Household repayment behavior: The role of social capital and institutional,political, and religious beliefs

We examine the influence of social capital and various prevailing beliefs on household repayment behavior in Europe, after accounting for household-specific characteristics and country differences in institutions. Arrears are more common among households living in regions with dense corruption beliefs, low confidence in institutions and authorities, and a low fraction of religious people. Moreover, high stocks of social capital reduce the likelihood of arrears, net of the influence of various potentially relevant factors. Households in these communities face a higher hazard of losing standing in the group and access to the positive externalities of social capital.     

The wise,the politician,and the strongman: Types of national leaders and quality of governance

This paper assesses how national leaders’ quality of governance varies with their career and education. Using a sample of 1,000 rulers between 1931 and 2010, I identify three types of leaders: military leaders, academics, and politicians. Military leaders are associated with an overall negative performance, while politicians who have held important offices before taking power tend to perform well. Academics have on average non-significant effects. These results are partially driven by differences in policy decisions and in leadership styles. Military leaders spend less in health and education, are more likely to establish a personalistic regime, to disrespect the constitution, and to move towards a non-electoral regime, while the reverse holds for politicians. Additionally, this paper highlights the weakness of using educational attainment as a proxy for politicians’ quality, and of growth as a measure of national leaders’ performance.     

Trade, inequality, and the political economy of institutions

This paper investigates the relationship between international trade and the quality of economic institutions. We model institutions as fixed costs of entry, in a framework that has two key features. First, preferences over entry costs differ across firms and depend on firm size. Larger firms prefer to set higher costs of entry, in order to reduce competition. Second, these costs are endogenously determined in a political economy equilibrium. Trade opening can lead to higher entry costs when it changes the political power in favor of a small elite of large exporters, who in turn prefer to install high entry barriers.     

资本市场、独立审计与诚信奖励——基于三方博弈的模型分析

当广大中小投资者及一些研究者极力呼吁加大对上市公司做假及会计师事务所配合上市公司做假的处罚力度和强度时,本文却通过引入奖励这一变量,构造了上市公司、会计师事务所与监管部门的三方博弈模型,提出奖励作为监管手段的一个方面,也许比只使用处罚更有利于上市公司和会计师事务所的成长。     

The conspicuous absence of examination questions concerning the Great Irish Famine: political economy as science and ideology *

To advance our general understanding about the development of nine-teenth-century Irish political economy in the wake of the Great Irish Famine (1846–51), this article analyses the Famine's impact on a previously unstudied, yet uniquely authoritative, element of the displine: the questions given to candidates for the Whately Professorship of Political Economy at Trinity College, Dublin from 1832 to 1882. This article concludes, contrary to previous arguments, that the Famine did not fundamentaly influence the discipline's development, and relates this conclusion to debates over whether and how political economy functioned as an ideology in shaping policy responses to the Famine.     

Crony capitalism,the party-state,and the political boundaries of corruption

We build a model that puts together crony capitalism, the hierarchy of the Chinese communist party-state, and the decision-making process inside the Party Center. We show that inefficient economic institutions create local corruption that raises realized productivity, while generating rents that flow along the party-state hierarchy up to the provincial level, threatening the Center’s control in potential crises. Although both stronger crisis control and higher economic performance help the Center’s goal to stay in power, we show that given a general fat-tailed risk of crisis, the Center will maximize crisis control at the expense of the economy when choosing its tolerance of local corruption. Power structure and corruption within the Center and reciprocal accountability between central and provincial leaders are also analyzed. Our analysis suggests conditions under which China’s communist regime will or will not deal with the existential threat presented by corruption.     

Narcissism,political tenure,financial indicators and the effectiveness of environmental regulation

This article explores the factors that determine the effectiveness of environmental regulation in the United States and Australia. Unlike prior literature, in which lagging performance measures (such as carbon emissions) are used, we use financial data to develop effectiveness scores and identify the determinants of effectiveness, including narcissistic behaviour, tenure of political leaders and financial indicators. Consistent with the emerging literature on environmental finance, we find that abnormal returns are associated with environmental regulation and that effectiveness is adversely affected when narcissistic leaders are in power. Our results remain robust when we control for various event windows and models.     

Lobbying,political competition and the welfare effect of campaign contribution tax

This paper develops a probabilistic voting model in which a single lobby group commits campaign contributions to parties, contingent on the policy position the party adopts. Parties may have different propensities for diverting campaign funds towards rents. We show that a party that skims more from contributions mobilises fewer uninformed voters but places more value on receiving greater contributions. Further, the contributions and vote share of the party increases with the distance between the lobby's preferred policy and the median voter's ideal policy. Finally, we show that the equilibrium policy is between the median voter's ideal point and the lobby's preferred policy. Such an equilibrium policy does not maximise the aggregate social welfare due to the distortionary nature of lobbying. However, when an appropriate contribution tax is introduced to limit this distortion, social welfare will be maximised.     

Nationalism, development and integration: the political economy of Ernest Gellner

In this paper, we show how in Gellner we can find a stimulatinganalysis of the institutional equilibria that characterise agrarianand industrial society and the conditions that make possibleinstitutional change from one equilibrium to another. This allowsa convincing account of the reasons why some countries industrialisedbefore others and why nationalism had such an uneven impacton the development of market economies. We consider the relationbetween Gellner's analysis and other theories of organisationand point out how Gellner can help to solve some paradoxes thatarise in these theories. We also argue that joining Gellner'scontribution to the analysis of the positional nature of statusand power reinforces his conclusion about the necessary stagnationof agrarian societies and the necessary (over)accumulation ofdifferent forms of capitalism. We conclude by examining theimplications of his analysis for the process of globalisationand its challenge to national states.     

Wicksell,Ramsey and the theory of interest *

The article discusses Wicksell's assessment of the controversy between Böhm-Bawerk on one side, and Fisher and Bortkiewicz on the other, on the role of productivity (the ‘third reason’) in the determination of the rate of interest. It is shown that in the process of arguing out the third reason Wicksell came remarkably close to Frank Ramsey's view of the determinants of saving in economies with a positive subjective rate of discount. The similarities between Wicksell and Ramsey result from the fact that – in contrast with Fisher and Böhm-Bewerk – they assumed reinvestment, with the corollary that maximum permanent consumption will be reached at zero interest if the subjective rate discount of future utility is zero. Wicksell used his Ramsey–like saving rule to explain the interaction betwen Böhm–Bawerk's three reasons in either dynamic or stationary conditions, which enabled him to reformulate the third reason as the ‘marginal productivity of waiting’. Finally, the relevance of Wicksell's savings rule for the perennial debate on ‘Wicksell's missing equation' is considered in the last section of the article.     

Banerjee,Duflo, Kremer,and the Rise of Modern Development Economics*

In 2019, Abhijit Banerjee, Esther Duflo, and Michael Kremer received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. These three scholars were recognized “for their experimental approach to alleviating global poverty”. This paper reviews the contributions of these three scholars in the field of development economics, to put this contribution in perspective. I highlight how the experimental approach helped to break down the challenges of understanding economic development into a number of component pieces, and I contrast this to understanding development using macroeconomic aggregates. I discuss pioneering contributions in understanding the challenges of education, service delivery, and credit markets in developing countries, as well as how the experimental approach has spread to virtually all aspects of development economics.     

Measurement,incentives and constraintsin Stigler's economics of science *

Abstract

George J. Stigler's seminal role as one of the founders of the economics of science is summarized and evaluated. His main contribution rests in his asking an array of important questions and arguing persuasively for the application of empirical, and especially statistical, techniques to the answering of those questions. He asks whether and how science progresses; whether a scientist's biography is important in understanding his science; what characteristics of a scientist are most complementary to success in science; and how the professionalization of science redirects the attention of scientists more toward internal puzzle-solving, and less toward applied relevance.     

The innovation and economic consequences of knowledge spillovers: fit between exploration and exploitation capabilities,knowledge attributes,and transfer mechanisms

The purpose of this study is to investigate the moderating roles of the attributes and transfer mechanisms of knowledge in the relationship between organisational capabilities and innovation and economic performance. Regression analysis on a sample of 120 Taiwanese firms was used to test our model. The findings suggest that the organisational capabilities of exploration and exploitation are positively related to innovation and economic performance. The effect of exploration on performance is positively moderated by tacit knowledge and adaptation knowledge transfer mechanisms. In contrast, exploitation is a stronger predictor of performance when organisations acquire well-defined knowledge and use replication knowledge transfer mechanisms.     

Firm Heterogeneity,Contract Enforcement,and the Industry Dynamics of Offshoring*

We develop an endogenous growth model with R&D spillovers to study the long‐run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm's production chain between a home upstream division and a foreign downstream division. While there is always a positive correlation between upstream bargaining weight and offshoring activities, there is an inverted U‐shaped relationship between these and growth. Whether offshoring with incomplete contracts also increases consumption depends on firm heterogeneity. As for welfare, whereas with complete contracts an R&D subsidy is enough to solve the inefficiency due to R&D spillovers, with incomplete contracts a production subsidy is also needed.     

Internationalization of Indian Enterprises: Patterns,Strategies, Ownership Advantages,and Implications*

The recent spate of large cross‐border acquisitions – for example, Tata Steel–Corus, Hindalco–Novelis, and Tata Motors–Jaguar/Land Rover – and greenfield investments by Indian companies have helped in focusing attention on the emergence of new corporate players on the global scene. India's emergence as a source of foreign direct investment outflows is impressive for its level of development. It is argued that the destinations, sectoral composition, motivations, and entry strategies of Indian investments have been changing with magnitudes. This paper examines the sources of Indian companies’ ownership advantages and trends, patterns, and implications. It has been argued that the source of their ownership or competitive advantage lies in their accumulation of skills for managing large multilocation operations across diverse cultures in India and in their ability to deliver value for money with their “frugal engineering skills” honed up while catering to the larger part of income pyramid in India.     

Poverty, political freedom, and the roots of terrorism in developing countries: An empirical assessment

We find that political freedom has a significant and non-linear effect on domestic terrorism, but has no statistically significant effect on transnational terrorism. Geography and fractionalization limit a country’s ability to curb terrorism, while strong legal institutions deter terrorism.     

Revenue risks,insurance, and the behavior of competitive firms

This paper explores some issues relating to a competitive firm's choice of the levels of output and insurance cover when faced with certain types of revenue risks. The analysis generalizes and extends existing results. In particular, we examine the implication, for the level of output and of insurance cover, of different risk attitudes of the firm under variable and fixed premium schemes. The possibility of using the premium schedule in, say, an export credit-guarantee scheme, as an instrument for stimulating the firm's output is noted.     

Status-seeking behavior,the evolution of income inequality,and growth

Using an overlapping generations model, this paper investigates the implications of status-seeking behavior, induced by preferences for relative income, for the evolution of income inequality. When average income rises, an individual’s marginal utility of their own income may increase (keeping up with the Joneses, or KUJ), or decrease (running away from the Joneses, or RAJ). It is shown that income inequality is shrinking over time in the KUJ economy, whereas it is expanding in the RAJ economy. We also explore the implications for long-run growth and inequality, in the existence of both KUJ and RAJ agents. I am truly grateful to Koichi Futagami for his encouragement and guidance in writing this paper. I have benefitted from comments by an anonymous referee, Been-Lon Chen, Giacomo Corneo, Akiomi Kitagawa, Kazuo Mino, Kazuhiro Yuki, and seminar participants at Osaka University, the 2006 Japanese Economic Association Autumn Meeting at Osaka City University, the Far Eastern Meeting of Econometric Society 2007 at Taipei, SER Conference 2007 at Singapore, and the European Meeting of Econometric Society 2007 at Budapest. All remaining errors are, of course, my own. The financial support from JSPS Research Fellowships for Young Scientists is greatly acknowledged.     

Economic transition,gender bias,and the distribution of earnings in China*

Market‐oriented economic reform, which accelerated after 1992, has brought substantial changes to the Chinese economy. This dramatic economic transition was raised two important questions: ‘How are women faring in the transition from a planned economy to a market economy?’ and ‘Are some women faring relatively better than other women’? We use data from the Chinese Household Income Projects for the years 1988 and 1995, a standard earnings equation, and quantile regressions to estimate and decompose the earnings gap. Our findings suggest that while the earnings gap has increased, the fraction of the gap ‘unexplained’ by differences in human capital variables such as education and experience has declined over time. This result is particularly pronounced for low earning women.     

Understanding the Determination of Severance Pay: Mandates,Bargaining, and Unions*

A substantial share of severance payments derives from private contracts or collective agreements. In this paper, we study the determination of these payments. We analyze joint bargaining over wages and severance payments in a search-and-matching model with risk-averse workers. Individual bargaining results in levels of severance pay that provide full insurance, but also depend on unemployment benefits and job-finding rates. Unions also choose full insurance. Because their higher wage demands reduce job creation, this requires higher severance pay. Severance pay observed in eight European countries, to which we calibrate the model, lies between predictions from the bargaining and union scenarios.