Deregulation and globalization of airlines

Although the airline industry has contributed to the globalization of the world economy, it is itself one of the least globalized sectors. This article identifies the governmental policies that have contributed to that outcome, and the economic and political forces that have gradually eroded regulatory barriers to competition and globalization in the last ten to fifteen years. Based on their airline industry policies in the mid-1990s, countries are classified as efficiency seekers (e.g., the United States), late reformers (e.g., Germany), and shelter providers (e.g., France), with the first embracing deregulation and globalization, the second adopting those policies somewhat slowly and reluctantly, and the third continuing to resist them in every possible way. Using Porter's “diamond” of international competitiveness, the article then explores the interaction of country characteristics and government policies to shape the competitiveness of U.S. and European airlines. The article concludes that, as a group, U.S. airlines are quite competitive, whereas in Europe the situation varies greatly between efficiency-seeking countries, such as the United Kingdom and the Netherlands, whose airlines have become very competitive, and shelter-providing countries, such as France, Italy, and Spain, whose airlines continue to be plagued by high costs and poor service. Because first-mover advantages can be significant as the airline industry globalizes, countries that postpone reforms are likely to find that the passage of time makes it harder to make their airlines internationally competitive, not merely in terms of cost but also in terms of nonprice dimensions, such as quality, service, and reliability.     

Which Regional Inequality? The Evolution of Rural–Urban and Inland–Coastal Inequality in China from 1983 to 1995

This paper develops a unified empirical framework for describing the relative contribution of rural–urban and inland–coastal inequality to overall regional inequality in China during the 1980's and 1990's. The framework assesses rural–urban and inland–coastal inequalities from the same data set, presents results for a sufficiently long time period to transcend short-term fluctuations, allows for differential price changes, and applies a consistent notion of the contribution to inequality using a decomposition analysis. While the contribution of rural–urban inequality is much higher than that of inland–coastal inequality in terms of levels, the trend is very different. The rural–urban contribution has not changed very much over time, but the inland–coastal contribution has increased by several fold. The paper ends by investigating the role of labor migration in this outcome. J. Comp. Econom., December 1999, 27(4), pp. 686–701. Department of Agricultural, Resource, and Managerial Economics, 309 Warren Hall, Cornell University, Ithaca, New York 14853; International Food Policy Research Institute, 2033 K Street, NW, Washington, DC 20006.     

Traded and Nontraded Goods and Real Wages

The paper explains most, if not all, observations made by the empirical literature regarding the behavior of skilled and unskilled real wages in the United States, especially those since 1980. Generalizing the Stopler–Samuelson theorem, the authors show that the nontraded sector is critical to explaining the effects of changes in the price of traded goods on relative and absolute wages. Factor‐intensities play their role as in the traditional Stolper–Samuelson model, but the output of the nontraded sector matters as well. Specifically, freer trade benefits capital and hurts both the skilled and unskilled labor if the import as well as the nontraded sectors contract. This is a new result to the literature on Stolper–Samuelson issues.     

Community and class antagonism

We investigate how vertical unity within a community interacts with horizontal class divisions of an unequal income distribution. Community is conceptualized in terms of a public good to which all those in the community have equal access, but from which outsiders are excluded. We formulate the idea of redistributive tension, or class antagonism, in terms of the costs that poorer individuals would be willing to impose on the rich, to achieve a given gain in personal income. Our conclusion is that the nominal distribution of income could give a misleading picture of tensions in society, both within and across communities. Ideologies of community solidarity may well trump those of class solidarity because of the implicit sharing of community resources brought about by community-specific public goods. Greater economic mobility of particular types may actually exacerbate class tensions instead of attenuating them. We illustrate our theoretical results with a discussion of a number of historical episodes of shifting class tensions and alliances.     

Symposium onMarket development and inequality in China1

After three decades of market development, the problem in China is no longer how to achieve growth but how to manage its consequences and how to sustain it. One of the most important consequences is the growing inequality – between skilled and unskilled workers, between the genders, between rural and urban areas, and between inland and coastal regions. The papers in this symposium shed light on the important issue of inequality during rapid market development in China. Analysis based on ground level empirical studies can help us to understand better the sources of the rising inequality and to illuminate the nature of the future challenges.     

Testing the limits of privatization: Argentine railroads

Just how far can privatization be pushed, and with what consequences? Based on a study of Argentine railroads, this paper concludes that even large, unprofitable firms in developing countries faced with market failures can be privatized, but the gains from doing so depend on how badly the state enterprise was performing to begin with, and the potential for introducing competition in the market and for the market. The broader lesson is that when both market failures and government failures are present, a public-private solution is preferable to a purely private or a purely public solution. Privatization is not a panacea but potentially a palliative, when it comes to reducing subsidies or coping with regulatory failures.     

Managerial ownership and corporate diversification: a longitudinal view

Strategy and finance research suggests that managerial ownership results in increased incentive alignment and therefore is negatively related to corporate diversification. Using a longitudinal approach, we develop arguments to examine whether managerial ownership is associated with subsequent changes in diversification and/or if diversification is associated with subsequent changes in ownership. The results indicate that levels of managerial ownership in one time period are not associated with subsequent changes in corporate diversification, which raises incentive alignment questions. We also find that higher levels of corporate diversification are associated with changes in managerial ownership, which suggests support for the employment risk‐reduction perspective. This study provides important reasons to reassess the longitudinal implications of the managerial ownership‐corporate diversification link from both theoretical and managerial perspectives. Copyright © 2007 John Wiley & Sons, Ltd.