PERESTROIKA AND ARMS CONTROL

Mikhail Gorbachev's perestroika has had its most conspicuous success in restructuring US.-Soviet relations. The INF treaty with the United States and the talks now under way on a prospective START agreement are major developments in international arms control. But Soviet START proposals are a threat to nuclear deterrence. START reductions in strategic nuclear weapons will decrease U.S. security dangerously unless they are implemented under the vrotective umbrella of a U.S. missile defense system.     

ARMS NEGOTIATIONS, THE SOVIET ECONOMY, AND DEMOCRATICALLY INDUCED DELUSIONS

It is widely assumed that weak economic performance in the Soviet Union provides motivation for Soviet leaders to pursue arms negotiations in good faith. This paper argues that the reality is quite the opposite. For both political and economic considerations, the weak economy of the Soviet Union generates incentives for the Soviets to use arms control negotiations to achieve military advantages rather than to limit arms.     

INFORMATION,RISK SHARING,AND INCENTIVES IN AGENCY PROBLEMS

This article studies the use of information for incentives and risk sharing in agency problems. When the principal is risk neutral or the outcome is contractible, risk sharing is unnecessary or dealt with by a contract on the outcome, so information systems are used for incentives only. When the outcome is noncontractible, a risk‐averse principal relies on imperfect information for both incentives and risk sharing. Under the first‐order approach, this article relaxes Gjesdal's criterion for ranking information systems and finds conditions justifying the first‐order approach when the principal is risk averse and the outcome is noncontractible.     

LEGISLATOR INCENTIVES IN A FRAGILE DEMOCRACY: EVIDENCE FROM BUDGET ALLOCATION IN THAILAND

This article investigates if legislators in a fragile democracy share the same local benefit seeking incentives that are observed among politicians in mature democracies. Fledgling democracies are characterized by uncertainty over the survival of democratic institutions, which may discourage elected officials' reelection effort in favor of more direct measures to gain personal payoffs. Analyses of the relationship between legislative representation and the allocation of the budget among Thailand's 76 provinces indicate that Thai legislators are directing government expenditure to their home provinces. This result suggests that politicians' self‐serving motives play an important allocation role even in a young, fragile democracy.(JEL D72, H59)     

INCENTIVES FOR COMPETITIVE RESPONSES IN REPLICATED ECONOMIES: A GENERALIZATION

A simple proof is presented of a theorem of Roberts and Postlewaite on truthful revelation of preferences for replicated economies. The proof provides some generalizations of the earlier result using the strict definition of feasibility. First, to economies with an infinity of agents but with a finite number of types; secondly, to economies with a countable number of commodities.     

ECONOMIC INCENTIVES FOR AN URBAN BIAS IN DEVELOPMENT POLICIES*

This paper presents a labor turnover model in which urban employers have an economic incentive to support an urban bias in development policies because of the indirect effect of rural incomes on urban training expenditures through the rate of labor turnover. A comparative static analysis of the model shows that an income transfer from rural workers to urban workers increases the profits of urban employers, even if urban employers are not directly involved in the transfer. Unlike previous versions of the labor turnover model, worker behavior is explicitly grounded in utility maximization.     

CAPITAL-LABOUR SUBSTITUTION AND SLOWDOWN IN SOVIET ECONOMIC GROWTH: A RE-EXAMINATION

This paper tests aggregate Variable Elasticity of Substitution production functions for the Soviet economy. The estimated equations show that the elasticity of substitution is less than unity and is decreasing quite rapidly.     

EFFECT OF FIRM ORGANIZATIONAL STRUCTURE ON INCENTIVES TO ENGAGE IN PRICE FIXING

This article examines price fixing and bid rigging by applying the theory of the economics of crime to explain the calculus of the individual decision maker in the firm. This approach departs somewhat from the traditional approach to investigations of collusion. The latter has emphasized market structure and firm interrelationships while it has ignored the characteristics of the firm itself. But analyses ignoring firm organizational and financial structure are incomplete insomuch as these factors are crucial to the incentives and costs that the decision maker confronts. This paper offers an alternative approach in which price-fixing and bid-rigging offenders' prominent characteristics apparently are mirrored in defendant firms and individuals that the Antitrust Division has prosecuted recentlv.