Bundled discounts: Strategic substitutes or complements?

Bundled discounts by pairs of otherwise independent firms play an increasingly important role as a strategic tool in several industries. Given that prices of firms competing for the same consumers are strategic complements, one would expect their discounts levels also to be strategic complements. However, in this paper we show that under some circumstances bundled discounts may be strategic substitutes. This occurs under vertically differentiated products where a low quality pair of producers may indeed prefer to lower its discount after an increase in the discount offered by a high quality pair of producers.     

Convergence or divergence in cross-country growth?

In the traditional empirical convergence literature, a negative coefficient on initial income in a cross-country growth regression is interpreted as evidence of poor countries growing faster than richer ones. A key assumption in this work is that the relationship between initial income and income growth is linear. The linearity assumption is challenged in some new growth theories, and studies adopting an alternative (semi-parametric or nonlinear) econometric methodology provide support for a nonlinear specification. This paper finds evidence for nonlinear convergence. Using semi-parametric estimation we find that convergence occurs among countries with very low and very high initial incomes, suggesting that convergence clubs characterize the cross-country growth process. Our results provide further evidence for multiple-regime steady states.     

Energy and capital: substitutes or complements? Some results for the UK industrial sector

This paper investigates the substitutability or complementarity possibilities between capital, labour and energy in the UK industrial sector, with particular attention to the captial-energy relationship. It is found, using the translog-cost-function approach, that capital and labour as well as energy and labour are substitutes. However, capital and energy are found to be complements.     

Culture matters: what cultural values influence budget transparency?

This article empirically examines whether cultural values significantly influence budget transparency. We employ data for budget transparency from the Open Budget Index, and data for national culture from Hofstede’s cultural dimensions, the Global Leadership and Behavioral Effectiveness Research Project and the World Values Survey to explore this question. We find evidence that individualism positively influences budget transparency. We also find that stronger preferences for institutional collectivism, masculinity and authoritarian rule lower budget transparency. These results suggest that national culture shapes preferences for budget transparency and influences the possibility of success for attempts to improve budget transparency across countries.     

Overqualification: permanent or transitory?

This article analyses job mismatches in Switzerland based on a subjective measure of overqualification. According to job search and job matching theories, overqualification is a transitory problem. Other theories show that overqualification can also be of a permanent nature. We test the perpetuity of overeducation using panel data from the first eight waves of the Swiss Household Panel (SHP) covering the period 1999 to 2006. Our empirical analysis reveals little evidence for lasting rigidities that would cause permanent job mismatches. Rather, spells of overqualification are relatively short: about half of all individuals who were overqualified in a given year had an adequate job match 1 year later. While a short duration of overqualification would be consistent with job search and job matching theories, our observation that the probability of a job mismatch does not significantly decrease with experience is at odds with these theories. Our article provides an alternative explanation for this phenomenon: the constant accumulation of experience and qualifications throughout a worker's career implies that, for a good job match to be maintained, qualification-specific job requirements must increase as the worker ages. If this does not occur, even older workers face a risk of becoming overqualified.     

Convergence or divergence? The impact of technology on “why growth rates differ”

This paper presents an overview and assessment of the theoretical and empirical work on catch-up and growth, with particular emphasis on the impact of technology, and the consequences for developing countries. The point of departure is the neoclassical theory of economic growth, as laid out by Solow and others in the 1950s, and the applied work that followed (growth accounting). Then the contributions from economic historians and more heterodox economists, such as Schumpeter, Kaldor and others, are discussed, followed by an account of the most recent theoretical developments (new growth theory) and the empirical (econometric) work in this area.An earlier version of this paper was presented at the Joseph A. Schumpeter Society 1992 Conference, 19–22 August, Kyoto, Japan. I want to thank the commentator, Karl Heinrich Oppenländer, and the other participants at the session for comments and suggestions. The revision of the paper has also benefited from my recent work in this area, whether under single authorship (Fagerberg 1994) or together with Nick von Tunzelmann and Bart Verspagen (Fagerberg et al. 1994). I am grateful to Nick and Bart for allowing me to draw on our joint work.     

Do Multinational Enterprises Contribute to Convergence or Divergence? A Disaggregated Analysis of US FDI*

It is widely held that foreign direct investment (FDI) has a positive effect on economic growth. To test this hypothesis, we perform convergence regressions derived from a theoretical model on the impact of FDI on endogenous technological change in small economies. The model includes FDI externalities that enhance growth, but also shows that FDI can crowd out host country income and reduce local innovation. The empirical analysis employs disaggregated US data for various FDI‐related activities—in addition to the conventionally used aggregate FDI stocks and flows. We estimate the net FDI impact on the convergence rate of per‐capita income to US levels, controlling for human development, financial development, and trade. We find that FDI accelerates convergence for high‐income countries only, otherwise slowing it down.     

Strategic Consumption Complementarities: Can Price Flexibility Eliminate Inefficiencies and Instability?

Generally, two facts occur with strategic complementarities and fixed prices: (i) the equilibria are multiple and (ii) if the complementarities are strong, the law of demand is violated and the equilibrium is unstable. In this paper, we analyse the effect of price flexibility on these features as well as on market welfare properties. Assuming an exchange economy with H agents consuming two goods with one strategic complement, we show that flexibility of prices may remove both the multiplicity of the equilibria and the instability of behavior when the externalities are strong. Moreover, we find conditions to correct instability when it is caused by perverse wealth effects. When preferences are quasilinear and identical, if the externality is beneficial, any equilibrium is Pareto optimal despite the externality. But if the externality is detrimental, corrections are required.     

Strategic Technology Alliances: A Way to Innovative Enterprises in Russia?

This article examines whether, how, and to what extent international technology partnerships of Russian enterprises and research institutes contribute to their technological capability building. It presents results obtained by analysis of both a unique survey of Russian enterprises and research institutes co-operating with Western partners in seven selected high-technology fields and four Russian regions with a high concentration of R&D, and additional evidence from 16 in-depth interviews with managers of such Russian high-technology entities (HTE).     

Large Scale Marine Protected Areas for Biodiversity Conservation Along a Linear Gradient: Cooperation, Strategic Behavior or Conservation Autarky?

In this paper we investigate effects of overlap in species between ecosystems along a linear gradient on the location of marine protected areas (MPAs) under full cooperation, strategic behavior and conservation autarky. Compared to the full cooperation outcome, both strategic behavior and conservation autarky lead to under-investment in biodiversity protection. Under strategic behavior, however, we observe the additional problem of ??location leakage?? i.e. countries invest less in species protected by others. Conservation autarky eliminates location leakage; in ecosystems with partly overlapping species compositions at country borders it even induces MPAs that are too large from a global perspective. We also find that, in our setting of a linear gradient without migrating species, countries focus their conservation efforts on species unique to their own country and that these species are relatively well protected compared to common species.     

Inflation-targeting rules: History-dependent or forward-looking?

This note discusses the inflation-targeting strategy if price setting gives rise to a hybrid Phillips curve. The strategy is inverted relative to private sector pricing behavior: if private sector price setting is backward-looking, policy should be forward-looking, and vice versa.