A new look at the impact of U.S. import barriers on corporate profit expectations

A New Look at the Impact of U.S. Import Barriers on Corporate Profit Expectations. — The notion that industries benefit from protection is firmly grounded in trade theory. However, previous “event studies” measuring the impact of trade restrictions on stock prices reveal that shareholders expect no improvement in industry profits from protection. The implication is that barriers designed to promote industry adjustment are considered ineffective by equity holders. This investigation of U.S. “Escape Clause” cases shows that shareholders do expect protection to enhance profits, but not universally. Outcomes are linked to the type of trade measure selected, with industries protected by tariffs or global quotas faring better than those shielded by nonglobal “Orderly Marketing Agreements.”     

Total capital and economic growth

In contrast to the official estimates of gross private domestic investment and associated capital stocks prepared by the Bureau of Economic Analysis (BEA), the author presents estimates of total investment and capital, human and nonhuman, tangible and nontangible, by all sectors of the U.S. economy. Total investment is 3.1 times the BEA estimate in 1929, rising to 4.1 times in 1990. It accounts for almost half of adjusted GDP in the latter year. As hypothesized, real total capital stocks rise at about the same 2.9 percent average annual rate as real gross domestic product 1929–90, 0.1 percentage points more in the total economy and 0.2 points less in the predominant business sector. Increases in nontangible capital (mainly education, training, health, and research and development—“R&D”-) largely explain the growth in total tangible factor (capital) productivity in the whole economy. Nontangible, human capital has grown relatively faster in the business sector than in the entire economy, helping to explain its more rapid productivity advance. The author recommends that when BEA shifts to the U.N. standard system of accounts, it include nontangible and human tangible investments and capital in “satellite” accounts, as well as tangible investments for all sectors in the core accounts. This will greatly facilitate the analysis of economic growth. Presidential Address at the Thirty-Sixth Atlantic Economic Society Conference, October 7–10, 1993, Philadelphia, Pennsylvania.     

Exchange-Rate Policies in Emerging Countries: Eleven Empirical Regularities From Latin America and East Asia

In this paper I discuss some of the most important lessons on exchange-rate policies in emerging markets during the last 35 years. The analysis is undertaken from the perspective of both the Latin American and East Asian nations. Some of the topics addressed include: the relationship between exchange-rate regimes and growth, the costs of currency crises, the merits of “dollarization,” the relationship between exchange rates and macroeconomic stability, monetary independence under alternative exchange-rate arrangements, and the effects of the recent global “currency wars” on exchange rates in commodity exporters.     

Entrepreneurship and corporate governance

Conclusions The main message of this article is that Austrians can continue to work within the contractual, or Coasian, approach to the firm in elaborating the insights discussed above. In particular, the problem of corporate governance, and the corollary view that firms are investments, belongs at the forefront of Austrian research on the theory of the firm. Emphasis should thus be placed on the plans and actions of the capitalist-entrepreneur. A particularly undeveloped area concerns the provision of capital to small, “entrepreneurial” ventures. Most of the literature on governance focuses on the large corporation, and the use of stock and bond markets to govern these organizations. Equally important, however, are smaller, privately held firms, financed with venture capital or other forms of investment. So far, the firm-as-investment literature has said little about these organizations, despite their growing importance, particularly in high-growth, technologically-advanced industries like software and biotechnology. Further research in this area is sorely needed. Earlier versions of this article were presented at George Mason University’s “Seminars in Austrian Economics IV: Inside the Black Box,” October 1997; the Austrian Scholars Conference 4, Auburn University, April 1998; and Copenhagen Business School’s RESPECT workshop, November 1998.     

Economic forces,structural discrimination and black family instability

The social and economic gains achieved by black families during the 1960s were severely eroded during the seventies and eighties. Unemployment, poverty, single-parent families, out-of-wedlock births, and adolescent pregnancies soared to alarming levels. According to the thesis of the declining significance of race, this crisis is mainly concentrated among the black “underclass” and it is broad societal trends, not racism, that is mainly responsible for their increased deprivation. We contend that this thesis fails to assess the role of institutionalized racism as it is manifested in “unintended” or “structural” discrimination, i.e., the disproportionate adverse effects of economic trends and policies on the functioning of low-income and middle-income black families. Moreover, we argue that social forces or policies that have racially disparate adverse effects are “discriminatory” by result, whether intended or not. The major economic trends that affected black families adversely during the seventies and eighties were: back-to-back recessions, double-digit inflation, and industrial and population shifts. The key economic policies that undermined black family stability have been: anti-inflation fiscal and monetary policies, trade policies, plant closings, social welfare, block grants, and federal per capita formulas for allocating funds to states and local areas that have not been corrected for the census undercount.     

Big philanthropy and the funding of black organizations

Conclusion The general overview of foundation giving to promote black interests and the specific look at the Ford-MARC relationship support the notion that few foundation grants will go to “controversial” or “political” projects. The Peterson Commission estimated that only three percent of all private foundation grants are “innovative” and an even smaller percentage are “politically controversial.” Most often, these projects usually become controversial after the grant is made. A 1971 Urban League study revealed that grants for human services made by private foundations to black and Spanish-speaking communities were disproportionately low when measured in terms of the per capita needs of the minority population. Nevertheless, it is unrealistic to expect Ford, Rockefeller Brothers, Mott, or Carnegie to redistribute income or become the “cutting edge of social change”.     

Racial differences in consumer expenditure patterns, 1972–73

Summary and Conclusion In this paper, we have endeavored to analyze black-non-black differences in expenditure patterns as revealed by the 1972–73 BLS Consumer Expenditure Interview Survey Summary. Specific data shortcomings have been noted above. In addition, however, possible black-non-black differences in the propensity to misreport or withhold information may have affected the reliability of our findings. With these limitations in mind, the evidence of the survey data points to a main conclusion, namely, that although the “average” black consumer unit tended to spend a larger proportion of its after-tax income than the “average” non-black unit-just as the well-known stereotype implies-the statistical model underlying our analysis suggests that black consumer units with the same “characteristics” (after-tax income, family size, regional location, as well as the same age, education, and retired-nonretired status of family head) as the average non-black units tended to spend a smaller-not larger-proportion of their income than did the “comparable” non-black units. In addition, the model suggests that if Blacks maintained their own average characteristics but had the same “consumer behavior” as non-blacks, their APSp would rise substantially.     

The impact of black mayors on the black community: The case of New Orleans’ ernest morial

Conclusion Dutch Morial is deeply respected by the New Orleans black community. According to a poll conducted in April 1983 by Rose-Stekler Associates, 80% of the black respondents gave Morial “excellent” or “good” job ratings, compared to only 11% who found him doing a “fair” or “poor” job. Despite very limited resourses, the Morial mayoralty has facilitated the entrance of the black middle class into the governmental process, providing access to city contracts and administrative positions. On the other hand, the black underclass has received meager rewards in the form of employment or a reduction in police brutality. Hopefully, economic development, in the long-run, will create jobs and provide additional city revenue to fund services for the poor. But for now, the primary impact of a black mayor on the black community of New Orleans has been symbolic kinds of benefits. Yet the potential positive benefits of a black mayor serving as a role model for black youth, as well as the value of civil rights rhetoric in fostering hopefulness and a more self-reliant black community, should not be underestimated. The characterization of the status of the civil rights movement in 1983 offered by C. T. Vivian, head of the Anti-Klan Network, well applies to New Orleans black community today: “Everything has changed and nothing has changed. The statistics are still terrible. But the atmosphere is totally different.”⁴⁹     

The origin,birth, and adolescence of the review of black political economy and the black economic research center

The Review of Black Political Economy (RBPE) and the Black Economic Research Center (BERC) arose from the atmosphere of the late sixties, when black nationalism was at its apex and vigorous efforts were under way to give meaning to the concepts of “black economic development” and “black capitalism.” They were created as vehicles to assist black economists and economic activists to analyze and disseminate relevant data on black economic affairs and to explore and facilitate new approaches to black economic problems.RBPE offered black economists a place where they could publish their work and share it with their colleagues. The flavor ofRBPE has changed somewhat over its twenty-three year life, becoming less polemical and more scholarly.     

The Link Between CEO Compensation and Firm Performance: Does Simultaneity Matter?

In order to combat the principle-agent problem, directors of public companies use incentive-based contracts to align the interests of CEOs and shareholders. Some studies suggest that these contracts are an inefficient use of resources, and that they do not motivate CEOs to do what is best for the firm. In this study, the author estimates a regression to find the relationship between CEO Compensation and market value of a firm. In order to address persistence, endogeneity and firm-specific effects the author uses the first-differenced and system GMM regression techniques first used by [Arellano, M.; Bover, O. “Another Look at the Instrumental-Variable Estimation of Error-Component Models,” Journal of Econometrics, 68, 1995, pp. 29–51] and [Blundell, R. W.; Bonds, S. R. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,” Journal of Econometrics, 87, 1998, pp. 115–43; Blundell, R. W.; Bond, S. R., Windmeijer, F. “Estimation in Dynamic Panel Data Models: Improving on the Performance of the Standard GMM Estimators,” Institute for Fiscal Studies Working Paper W00/12, London, England, 2000]. These regressions report a positive relationship between CEO compensation and market value of a firm. This study concludes that incentive based contracts are effective, due to the positive pay-to-performance link, when controlling for simultaneity. First place winner of the Undergraduate Best Paper Award Competition at the 60th International Atlantic Economic Conference in New York, NY, October 6–9, 2005.     

Resource allocation: A hayekian paradigm for maritime conglomerates

Conclusion This article provides a new synthesis between the strategic management literature and Austrian capital theory. The resource allocation process plays out in the context of differing subunit preferences, potentially resulting in tension and periodic conflict that may lead to dysfunctional relationships over time. Absent clearly understood and effective operational rules, the potential for heightened dysfunctional internal relationships will lead a conglomerate organization to have a diminished resource base for achieving its future strategic goals. This article presents a set of resource-allocation rules based on the Hayekian theory of production. By developing an effective resource-allocation paradigm based on economic theory, the organization can gain market share resulting in increased profitability and continued success in the marketplace. The Hayekian triangle offers firms an objective measure reflecting environmental shifts by tracking interest-rate changes that affect consumer and production demand. Organizations can gain “first-mover advantages” essential to provide the competitive advantage vis-à-vis their rivals while maintaining harmonious relationships among subunits. Entrepreneurial innovation can also be exercised by “second movers” who imitate the “first movers,” perhaps taking advantage of lessons learned. This kind of innovative imitation may well provide the greatest scope for entrepreneurial activity. The authors remain responsible for any errors or omissions.     

Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation

Previous studies have shown that the localisation of firms can be an important factor in attracting new foreign direct investment into a host country. The authors distinguish between “efficiency agglomerations” which arise as firms increase their efficiency by locating close to each other, and “demonstration effects” whereby existing firms send signals to new investors as to the reliability and attractiveness of the host country. They try to disentangle these two effects by examining the location of US firms in Ireland. They find that both sources of agglomerations have been important determinants of US firm entry into Ireland. JEL no. F23     

Comments on R. Cooper, M. Bordo and H. James: Exchange rate arrangements and disarrangements: prospects for a world currency

This note evaluates the prospects for a world currency, using as a departure point the papers by Bordo and James (2006) and Cooper (2006). The note argues that a world currency is unlikely in the foreseeable future and probably undesirable. Although more evidence is needed, there seem to be no strong forces towards the creation of new monetary unions among the countries with major currencies or between those countries and the periphery. Based on recent experience, the note also argues that one of the main benefits to establish a world currency, the elimination of exchange rate uncertainty, is likely less important than commonly believed. No matter how rigid a currency arrangement is, initiatives to dissolve it tend to appear as bad times arise. Still, the present equilibrium of no world currency leaves unresolved many difficult issues related to the functioning of the domestic and international monetary systems. Sergio L. Schmukler has prepared this note as a comment to the papers “Proposal for an OECD Currency” by Richard N. Cooper and “One World Money, Then and Now” by Michael Bordo and Harold James, presented at the conference “Regional and International Currency Arrangements,” February 24 and 25, 2006, Vienna, Austria, organized by the Bank of Greece and the Oesterreichische Nationalbank (Central Bank of Austria). I thank conference participants for useful comments. I am also grateful to Jose Azar and Francisco Ceballos for excellent research assistance. The views expressed in this paper are entirely those of the author and do not necessarily represent the opinion of the World Bank.     

Quis Custodiet Ipsos Custodes? or Measuring and Evaluating the Effectiveness of Competition Enforcement

Summary  This article surveys, discusses and classifies methods for ex-post evaluation of the efficiency of competition authorities: court appeals, peer reviews, case studies, event studies, (authorities’ own) bottom-up calculations of consumer gains, deadweight-loss estimates, cross-country panel studies etc. Based on empirical estimates from other types of studies and on a simple oligopoly model, one conclusion is that many bottom-up calculations are based on exaggerated estimates of gains from cartel enforcement, relative to those from merger enforcement. Another conclusion is that authorities’ ex-post self evaluations are of limited value, relative to external evaluations. “Who watches the guardians?”, by Juvenal, 2nd century Roman poet and critic.     

Rhonda M. Williams: Competition, race, agency, and community

As the United States approaches the twenty-first century… in an information-based, transnational and managerial economy, it is becoming increasingly apparent that if we do not better negotiate race and ethnicity in our society, we will not adequately solve the problems of economic inequality and discrimination. Racial and/or ethnic divisions and competition shape our efforts to understand and challenge hierarchy and inequity. As long as we ignore those issues, we cannot solve the problems of poverty, unemployment, and crime, nor effect productive job creation and economic justice. Absent a cultural and economic reckoning with racism’s legacies, we will fail to revitalize our cities and to recover from the socioeconomic costs of “ending welfare as we knew it.” Although masked behind pronouncements of a “color-blind” society, unfinished racial business weakens our national will to provide one another the portfolio of social and economic rights essential to the sustenance of humane community in the post-industrial global economy. (Nembhard and Williams 1998).     

African-oriented and Euro-American-oriented world views: Research methodologies and economics

Conclusion This paper has shown two things. First, it has indicated some of the philosophical ways in which a “pure” African-oriented world view differs in kind from the “pure” Euro-American-oriented one. Second, it has set forth some of their respective differences in research methodology, primarily focusing on the area of economics. However, neither of these world views and, therefore, their research methodologies have absolute validity. Each can claim validity only under its respective limiting conditions. In the words of Kuhn, “truth may, like proof, be a term with only intra-theoretic applications.” In effect, no interworld view comparison can or should be made in terms of absolute correspondence to reality. However, overseas Africans in America do embody both world views in varying degrees. Researchers on black people, therefore, must be familiar with both methodologies in order to analyze completely the behavior of Afro-Americans.     

Stabilization and Association Agreements (SAAs), Europe Agreements,and Public Procurement

This paper initially presents Stabilization and Association Agreements (SAAs) provisions in terms of trade openness to the EC competition. It also makes reference to Europe Agreements (EUs) provision in this matter. It aims more precisely at specifying the impact of public procurement provisions of those Agreements to five Western Balkan public procurement markets. Combining the extent of “Buy National” policies within these countries, with information on the current international competitiveness, the paper identifies those industries that are likely to be particularly sensitive to the abolition of “Buy National” practices due to the provisions of the SAAs. These results can help national authorities overcome part of the negative impacts due to the EU competition.     

An alternative to Marshall: Economic history and applied economics at the early LSE

Conclusion The LSE in its early years did not produce a “school of economics” in the sense that Marshall's Cambridge constituted a “school.” English historical economics was too diffuse, too lacking in strong leadership, too untheoretical, and too committed to economic history as a discipline to create such a “school.” The special contribution of the LSE in the pre-war period was certainly not in theory, since one of the chief reasons for it being an alternative to Marshall's school of orthodoxy was that it paid relatively little attention to economic theory during this period. Rather, its alternative economics was its central conception that the economist'sraison d'etre was to solve pressing contemporary problems for which orthodox theory seemed to offer little guidance. Thus its teachers and curriculum, assembled by Hewins and the Webbs, emphasized applied subjects and economic history.     

Monetary policy on the 75th anniversary of the federal reserve system Edited by Michael T. Belongia Amsterdam: Kluwer Academic Publishers, 1991, 278 pp.

Conclusion Printed on the back cover of this volume is a summary of its contents that includes the statement that the book “…is perhaps best seen not as the end-product of a recent research agenda but as a roadmap for future research on unresolved issues in monetary theory and policy.” This certainly is truth in advertising. Although the roadmap provided in this book is not unflawed, it is brilliantly colored and well marked and should be widely read by students and practitioners alike.     

Why Speed Doesn’t Kill: Learning to Believe in Disinflation

Central bankers generally prefer to reduce inflation gradually. We show that a central bank may try to convince the private sector of its commitment to price stability by choosing to reduce inflation quickly. We call this “teaching by doing”. We find that allowing for teaching by doing effects always speeds up the disinflation and leads to lower inflation persistence. So, we clarify why “speed” in the disinflation process does not necessarily “kill” in the sense of creating large output losses.