PARTISAN POLITICS, INTEREST RATES AND THE STOCK MARKET: EVIDENCE FROM AMERICAN AND BRITISH RETURNS IN THE TWENTIETH CENTURY

We examine the relationship between government partisanship, interest rates and the mean and volatility of stock prices in the United States and United Kingdom. We suggest that traders in the stock market rationally expect higher (lower) post-electoral interest rates during the incumbency of the left-wing (right-wing) party – Democrats and Labor (Republican and Conservative) – and in election years when they expect the left-wing (right-wing) party to win elections. We hypothesize that expectations of higher (lower) interest rates decrease (increase) the mean and volatility of stock prices during the actual incumbency or even anticipation of a left-wing (right-wing) party holding the office of the chief executive. Results from empirical models estimated on data from U.S. and U.K. markets over most of the twentieth century statistically support our claims.     

中国和印度的农村工业化比较研究

在过去几十年里，中国农村的非农经济取得了举世瞩目的高速增长，对中国经济的整体增长做出了积极贡献。而在印度，该部门的表现却大为逊色，无论产出还是就业都增长缓慢。本文从两国制度性及政策差异（特别是在政治制度、所有权结构、信贷制度）来分析两国农村非农业部门出现不同的发展模式的原因。通过中印两国农村非农业经济的优劣势的回顾，我们可以更清楚地看到该部门增长的潜力与挑战。     

International Outsourcing,Tax, and Patent Protection

We show the implications of strengthening patent protection in a developing country in the presence of a vertical technology transfer, which, despite its empirical relevance, did not get due attention in the literature. We show that if there is imperfect knowledge spillover under a weak patent protection, a strong patent protection in the developing country increases the profit of the developed‐country firm if there is a uniform tax rate in the developing country. However, if there is either perfect knowledge spillover under weak patent protection or discriminatory tax policy in the developing country, the profits of the developed‐country firms are the same under weak and strong patent protections in the developing countries.     

Optimal employment contracts and the returns to monitoring in a principal-agent context

Abstract. In this paper we study a two-person firm consisting of a principal and an agent. The principal hires the agent to provide some input into the production process. The output of the production process is determined by the agent's input and an exogenous state realization. Subsequent to joining the firm, but prior to choosing his input, the agent privately observes the state realization. The principal employs an imperfect monitoring system that publicly reports on the state realization. Our purpose in studying this model is to better understand the effects of monitoring on the design of the optimal employment contract and the determinants of the value of monitoring in a model with asymmetric information. Résumé. Les auteurs étudient une entreprise constituée de deux personnes, un mandant et un mandataire. Le mandant embauche le mandataire pour sa contribution au processus de fabrication. Le résultat du processus de fabrication est déterminé par la contribution du mandataire et par la réalisation d'un état exogène. Après s'être joint à l'entreprise, mais avant de déterminer quelle sera sa contribution, le mandataire observe, en privé, la réalisation de cet état exogène. Le mandant a recours à un système de suivi imparfait qui fait le point, à l'intention du public, sur la réalisation de l'état en question. L'étude de ce modèle permet une meilleure compréhension des conséquences du suivi sur la nature de contrat d'emploi optimal et des déterminants de la valeur du suivi dans un modèle caractérisé par une information asymétrique.     

中国和印度的农村工业化比较研究

在过去几十年里,中国农村的非农经济取得了举世瞩目的高速增长,对中国经济的整体增长做出了积极贡献。而在印度,该部门的表现却大为逊色,无论产出还是就业都增长缓慢。本文从两国制度性及政策差异(特别是在政治制度、所有权结构、信贷制度)来分析两国农村非农业部门出现不同的发展模式的原因。通过中印两国农村非农业经济的优劣势的回顾,我们可以更清楚地看到该部门增长的潜力与挑战。     

JOINT VENTURE BUY‐OUTS UNDER UNCERTAINTY*

This paper provides a theory of joint venture buy‐outs in the presence of demand uncertainty. In an infinite horizon framework with demand uncertainty, we consider a foreign firm's decision on whether to form a joint venture or to open a fully owned subsidiary. Without the possibility of future share adjustment, the foreign firm enters the market through a joint venture if the host‐country firm helps to reduce the uncertainty significantly. Consequently, the firm enters at an earlier point in time compared to the situation in which opening a fully owned subsidiary is the only option to the firm. The possibility of future share adjustment in the joint venture further increases the incentive to speed up foreign investment. Although the possibility of share adjustment results in a joint venture buy‐out and can reduce the future profits of the host‐country firm, it may increase host‐country welfare by attracting foreign investment at an earlier point in time. We show the implications of learning in the joint venture.     

SEEKING RENT IN THE INFORMAL SECTOR

Rent seeking within the vast informal segment of the developing world is a relatively under‐explored topic in the interface of labor market policies and public economics. Moreover, how rent seeking and corruption within the informal segment gets affected by economic reforms targeted for the formal sector is rarely discussed in the literature. This paper fills the gap. We identify conditions under which economic reform in the formal segment will increase the rate of corruption or rent seeking in the informal sector and raise the pay‐off for those involved in rent‐seeking activities. When the formal sector contracts due to reforms, rent seeking in the informal sector may increase and lower the level of welfare unconditionally. Economic reforms may increase corruption instead of reducing it, unlike standard conjectures.     

Learning about Mutual Fund Managers

We study capital allocations to managers with two mutual funds, and show that investors learn about managers from their performance records. Flows into a fund are predicted by the manager's performance in his other fund, especially when he outperforms and when signals from the other fund are more useful. In equilibrium, capital should be allocated such that there is no cross‐fund predictability. However, we find positive predictability, particularly among underperforming funds. Our results are consistent with incomplete learning: while investors move capital in the right direction, they do not withdraw enough capital when the manager underperforms in his other fund.     

A Note on the Adverse Effect of Competition on Consumers

It is usually believed that higher competition, implying more active firms, benefits consumers. We show that this may not be the case in an industry with asymmetric cost firms. A rise in the number of more cost‐inefficient firms makes the consumers worse off in the presence of a welfare‐maximizing tax/subsidy policy. A rise in the number of more cost‐inefficient firms also reduces social welfare.