Will the Future Be Better Tomorrow? The Growth Prospects of Transition Economies Revisited

The favored approach in the literature on the growth prospects for transition economies is based on specifications from Barro (1991) and Levine and Renelt (1992). This paper examines this literature critically by identifying and testing for the underlying assumptions. Our main finding is that this approach performs poorly in the transition context. Our results indicate that, almost a decade after the transition began, the former centrally planned economies are still structurally different from market economies at similar levels of per capita income. The legacies of central planning are more resilient than previously thought. J. Comp. Econ., December 2001, 29(4), pp. 663–676. University of Newcastle, Newcastle upon Tyne, and Centre for Economic Policy Research, London, United Kingdom; and The William Davidson Institute at the University of Michigan, Ann Arbor, Michigan. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: E23, O40, P20, P52.     

A Note on Viable Proposals*

Sengupta and Sengupta (“Viable Proposals,”International Economic Review 35 (1994), 347–59.) consider a payoff vector of a TU‐game as a viable proposal if it challenges each legitimate contender. They show that for each game the set of viable proposals is nonempty. Their proof, however, has a flaw. I present a proof based upon a result by Kalai and Schmeidler (“An Admissible Set Occurring in Various Bargaining Situations,”Journal of Economic Theory 14 (1977), 402–11) .     

Are Public and Private Social Expenditures Complementary?

Most analyses of social protection are focussed on public arrangements. However, social effort is not restricted to the public domain; all kinds of private arrangements can be substitutes to public programs. OECD data indicate that accounting for private social benefits has an equalising effect on levels of social effort across a number of countries. This suggests complementarity between public and private social expenditures. But their distributional effects differ. Using cross-country data, we find a negative relationship between net public social expenditures and income inequality, but a positive relationship between net private social expenditures and income inequality. We conclude that changes in the public/private mix in the provision of social protection may affect the redistributive impact of the welfare state.Part of Leiden Social Security Incidence Project. Revised version of a paper presented at the 57th International Atlantic Economic Conference, Lisbon, Portugal (March 10–14, 2004), and at the 60th Congress of the International Institute of Public Finance, Milan, Italy (August 23–26, 2004). The usual disclaimer applies.     

CAN SECRET INTERVENTION BE COMPATIBLE WITH A NON‐PROFITMAKING CENTRAL BANK AND A FUNDAMENTAL‐CONSISTENT TARGET?

The coexistence of secret intervention operations and “the signaling channel” (Mussa. The Role of Official Intervention, 1981) seems confusing. Vitale ( Journal of International Economics, 49, 1999, 245–267) resolves this puzzle by employing an asymmetric information framework and an assumption of a fundamental‐inconsistent target for the exchange rate. Ferré and Manzano ( International Journal of Finance and Economics, 14, 2009, 378–393) follow Vitale's microstructure framework and argue that the central banks' profitability motivation offers a rationale for their secret intervention even under a target consistent with the fundamentals. However, that the authority uses its superior information to obtain speculative profits through secret intervention in the market is not a typical goal for central banks. To theoretically explain the opaqueness in non‐profitmaking central banks' exchange rate policies, we employ a model of a central bank's optimization by considering that no bank really knows the exact fundamental rate and they take into account the possible bad consequences of announcing the intervention. We also show that, in passing the bank's private information to market participants, a bank's announcement of the intervention size is equivalent to revealing its target rate. (JEL E58, F39)     

An evening at the theatre: using choice experiments to model preferences for theatres and theatrical productions

This article examines people's preferences and demand for live theatre. It investigates the preferences for people attending a regional theatre, Northern Stage in Newcastle, in relation to other live theatres they could attend, and in relation to the attributes of theatrical productions and ticket price. It uses a Stated Preference (SP), discrete choice experiment, to assess people's utility and Willingness To Pay (WTP) for the different attributes of theatrical productions. The model assesses the effect of the attributes of plays on choice; and the impact of Socio-Economic (SE) and demographic variables on choice and demand. Results reveal the heterogeneity of theatregoers’ tastes for different types of plays and ticket prices. The models reveal the significance of ‘reviews’ and ‘Word Of Mouth’ (WOM) opinions on plays, as the most important variables determining choice.     

Book Review

L'économie polonaise. Plan, investissement, gestion, progrés technique (The Polish economy. Plan, investment, management, technical progress), Cahiers de I'I.S.E.A., Economies et sociétés, vol. IV, No. 1, January 1970, 342 pp. International Labour Office : Towards Full Employment. A Programme for Colombia, Prepared by an Inter-Agency Team Organized by the International Labour Office, Geneva, 1970, 471 pp. Fernand Baudhuin : Histoire économique de la Belgique, 1957-1968 (Economic History of Belgium, 1957-1968), Emile Bruylant (Publ.), Brussels, 1970, 514 pages. Reinhold Henzler : Der genossenschaftliche Grundauftrag: Förderung der Mitglieder (The co-operative's basic task: to help its members) collected treatises and contributions), publications of the German Co-operative Fund, Frankfurt-am-Main, 1970, vol. 8, 347 pp. State AND Cooperative Development , published by Allied Publishers for International Cooperative Alliance, New Delhi, 1971, 194 pages.     

中国农产品产业内贸易现状分析

By using HS classification, the author has divided total agricultural products into 24 categories. The paper calculated the G-L intra-industry trade index, Brülhart marginal intra-industry trade index, and Thom & McDowell marginal industry trade index for each type of agricultural products during the period from 1996 to 2005 in China. The conclusion shows the overall level of agricultural intra-industry trade is relatively low, and Brülhart index indicates China’s agricultural products decades of improvement mainly from inter-industry trade, at the same time Thom & McDowell index shows that China’s agricultural intra-industry trade growth is mainly from the growth of vertical intra-industry trade. __________ Translated from Guoji maoyi wenti 国际贸易问题 (Journal of International Trade), 2008, (1): 14–20     

High-quality bias in vertically differentiated oligopolies—a note on skills, trade, and welfare

In a vertically differentiated Cournot oligopoly where the high-quality variant of the good requires the use of high-quality labor, firms may either all supply the same quality or differentiate their product. In differentiated configurations the number of firms choosing to supply the high-quality variant is generally above the optimum. The opening of trade between symmetric countries entails a pro-competitive effect that raises welfare through a reduction in average quality. This result contrasts with previous findings concerning the opening of trade in vertically differentiated oligopolistic industries (Gabszewicz, Shaked, Sutton, and Thisse,International Economic Review 22 [1981]; Shaked and Sutton, in Kierzkowski, ed.,Monopolistic Competition and International Trade, Oxford 1984).     

Book Review

Jacques Berthelot : Les Coopératives Agricoles en Economie Concurrentielle (Agricultural Co-operatives in a Competitive Economy). Preface by Robert Badoin, Professor in the Faculty of Law and Economic Sciences, Montpellier, Cujas, Paris, 1972, 366 pages. Albert Meister : Où va l'autogestion yougoslave? (Whither Yugoslav Self-Management?), Anthropos, Paris, 1970, 374 pages. W. Friedmann and J.F. Garner : Government Enterprise – a Comparative Study, British, Institute Studies in International and Comparative Law, No. 5, Index, London, Stevens & Sons, 1970, 341 pp. H. Knapp and A.E. Rauter : Akzente konsumgenossenschaftlicher Verbraucherpolitik (Aspects of the consumer co-operatives'policy on consumer protection), Genossenschaftliche, Schriftenreihe, No. 37, Konsumverband, Vienna, 1972, 66 pages. Business Switch – an Introduction to Business Management in Retailing, Ragnar Arvidsson and S. Dandapani, International Co-operative Alliance, New Delhi, 1972. Rolf E. Vente and Dieter Seul : Makro-ökonomische Planung. Eine Bibliographie (Macro-economic Planning – a Bibliography), Nomos Verlangsgesellschaft, Baden-Baden, 1970, 292 pages.     

Reviews

Books reviewed in this article: Australia Wet or Dry? By B. R. DAVIDSON. Agricultural Development in Asia. Edited by R. T. SHAND. The Economic Outlook for New Zealand. By J. B. CONDLIFFE. Regional Seminar on Agriculture. Papers and Proceedings. Automation: Threat or Promise? Edited by G. W. FORD. The Theory of Imperfect Competition. A Radical Reconstruction. By D. DEWEY. International Economics. By S. J. WELLS. The Soviet Economy. By H. J. SHERMAN. The Molding of American Banking: Men and Ideas. By F. REDLICH. The Pure Theory of International Trade and Investment. By M. C. KEMP.     

A retrospective evaluation of International Review of Economics and Finance (1992–2001)

International Review of Economics and Finance (IREF) was founded in 1992 and it has been well received by authors in the US and around the world. Over the 10 years of 1992–2001, the journal has published 281 articles by 418 authors from 265 different institutions in 26 countries. Articles are indexed by Finance Literature Index and are abstracted in EconLit and ABI/INFORM. The distribution of economics/finance articles, theory/empirical articles, geographic characteristics, and authorship characteristics are also presented.     

International Financial Liberalization, Capital Flows, and Exchange Rate Regimes: An Introduction

This introduction to a special edition of Review of International Economics summarizes a collection of articles that originated in a conference on “Is Globalization of Capital Markets a Boost or a Hindrance to Development?” that was sponsored by the Program in Economic Policy Management (PEPM) at Columbia University during 16–17 April 1999.     

RECURSIVE AMBIGUITY AND MACHINA'S EXAMPLES

Machina (American Economic Review 99 (2009), 385–392; American Economic Review 104 (2014), 3814–40) lists a number of situations where Choquet expected utility, as well as other known models of ambiguity aversion, cannot capture plausible features of ambiguity attitudes. Most of these problems arise in choice over prospects involving three or more outcomes. We show that the recursive nonexpected utility model of Segal (International Economic Review 28 (1987), 175–202) is rich enough to accommodate all these situations and, moreover, that this can be done using the same functional form for all situations.     

Entry and Managerial Incentives: A Note

This note reinforces the results in a paper by Sen (International Journal of Industrial Organization, vol. 11, 1993, pp. 123–37). It is shown that his assumption that the incentive schemes in a two‐period model are the same for the two periods is not necessary for the results: only the long‐term nature of contracts with managers matters.     

On the macroeconomic effects of establishing tradability in weak property rights

The New Economy is closely associated with computing & communications technology, notably the Internet. We discuss property rights to, and trade in, the difficult-to-define intangible assets increasingly dominating the New Economy, and the possibility of under-investment in these assets. For a realistic analysis we introduce a Schumpeterian market environment (the experimentally organized economy). Weak property rights prevail when the rights to access, use, andtrade in intangible assets cannot be fully exercised. The trade-off between the benefits of open access on the Internet, and the incentive effects of strengthened property rights, depend both on the particular strategy a firm employs to secure property rights, and the protection offered by law. Economic property rights can be strengthened if the originator can find innovative ways to charge for the intangible assets. The extreme complexity of the New Economy and the large number of possible innovative private contract arrangements make it more important to facilitate the use and enforcement of private individualized contracts to protect intellectual property than to rely only on standard patent and copyright law. Enabling law is one proposed solution. Current patent legislation in the US has led to costly litigation processes weakening the position of small firms and individuals in patent disputes. The property rights of such firms and individuals could be strengthened with insurance or arbitration procedures.JEL Classification: D21, D23, D52, D82, H54, K11, K22, K41, L11, L23, M13, O14, O33An earlier version of this paper was presented at the 9th Congress of the International Joseph A. Schumpeter Society (ISS), Gainesville, Florida, USA, March 28-30, 2002. The paper is part of the Nödfor project on Schumpeterian Creative Destruction, notably the exit and bankruptcy process, based at the Ratio Institute, Stockholm.     

Review

Peter Young & Paul Reynolds, The Amnesia of Reform. A Review of Post‐Communist Privatization. London: Adam Smith Research Trust, 1994, 40 pp., p/b.

Michael Kaser, Privatization in the CIS. London: Royal Institute of International Affairs, 1995, 62 pp., p/b.     

International Joseph A. Schumpeter Society 10th ISS Conference

Announcement

International Joseph A. Schumpeter Society 10th ISS ConferenceInnovation, Industrial Dynamics and Structural Transformation: Schumpeterian Legacies, Università Bocconi, Milan, 9-12 June 2004     

TESTING FOR MULTIPLE BUBBLES: LIMIT THEORY OF REAL‐TIME DETECTORS

This article provides the limit theory of real‐time dating algorithms for bubble detection that were suggested in Phillips, Wu, and Yu (PWY; International Economic Review 52 [2011], 201–26) and in a companion paper by the present authors (Phillips, Shi, and Yu, 2015; PSY; International Economic Review 56 [2015a], 1099–1134. Bubbles are modeled using mildly explosive bubble episodes that are embedded within longer periods where the data evolve as a stochastic trend, thereby capturing normal market behavior as well as exuberance and collapse. Both the PWY and PSY estimates rely on recursive right‐tailed unit root tests (each with a different recursive algorithm) that may be used in real time to locate the origination and collapse dates of bubbles. Under certain explicit conditions, the moving window detector of PSY is shown to be a consistent dating algorithm even in the presence of multiple bubbles. The other algorithms are consistent detectors for bubbles early in the sample and, under stronger conditions, for subsequent bubbles in some cases. These asymptotic results and accompanying simulations guide the practical implementation of the procedures. They indicate that the PSY moving window detector is more reliable than the PWY strategy, sequential application of the PWY procedure, and the CUSUM procedure.     

A HYBRID DISCRETE CHOICE MODEL OF DIFFERENTIATED PRODUCT DEMAND WITH AN APPLICATION TO PERSONAL COMPUTERS

In this article, I consider a new discrete choice model of differentiated product demand that distinguishes a brand‐level differentiation from a product‐level differentiation. The model is a hybrid of the random coefficient logit model of Berry et al. (Econometrica 63 (1995), 841–90) and the pure characteristics model of Berry and Pakes (International Economic Review 48 (2007), 1193–1225) and describes markets where firms offer multiple products of different qualities under the same brand name. I compare the hybrid model with existing models using data on personal computers. Using the estimates of the hybrid model, I also provide empirical evidence that firms reposition their brands in a postmerger market.     

University of Laneaster

L. J. White , The Automobile Industry since 1945, Cambridge, Massachusetts: Harvard University Press, C. K. Rowley , Steel and Public Policy. London: McGraw-Hill, 1971 J. B. Heath (ed.), Department of Trade and Industry, International Conference on monopolies, mergers and restrictive practices, Papers and reports, Cambridge. 1969. London: C. F. Pratten , Economies of Scale in Manufacturing Industry. Cambridge: Cambridge University Press, 1971 A. Singh . Takeovers, their relevance to the stock market and the theory of the firm. Cambridge: Cambridge University Press, 1971 D. Coombes , State Enterprise. Business or Politics? London: Allen & Unwin, 1971