Efficiency Wages,Partial Wage Rigidity,and Money Nonneutrality

The efficiency wage theory is generally regarded as a plausible explanation as to why wages do not fall to clear labor markets in the presence of involuntary unemployment. At the current stage of its development, not much is said concerning the role of nominal money and the fluctuations in aggregate employment and output. Adopting the efficiency wage theory, this paper uses the idea of partial rigidity of wages in an attempt to explain why changes in money supply and other demand management policies can cause fluctuations in aggregate employment and output.     

Reflexivity,business cycles,and the new economy

Conclusion Markets are not efficient as that term is currently used in academic finance. Rather, markets are reflexive in that market behavior and the fundamentals reflect each other via a two-way, interactive feedback loop. Free markets remain reflexive unless market participants close the feedback loop, which they can do, and have done, to justify and perpetuate a boom. Practical finance theory was clear on the market behavior boom-bust cycles generate, but it was silent regarding the cause of such cycles. Austrian business cycle theory, on the other hand, provides a clear theoretical explanation of the cause and effects of business cycles. By utilizing both theories in a unified manner it is possible to track each stage of a business cycle, which was demonstrated in an analysis of the recent new economy business cycle. Such an approach could be enormously beneficial to both academicians and practitioners during the next business cycle. A Second Vice President of the General Star Management Company, a subsidiary of Berkshire Hathaway. The opinions expressed in this paper are mine, and do not necessarily represent the views of General Star Management Company or Berkshire Hathaway.     

Effects of presidents’ characteristics on internationalization of small and medium firms in Japan

Recent heterogeneous-firm models of international trade suggest that productivity determines whether firms engage in export activity and foreign direct investment. In practice, however, many productive firms are not internationalized, whereas many unproductive firms are, which suggests that there are factors other than productivity that influence firms’ internationalization. This study uses a unique panel data set for Japanese small and medium enterprises (SMEs) to examine whether the personal characteristics of a firm’s president are factors in firm internationalization. We find that SMEs with a risk-tolerant, forward-looking president are more likely to be internationalized. These effects are large in magnitude, as is the productivity effect, which provides a partial explanation as to why many productive firms are not internationalized. In addition, we find that productivity has an insignificant effect on firms exiting export markets, whereas presidential myopia increases the probability of exit. The evidence further suggests that a firm’s initial export costs become sunk following its entry into export markets, which explains why many unproductive firms are internationalized.     

Economic Integration and Union Power

The standard utility-maximizing model of the trade union in a closed economy is reformulated for an environment where economic integration is under way or expected to occur soon. In the (European) realistic setting of union-dominated labor markets, domestic wages are shown to be affected by labor market developments abroad. This article provides an explanation of the international transmission of inflation and disinflation     

Select bibliography of contributions to economic and social history appearing in Scandinavian books,periodicals and year-books, 1977

Abstract

The structure of markets, of production and of bargaining institutions provide us with important clues as to why British and Swedish bargaining developed in very different ways during the interwar period. To understand fully the choices which employers made and the responses of their workers to these policies we should, it is argued here, extend our analysis beyond the market environment and the institutional structures which emerged in the two countries. This essay provides evidence that the different cultural and political values of the participants was an important formative influence in the making of the bargaining system. We seek to demonstrate this point by a brief survey of the wider social and political context in which the bargaining practices of the metal working trades were developed in this period, and suggest that we need to see the local as well as central organisations of workers and employers as contributors to this process.     

农户偏好农村非正规金融的动因:理论模型与经验证据

在广大发展中国家及欠发达地区,农户参与正规金融市场的程度很低,尤其是贫困农户的参与度更低。已有的研究认为正规金融部门实施的信贷配给导致了上述现象的发生。而本文提出一个新的命题:农户偏好从非正规金融市场借款是出于成本收益的算计,是既定约束条件下的理性选择,越贫困的农户越偏好农村非正规金融市场。此外,还运用数理模型论证了该命题在理论上成立的可能性,并通过对相关调研资料的梳理及实地调研为该命题的成立提供了充分的经验证据。     

Bank-moneylender linkage as an alternative to bank competition in rural credit markets

This paper proposes a new method in which banks and moneylenderscan link in rural credit markets. Banks and moneylenders, twoof the major lenders in rural credit markets, differ in theirinformation on borrowers and costs of funds. Due to informationconstraints, banks must deny further loans to borrowers whocannot repay a certain amount. In the linkage, these borrowersobtain loans from moneylenders, repay the banks, and have continuingaccess. We then evaluate conditions under which the linkagewould be preferred to bank competition and find that the linkagedominates for a wide range of parameters. In light of recentproposals to liberalize Indian banking, the analysis providesa cautionary note to the limits of introducing banking competitionin rural credit markets and provides an alternative.     

Technology Transfer,Income Distribution and the Process of Economic Development

This paper studies the role of income distribution and technology transfer in the process of economic development. A novel aspect of the model is that the composition of human capital as well as the level affect economic growth. Utilizing an overlapping-generations model in which income distribution changes endogenously, we present an economic explanation for why some countries could not start modern economic growth; why some countries took off but have apparently stopped growing after some time; and why some countries have successfully developed and continue to grow.     

Financial Market Competition: The Effects of Transparency

European and US financial markets are faced with increased competition for order flow. Fundamental in the competition process is the organization of the trading process, since this directly influences the performance and trading costs of those markets. In this paper we examine the effects of public quote disclosure and the disclosure of transaction information on market liquidity and price efficiency. Our results indicate a clear trade-off between efficiency and liquidity. These findings could explain why a variety of co-existing trading structures can be optimal among competitive financial markets.     

Dual labour markets and nominal rigidity

The conventional menu cost framework performs poorly with realisticlabour supply elasticities: the menu costs required for pricerigidity are very high and the welfare consequences of monetarydisturbances are negligible. We show that the presence of duallabour markets greatly improves the performance of the frameworkboth by reducing the minimum effective menu costs and by boostingthe welfare consequences. In addition, the introduction of duallabour markets provides an explanation of procyclical productivityand the shrinking of wage differentials during booms, in linewith stylized facts on business cycles.     

Political risk and the international bond market between the 1848 revolution and the outbreak of the First World War1

This article uses price data and editorial commentaries from the contemporary financial press to measure the impact of political events on investors’ expectations from the middle of the nineteenth century until the First World War. The main question addressed is why political events appeared to affect the world's biggest financial market, the London bond market, much less between 1881 and 1914 than they had between 1843 and 1880. In particular, I ask why the outbreak of the First World War, an event traditionally seen as having been heralded by a series of international crises, was not apparently anticipated by investors. The article considers how far the declining sensitivity of the bond market to political events was a result of the spread of the gold standard, increased international financial integration, or changes in the fiscal policies of the great powers. I suggest that the increasing national separation of bond markets offers a better explanation. However, even this structural change cannot explain why the London market was so slow to appreciate the risk of war in 1914. To investors, the First World War truly came as a bolt from the blue.     

The theory of bank redlining and discrimination: An exploration

This article addresses a gap in the economic literature on race and credit markets: the theoretical basis of lending discrimination and redlining. It provides a unified model for exploring why discrimination and redlining exist in credit markets. This model is first used to examine three explanations offered by other authors—bigotry, differential risk, and market segmentation. The article then suggests several new explanations of race effects. These emphasize the interlinkage between labor and credit markets; market spillovers due to housing liquidity, refurbishment, and branch location effects; and strategic interaction among lenders.     

Open economy and financial burden of corruption: theory and application to Asia

We discuss why corruption remains high and show that corruption contributes to the Banking distress and to the rapid transmission across international stock and currency markets. Undeveloped ‘derivative securities’ markets make the risk from stress-induced volatility difficult to manage. Vinod’s (1999) closed economy model is extended to indicate the asymmetry of ‘home bias’ and the effect of corruption on the value at risk (VaR). Our theory predicts that capital flight controls will be many, foreign direct investment (FDI) will be low and cost of capital will be high in corrupt developing countries, which is supported by Asian data. We include some policy recommendations regarding financial institutions and markets.     

Impact of temporary trade barriers: Evidence from China

With a decrease in tariffs around the world, temporary trade barriers (TTBs) have increased dramatically to take their place. These TTBs are usually in the form of antidumping duties, countervailing duties and global safeguards. Recently, an increasing number of these TTBs have been targeted towards China. In this paper, I explore the impact of the US temporary trade barriers (TTBs) on Chinese exports. Using detailed product level data for the period 2002–2008, I find robust evidence of trade deflection i.e. the US trade barriers against China led to an increase in the growth of Chinese exports to other countries. However, I do not find any evidence of trade depression. The results are robust to a wide variety of specification and robustness tests. While I do not find any difference in the impact of TTBs across developed and developing countries, there is considerable heterogeneity in response to TTBs depending on the type of products involved. Specifically, I find that, while the US TTBs on non-steel products lead to an increase in Chinese exports of those products to third markets, there is a significant chilling effect in case of steel. Finally, most of the trade-deflection seems to be along the intensive margins i.e. an increase in exports to the existing third country markets rather than exports to new markets. If anything, the US TTBs on China seem to decrease Chinese exports to newer and more volatile markets.     

The political economy of income distribution in South Korea: The impact of the state's industrialization policies

A number of previous studies of economic growth and income distribution in South Korea, based largely on 1960s data, concluded that South Korea was an exception to Kuznets' ‘inverse U-pattern’ of income inequality. Also, it was regarded as an exception to the usual negative consequences predicted by dependency theory for an economy so dependent on foreign capital and world markets. This author presents more recent data — for the 1970s and early 1980s — in order to support his claim that the trend toward income equality that appeared in the 1960s was reversed in the 1970s. The author develops a thesis that stresses the role of the state in shaping the Korean political economy. He argues that it has been the strong South Korean developmentalist state in firm control of both domestic and foreign capital and its export-oriented industrialization policies that have been the principal determinant of the pattern of income distribution. He contests the usual explanation related to the level of economic development or external dependency per se.     

Jobs in the Bureaucratic Afterlife: A Corruption-Facilitating Mechanism Associated with Law Enforcement

This article starts with an observation that the employment of former regulatory officers by a regulated firm might be an integral part of the corruption-facilitating mechanism (CFM). The article hypothesizes that such employment constitutes the deferred payment for the corruption previously supplied. Although anecdotal evidence of this kind of corruption abounds, it has proven difficult to substantiate. The article provides an explanation for why this deferred payment arrangement might be attractive to both demanders and suppliers of corruption. It also offers tentative empirical support for the hypothesis that it plays a role as CFM in Korea, with the implication that this CFM hypothesis can be generalized to a host of regulatory countries.     

Een onderzoek naar de invloed van monetaire factoren op het reële groeiproces in enkele traditionele theorieen van economische groei (I)

Summary With some exceptions — e.g., Tobin and Johnson — theorists have been looking for an explanation of economic growth in the real sector. This is the first of three successive papers on the problem of to what extent monetary phenomena influence the real variables in a process of economic growth.If one aims at adding a monetary sector to a real model of economic growth, the first thing to do is getting an exposition of the monetary theory which is most suitable for this purpose. The monetary theory used in this paper is based on Patinkin and Gurley and Shaw. The conditions under which money does not affect the real economic process are amply discussed. Only in very special cases money turns out to be neutral.In the two subsequent papers this monetary theory is used for an investigation into the impact of money on growth according to a neo-classical and a neo-keynesian model of economic growth.De schrijvers zijn dank verschuldigd aan talrijke leden van de wetenschappelijke staf van de Economische Faculteit te Groningen en aan de deelnemers van een economistenconferentie te Tilburg op 12 januari 1968 voor hun stimulerende opmerkingen bij de oorspronkelijke versie van dit werkstuk.     

Exchange rate effects on a firm's output composition

Summary Goods produced for competitive markets and goods produced for imperfectly competitive markets are likely to have interdependent production costs in the sense that an increase in the price or the quantity produced of one type of good raises the costs of producing the other. Such production costs inderdependencies are ignored in the existing literature on exchange rate effects on domestic and foreign output. This article does take these interdependencies into account and shows then that exchange rate effects may be dramatically different. In particular, it is explained why aggregate output measures may be insensitive to exchange rate changes.The idea for this paper was born during a research visit to Reading. The paper was further developed benefitting from comments by Mark Casson from the University of Reading, Henk Jager and Eelke de Jong from the University of Amsterdam, and two anonymous referees. I am most grateful for their suggestions. Any remaining errors are, of course, mine.