Locational Competition: A Neglected Paradigm in the International Division of Labour

Krugman's verdict that competitiveness of countries is a largely meaningless concept is a serious misjudgement of the economics profession. Countries compete for the mobile factors of production, most importantly for capital and technology. The exit‐option of these factors and of firms changes the calculus of national governments. This paper sets out the main elements of the concept of competition between locations – locational competition – and analyses its impact on welfare and employment of the capital‐exporting country. It also looks at whether competition between countries necessarily results in a race to the bottom or whether it can function as a controlling mechanism for governments and as a discovery device. The paper discusses under which conditions common rules are needed to reduce transaction costs and to prevent strategic, opportunistic behaviour of countries and which common rules thus reduce transaction costs. Finally, it deals with the question whether one institutional equilibrium in the world economy can be expected or whether many national equilibriums can coexist.     

PUBLIC CHOICE AND URBAN ECONOMICS: THE UNNOTICED LINK BETWEEN LIQUOR LICENSING AND URBAN SPRAWL

The paper's hypothesis is that strict liquor licensing laws, as in Britain and the US, which ban street cafés (ostensibly to protect children) effectively transfer property rights in the streets to the commuting car users. Road pricing, either explicit or implicit via congested streets, loses its constituency. The result is road widening, neglect of city amenities and consequent urban sprawl. In line with the hypothesis, we find that continental European countries permitting street cafés and restaurants have less urban sprawl. They also attract more tourists, and their citizens are less obese. Therefore, the forthcoming Licensing Act, by (hopefully) assisting street cafés, marks an important step forward for British cities.     

Wage Compensation for Job Risks: the Case of Hong Kong

The paper provides an estimate of wage compensation for fatal job risk in Hong Kong. It uses the 1991 Population Census of Hong Kong merged with job fatality data collected by the Labour Department. The results show that there is a positive and significant compensating wage differential for job fatal risk for manual workers in Hong Kong. The estimated 'statistical value of a life' is approximately HK$10.8m in 1990 prices (about US$1.4m). While this figure is somewhat lower than many estimates for developed countries, it is much higher than workers' compensation.