The bail-in problem: systematic goals,ad hoc means

In this paper we analyze recent efforts of the international financial institutions to limit the moral hazard created by their assistance to crisis countries. We question the wisdom of the case-by-case approach taken in Pakistan, Ecuador, Romania and Ukraine. We show that because default and restructuring are painful and costly, it is simply not time consistent for the IFIs to plan to stand aside if the markets refuse to roll over maturing claims, restructure problem debts, or provide new money. Because these realities create an incentive to disburse even if investors fail to comply, the IFIs are then placed in the position of having to back down on their previous conditionality, which undermines their credibility. And since investors are aware of these facts, their behavior is unlikely to be modified by the IFIs’ less-than-credible statements of intent. Hence, this approach to “bailing in the private sector” will not work. Fortunately, there is an alternative: introducing collective-action clauses into loan agreements. This, and not ad hoc efforts to bail in the private sector, is the forward-looking solution to the moral hazard problem.     

Discriminating between autoregressive forms: A Monte Carlo comparison of Bayesian and ad hoc methods

The paper considers the problem of discriminating between the autoregressive forms of a Koyck distributed lag model and a regression model with autocorrelated distrubances. Several interpretations of an ad hoc rule-of-thumb suggested by Griliches are compared with Bayesian posterior odds analysis in a Monte Carlo experiment. The Bayesian analysis is generally superior to the rules-of-thumb, the latter exhibiting large probabilities of type I error, and low power. The rules-of-thumb excessively favour the distributed lag model, while the Bayesian method is free from such bias. All methods improve with increased sample size.     

Privatization Bolivian style: a cautionary tale

This article examines the long term impacts of Bolivia's partial privatization of state‐owned enterprises, known as capitalization. Despite attempting to introduce an innovative social component to distribute the benefits of privatization to Bolivian citizens, the lack of an adequate government regulatory structure meant that capitalization was unable to meet most of its objectives. While foreign direct investment rose between 1995 and 2000, these investments created few jobs and the taxes paid by the privatized companies failed to replace the revenue they had previously provided to the government. Capitalization has not reduced corruption but, rather, shifted the locus of rent seeking from the public to the private sector. The perception of the privatization of public resources led to increased social protest and political instability. The cycle of protests culminated with the resignation of the president in October 2003 following protests that left over 70 civilians dead. Rather than create a climate favorable for free markets, capitalization served as a catalyst to mobilize popular protest against neoliberal restructuring and may threaten the neoliberal economic policies in Bolivia in the coming years. Cet article étudie les impacts à long terme de la privatisation partielle des entreprises publiques boliviennes, désignée par ‘capitalisation’. Malgré la tentative d'introduction d'une composante sociale originale visant à distribuer les bénéfices de la privatisation aux Boliviens, l'absence de structure régulatrice gouvernementale adéquate a empêché la ‘capitalisation’ d'atteindre la plupart de ses objectifs. Même si l'investissement direct de l'étranger a progressé entre 1995 et 2000, ces fonds ont créé peu d'emplois et les charges fiscales payées par les entreprises privatisées n'ont pas remplacé les recettes qu'elles apportaient auparavant au gouvernement. La ‘capitalisation’ n'a pas atténué la corruption, décalant plutôt la scène du parasitisme du secteur public vers le secteur privé. La perception de la privatisation des ressources publiques a accentué agitation sociale et instabilité politique. Le cycle de protestation a atteint son apogée avec la démission du Président en octobre 2003 après des manifestations ayant fait 70 morts parmi la population. Au lieu de créer un climat favorable à la liberté de marché, la ‘capitalisation’ a servi de catalyseur à la mobilisation de l'opposition populaire contre la reconstruction néolibérale, mettant ainsi en péril les politiques économiques néolibérales de la Bolivie dans les années à venir.     

A note on randomized response models for quantitative data

Standard randomized response (RR) models deal primarily with surveys which usually require a yes or a no response to a sensitive question, or a choice for responses from a set of nominal categories. As opposed to that, Eichhorn and Hayre (1983) have considered survey models involving a quantitative response variable and proposed an RR technique for it. Such models are very useful in studies involving a measured response variable which is highly sensitive in its nature. Eichhorn and Hayre obtained an unbiased estimate for the expectation of the quantitative response variable of interest. In this note we propose a procedure which uses a design parameter (controlled by the experimenter) that generalizes Eichhorn and Hayres results. Such a procedure yields an estimate for the desired expectation which has a uniformly smaller variance.Acknowledgements We are grateful to two referees for their valuable and constructive comments.     

Assessing public leadership styles for innovation: a comparison of Copenhagen,Rotterdam and Barcelona

This article explores which leadership qualities public managers regard as important for public innovation. It is based on a survey of 365 senior public managers in Copenhagen, Rotterdam and Barcelona. Five perspectives on leadership were identified and tested using a number of items. Some of these proved to be more robust than others. Analysis of the three cities reveals a nuanced set of leadership styles, which include a transformational style, and one that is more dedicated to motivating employees, risk-taking and including others in decision-making. This suggests the need for more research on leadership and public-sector innovation.     

EDAP at Ford: a research note

The Employee Development and Assistance Programme (EDAP) is a unique new initiative launched jointly by the management and unions at Ford. Here the author outlines the scheme which provides a significant ‘model’ for adult and continuing education within commercial enterprises. It is attracting widespread interest and imitators.     

Nonlinearity measures: a case study

Summary An important problem in applied statistics is fitting a given model function f (β) with unknown parameters β to a data vector y. Minimizing the residual sum of squares provides the least squares estimates of β. If f (β) is linear in β the precision of these estimates is well-known. In a nonlinear case approximate (though asymptotically exact) confidence statements can be made. B eale [1] introduced measures of nonlinearity which can be used to indicate when approximate confidence statements are appropriate. G uttman and M eeter [2] showed that in some, severely nonlinear, cases Beale's measures do not give the right indication. In this paper two new nonlinearity measures are introduced and their use is illustrated on a practical problem described by W itt [3]. A more detailed discussion of the theoretical background can be found in references [1] and [2].     

A note on studentizing a test for heteroscedasticity

Breusch and Pagan (1979) have recently proposed a convenient test for heteroscedasticity in general linear models. This note derives the asymptotic distribution of their test under sequences of contiguous alternatives to the null hypothesis of homoscedasticity. The test is shown to possess asymptotically incorrect size (nominal significance level) except in the case of strictly Gaussian disturbances. A slight modification of the test is proposed which corrects this defect.     

R&D in a strategic delegation game revisited: a note

In this note we reconsider the paper of Zhang and Zhang (1997), published in Managerial and Decision Economics, who analyze a strategic delegation model with R&D spillovers in an imperfectly competitive market. We were motivated to study their setup by a puzzling result given in their paper: delegating the production and R&D decisions to managers is never beneficial for the owners of the firm. When we tried to understand the driving forces of this result, we found however that the findings of Zhang and Zhang (1997) are incorrect. We explain why their derivations are wrong and demonstrate via counterexamples that the main propositions in their paper do not hold. In addition, we show how the correct solution of this R&D model with spillovers can be obtained. Copyright © 2006 John Wiley & Sons, Ltd.     

Spatial Cournot competition and economic welfare: a note

We investigated welfare implications in location-quantity models in a symmetric linear city. We found that when firms are not agglomerated in equilibrium, increasing the distance between firms raises (reduces) producer surplus and social welfare (consumer surplus). Moreover, central agglomeration is always optimal for consumers among symmetric locations, but not necessarily for producers. Central agglomeration can be inefficient even if it is the unique equilibrium outcome. In short, the firms are more likely to agglomerate or locate closer than what welfare maximizers would dictate, whereas they locate farther apart than what consumer surplus maximizers would recommend.     

General Measures to Assist Workers and Firms in Adjusting to Injury from Freer Trade: Issues Raised by Various European Approaches and Some ad hoc Industry Measures Adopted elsewhere

A bstract . Various European measures to alleviate hardships following structural changes. including those resulting from changes in international trade. particularly imports. are summarized. It is noted that sectional political pressures tend to generate industry-specific schemes, especially in the textile, clothing and footwear fields. In some cases, the individual schemes facilitate change. But, in many others, they simply frustrate and hinder inevitable adjustment. Instances of both types are cited. The characteristics of an 'ideal' scheme are itemized along with some of the difficulties in maintaining them. Finally, suggestions are made to de-politicize the tariff-maknig process in the interest of freer trade.     

Shop stewards in the 1990s: a research note

Evidence suggests that the unions suffered badly during the 1980s, but how has this affected the lynch-pin of workplace industrial relations, the shop steward? The evidence of this research is that the shop stewards of the 1990s display remarkable stability in their influence and role when compared to earlier surveys.     

The Demand for Intermediate Goods in an Input–Output Framework: a methodological note

This methodological note suggests the use of the maximum eigenvalues of the matrices of the direct input–output coefficients and of the coefficients of vertically integrated sectors as indicators of the aggregate intensity of the demand for intermediate goods. Such indicators have the desirable property of being independent from both relative prices and the composition of final demand and reflect therefore only the structural characteristics of the productive system.     

The styles of management inventory: A methodological analysis of a training and research instrument

In recent years several theoretical ideas have been advanced in the area of problem-solving and decision-making in administration, with a focus on “leadership” styles. Instruments have been designed to operationalize the theory and for purposes of training and research. However, there has been little systematic testing of such instruments. This study examines the theoretical underpinning of one particular instrument, the Styles of Management Inventory. Then, it proceeds to test it for internal consistency by using multidimensional scaling. The data for this study were obtained from 288 probation administrators in the United States. Since this instrument is currently used by trainers and researchers, it is felt that this methodological study has important implications for both the management training and research fields.