh vista onto the socio‐economic role of the popolani in early modern Venice.     

The Impact of Macroeconomic Risk on Asset Prices in Ghana, 1997–2002

Abstract: The dwindling nature of overseas development assistance in the early part of the 1990s called for the establishment of capital markets in some African countries, including Ghana, with the view to increasing foreign direct investments and achieving sustainable inflows, growth and development. One important factor which affects the determination of prices and the growth of capital markets is macroeconomic risk which is quite high in developing countries. Following works done on advanced stock markets, this study seeks to investigate the impact of six macroeconomic risk factors on asset pricing in the various industrial classification — financial, manufacturing, food and beverages, distribution and mining under the Ghana Stock Exchange (GSE) for the period January 1997 to December 2002. Using the arbitrage pricing methodology developed by Ross (1976) and Chen et al. (1986) , the study revealed that investors in Ghana considered three main macroeconomic risk factors — short‐term interest rate risk, inflation risk and the term structure of the country's interest rate in the determination of the various industrial asset prices during the period under consideration. Analysis of the risks and returns profile of the industries also shows that financial assets made the best gains on the market. Both general and specific policy recommendations aimed at improving the performance of the GSE are explored.     

Sibling donation games: pure-altruism,strategic-altruism,and the interaction of familial and public transfers

Accompanying the rapidly aging populations of high-income countries are increasing transfers of time and money from adult children to elderly parents (ascending altruism). In this paper we first develop a theoretical model to characterize the general reaction-functions of two adult siblings choosing transfer amounts (possibly time) to their needy parents under two alternative motivations: pure altruism and strategic altruism. We show that transfers are strategic substitutes under pure altruism and strategic complements under strategic altruism. The Nash-equilibrium generates distinct predictions associated with each motivation and we then explore some implications of our findings. A result with potentially important policy implications is that the response of children transfers to increased pension payments to the parents depends on the children's motivations. This contrasts with much of the literature which assumes transfers decrease with increased pension payments.     

Modeling Energy and Development: An Evaluation of Models and Concepts

Most global energy models are developed by institutes from developed countries, focusing primarily on issues that are important in industrialized countries. Evaluation of the results for Asia of the IPCC/SRES models shows that broad concepts of energy and development, the energy ladder and the environmental Kuznets curve, can be observed in the results of the models. However, improvements can be made in modeling the issues that underlie these concepts, like traditional fuels, electrification, economic structural change, income distribution, and informal economies. Given the rapidly growing importance of energy trajectories of developing countries for global sustainability, the challenge for the future is to develop energy models that include all these aspects of energy and development.     

Optimal exchange-rate policy in an open economy

Summary Based on an empirical model constructed here and a quantified macroeconomic loss function, the analysis shows, by means of optimal control techniques, that a managed floating exchange rate would have been the optimal exchange arrangement for The Netherlands in the first half of the 1970s. Freely floating rates would have been the second-best solution. For both arrangements as well as for the adjustable peg the optimal time paths and various characteristics are deduced. Furthermore, quantification shows thatopenness does not exert the theoretically anticipated effect on a country's need for fixed exchange rates.     

Foreign Currency Exposure of Multinational Firms: Accounting Measures and Market Valuation*

Abstract. The accounting method in Statement of Financial Accounting Standards (SFAS) No. 8 for restatement of a foreign operation's financial statements denominated in a foreign currency into the parent's currency equivalents for inclusion in the parent company's financial statements was severely criticized by market participants and managers. Its replacement, SFAS No. 52, represented an attempt to improve on the methods of SFAS No. 8. This study examines two questions: did SFAS No. 8 produce relevant information for valuing US multinational firms, and are the results reported under SFAS No. 52 more valuation relevant than those reported under SFAS No. 8? Valuation relevance is studied because the Financial Accounting Standards Board (FASB) has stated that relevance is an important criterion for choosing among alternative accounting methods. Considered collectively, the results suggest that the rules in SFAS No. 8 produced a poor accounting measure for valuing US multinational firms, and that the introduction of SFAS No. 52 has resulted in a significant improvement in the valuation relevance of the accounting numbers associated with the restatement of a foreign operation's financial statements. However, this improvement applies only to the subset of firms that designated a foreign currency as their functional currency (i.e., switched to the current-rate method) and not to firms that designated the dollar as their functional currency (i.e., as if they still reported under SFAS No. 8).     

The optimal exchange rate regime for a small country

This paper examines the welfare comparisons between a freely floating, a managed floating, and a pegged exchange rate regime. We compare the expected loss under these regimes by modifying and generalizing Hamada’s (2002) model to accommodate intervention policy. We consider the de jure and de facto classifications, where the former is defined by the officially stated intentions of the monetary authorities, while the latter is based on the actually observed behavior of the nominal exchange rate. We first examine the exchange rate regimes from the central bank’s policy stance and the actual exchange rate policy. Next we assume that the regime which the private sector perceives according to an official announcement may be different from the one adopted actually by the central bank. We examine nine combinations of the de jure and de facto regimes. We interpret that, whenever they are different, there is informational friction between the central bank and the private sector. We show that the welfare level of a small country under freely floating is no less than that under other regimes, and that with some restrictive conditions, the de facto pegged or de facto managed floating is close to freely floating. This partly explains “Fear of floating” and “Fear of pegging”.     

Health,Education and Emergence from the Development Trap

Abstract: This paper studies the emergence of developing countries from a development trap. It shows that countries whose dynamics exhibits several growth peaks can be considered as cases of equilibrium jump. Applying this criterion to a sample of 65 countries that were initially very poor in 1950, it identifies 13 such countries, called ‘emerging economies’. Comparing emerging and non‐emerging economies in the 1950s and early 1960s, it shows that economic take‐offs starting in the 1960s can be related to health and education in the early 1950s, while other possible factors, such as savings, openness and democracy are not significant.     

Corporate Governance and Shareholder Value Maximization: An African Perspective

Abstract: This study looks at corporate governance and its impact on shareholder value maximization in Africa. Data from South Africa, Ghana, Kenya and Nigeria covering the period 1997–2001 were used and analysis done within the panel data framework. Results show that, though highly dispersed, both within and between firms, corporate boards in the selected countries are relatively not independent. The regression result shows that large board sizes enhance corporate performance and shareholder value maximization. Our study also shows that both sector and country‐specific effects have an impact on shareholder value maximization. While the mining sector is dominant in maximizing shareholder value, it also suffers from higher taxes and interest payments.     

The pribumi entrepreneurs of Bali and Central Java (or how not to help indigenous enterprise)

Fostering indigenous (pribumi) entrepreneurs remains a major aim in Indonesia. The history of the Central Javanese batik industry shows, however, that affirmative action programs in pursuit of that aim can be counter-productive if they undermine entrepreneurial skills–innovation in relation to products, markets, technologies and management–and instead encourage cultivation of political and bureaucratic contacts. The batik industry cloth subsidy did this by rewarding well-established and well-connected firms for continuing to do what they had long been doing, while discriminating against new and innovative firms. On the other hand, the emergence and rapid expansion of the Balinese garment industry showed that pribumi are capable of successful entrepreneurship in a favourable environment without any extraordinary government assistance. The challenge for policy makers determined that pribumi play a larger role in business, therefore, is to design policies that encourage the development of pribumi entrepreneurial skills, rather than causing them to atrophy.     

Keynes en de neoklassieken: Een herinterpretatie

Summary Following the examples of Hicks and Modigliani, most economists treat neoclassical and Keynesian theories as special cases of a more general model. In the opinion of Clower, Leijonhufvud and Shackle, Keynes differs from the neoclassics in assuming incomplete information. An analysis of non-tâtonnement pricing shows that the positive correlation between unemployment and real wage rates, still adhered to by Keynes, need not exist. With non-tâtonnement pricing and an-product economy, idleness of capital goods can be explained. The macro-economic production function, implying as it does a one-product, one-producer economy, is misleading.     

The Role of TTIP on the Environment

The current study empirically investigates and shows that, on average, the possible implementation of the Transatlantic Trade and Investment Partnership (TTIP) would generally help in the fight against global warming. In particular, the study finds that a 1% increase in the bilateral trade between the United States and the typical EU member would reduce annual per capita emissions of CO₂ and GHGs in the typical TTIP member by about 2.7% and 2.4%, respectively. However, results also show that TTIP may increase annual per capita emissions of GHGs in the United States by about 2.5% per year. These results stand because the factor endowment hypothesis and the pollution haven hypothesis based on population density variations appear to dominate the pollution haven hypothesis based on national income differences.     

Chasing Success: Health Sector Aid and Mortality

As many cases studies show, successful public health measures are being implemented in many places around the globe, and country-level mortality has fallen significantly in recent decades in all but a few countries. Are the two linked? Does development assistance for health (DAH) improve, on balance, recipient countries’ mortality trajectory? Using a new data source containing DAH on 96 high mortality countries, the regression analysis shows no effect of DAH on mortality. Other types of aid, including water development, also have no effect. Economic growth, on the other hand, has a strong negative effect on mortality. These findings confirm and build upon recent work by Williamson (2008) and are shown to be robust to a variety of sensitivity analyses and alternative model specifications and estimation methods.This analysis also shows that the effectiveness of DAH has not increased over time, even as the level of that funding has increased fourfold, though spending on infectious diseases and family planning may have caused small reductions in mortality. Furthermore, even though it is encouraging that DAH has tended to go where the need is highest, it also goes to states that have experienced the greatest mortality reductions in the recent past. In other words, DAH appears to be following success, rather than causing it.     

Response to ‘Duplications’ by Drelichman and Voth

In this response, we demonstrate that Mauricio Drelichman and Hans‐Joachim Voth, in their 2015 Economic History Review note ‘Duplication without constraints: Álvarez‐Nogal and Chamley's analysis of debt policy under Philip II’, provide a misconceived and inaccurate account of our argument about the finances of Philip II in ‘Debt policy under constraints: Philip II, the Cortes, and Genoese bankers’ (Economic History Review, 2014). Here, we summarize our position in the context of the current literature and provide a few comments on data gathering.     

“Fighting the Tide: Alternative Trade Organizations in the Era of Global Free Trade”—A Comment

LeClair [LeClair, M. S. (2002). Fighting the tide: alternative trade organizations in the era of global free trade. World Development, 30(6), 949–958] concludes that in theory Fair Trade is a second-best alternative to aid, may impose losses on non-Fair Trade producers and prolongs dependence on unsustainable modes of production. This paper shows how these conclusions depend upon a particular definition of subsidy and upon the assumptions of full employment and that Fair Trade goods face price-inelastic demand. An adverse impact on non-Fair Trade producers is possible but not intrinsic, and the claim of economic inefficiency cannot be sustained within a more general analysis.