Autocratic governors in public procurement

The personal role of sub-national rulers is crucial for regional development in countries with weak institutions. This paper studies the impact of regional governors’ tenure in office and their local ties on procurement performance in Russia. To identify the causal effect, we construct instruments for governor’s tenure by exploiting the regional vote share of ruling party in past parliament elections. We find the evidence that governors who do not have pre-governing local ties in the region (outsiders) demonstrate predatory behaviour, compared to governors with local ties (insiders). Namely, governors-outsiders restrict the competition at awarding stage significantly more than governors-insiders. Moreover, for governors-outsiders this restriction becomes stronger with tenure in office, while governors-insiders do not demonstrate such negative tenure effect. We argue that this restriction of competition by governors-outsiders cannot be explained by the intention of better contracts execution: the delays in execution and the probability of contract termination either increase or keep stable with tenure for governors-outsiders and these outcomes decrease with tenure for governors-insiders.     

Educational policy and the economics of the family

This paper analyzes the implications of alternative ways to model decision-making by families for educational policy. We show that many of the policy implications associated with credit constraints cannot be distinguished from the implications of models of the family that differ from the conventional Barro-Becker model. We then argue that it is the combination of credit constraints and non-conventional preferences that provides a robust basis for government intervention to promote educational investment.     

Nursing home choice,family bargaining,and optimal policy in a Hotelling economy

We develop a model of family bargaining to study the impact of the distribution of bargaining power within the family on the choice of nursing homes by families, and on the locations and prices chosen by nursing homes in a Hotelling economy. In the baseline (static) model, where the dependent parent cares only about the location of the nursing home, the markup of nursing homes is increasing in the bargaining power of the dependent parent, and nursing homes are located at the extreme periphery. We compare the laissez‐faire with the social optimum (which involves more central locations of nursing homes), and examine its decentralization in first‐best and second‐best settings. We explore the robustness of our results to introducing a bequest motive in a dynamic overlapping generations model, which allows us to study the joint dynamics of wealth accumulation and nursing home prices. If the bequest motive is strong, the markup is decreasing in the bargaining power of the dependent. However, wealth accumulation, by reducing interest rates, raises markup rates and nursing homes prices.     

Cost of policy choices: A microsimulation analysis of the impact on family welfare of unemployment and price changes

This paper calculates the welfare cost to families of an unemployment shock. Using U.S. data, we find an average annualized expected dollar equivalent welfare loss of $1,156 when the unemployment rate rises by one-percentage point. Relative to single families, the welfare loss is greater for married families and increases with education. We also estimate that a loss in purchasing power of 1.8% generates the same amount of welfare loss as a one percentage point rise in the unemployment rate. Additionally, the magnitude of the shock to purchasing power that a family is willing to endure to avoid a one percentage point increases in the aggregate unemployment rate rises with income. The results in this paper informs policy makers about the distributional implications of decisions likely to affect labor markets.     

Distortionary fiscal policy and monetary policy goals

We reconsider the role of an inflation conservative central banker in a setting with distortionary taxation. To do so, we assume monetary and fiscal policy are decided by independent authorities that do not abide to past commitments. If the two authorities make policy decisions simultaneously, inflation conservatism causes fiscal overspending. But if fiscal policy is determined before monetary policy, inflation conservatism imposes fiscal discipline. These results clarify that in our setting the value of inflation conservatism depends crucially on the timing of policy decisions.     

The relationship between coalition policy and party policy

The recent availability of multidimensional interval level data on the policy positions of most European political parties opens the way for a more sophisticated development and testing of policy-based coalition theories. This paper considers some of the conceptual and operational problems involved in dealing with notions such as the “policy package” of a coalition, the “policy distance” between two points in policy space, and the “aggregate policy distance” of a group of parties. It shows that party-specific perceptions of the salience of issue dimensions can have a considerable impact on the predictions of the theories concerned, which deal with coalition membership, coalition payoffs and coalition policy.     

Monetary policy,fiscal policy and cross signal jamming

This paper considers the issue of rule versus discretion when the central bank and the government share private information but have different preferences over inflation and output. We demonstrate that if the monetary policy is rule-based, Intuitive Criterion selects the unique separating equilibrium in which the central bank signals a low supply shock by a low interest rate. Interestingly, discretion may be better than the rule for the central bank, contrary to the case of complete information. Also, we examine the effect of information asymmetry on the monetary and fiscal policy mix. We show that cross signal jamming whereby the monetary authority and the fiscal authority successfully jams an unfavorable signal of each other does not occur in equilibrium.     

Waste management regulation: policy solutions and policy shortcomings

A model of packaging waste management is presented to explore the policy options available to governments to implement waste regulation in light of the Extended Producer Responsibility (EPR ). Our model endogenizes the packaging design as an additional determinant for the overall amount of waste jointly with consumers’ sorting effort and producers’ output decisions. The model shows that the policies that yield the first‐best allocation may not find public support. Furthermore, if the set of available policy instruments is limited, production and consumption of the good is likely to settle on a sub‐optimal level even though the optimal allocation may be achievable. Finally, the model demonstrates that a landfill tax may actually increase landfill waste in the presence of tradable credits for recycling activities. The results shed light on some shortcomings of existing regulatory schemes such as the Producer Responsibility Obligations (Packaging Waste) Regulations of the UK .     

Optimal containment and policy differentiation under unilateral climate policy

Abstract Without a broad international agreement, climate policy is less effective, owing to carbon leakage. We investigate whether this negative effect can be addressed by partially containing the policy’s effects to intermediate goods sectors, such as electricity or transportation services. We use a three‐sector model to study a policy that taxes emissions caused by intermediate goods production while subsidizing the intermediate good. We characterize the optimal containment policy for combating carbon leakage and show that it complements the concept of policy differentiation.     

Reliability of policy announcements and the effects of monetary policy

Monetary authorities regularly announce targets for monetary growth, but the market may not completely trust these announcements because they may not always be truthful. Hence, the market does not have perfect knowledge about future monetary policy and must form its expectations on the basis of information it can extract from the announcements and its observations of the actual money supply. This paper asks how the macroeconomic effect of monetary policy might be altered by more reliable policy announcements, in the setting of a medium-sized open economy. It is found that, contrary to the full-information case, a reduction in monetary growth of 1% may lead on impact to a reduction in inflation of much less than 1%, if the announcements are not very credible. The output costs of lowering inflation are smaller both in the short run and the long run, the more reliable the announcements. However, the plausibility of announcements does not affect the output loss for a given appreciation of the currency. Fluctuations in the exchange rate that are attributable to monetary disturbances beyond the policy-makers' control can nonetheless be dampened by making announcements that are more highly correlated with the truth.     

中国汽车产业政策与美国贸易政策的摩擦

改革开放以来,我国在许多领域推行了内容广泛的产业政策。然而,在世界经济一体化的今天,各国国内经济政策与其对外经贸的互动作用日益突出,贸易伙伴的反应常常在很大程度上决定着一国国内经济政策的可行性,因此,各国在制定任何一项产业发展政策时,都不能不顾及该政策对其贸易伙伴的影响及其可能作出的反应。显然,要考虑我国产业发展政策的可行性,就应当未雨绸缪,深入研究其与主要贸易伙伴贸易政策的矛盾。     

Incomes policy reconsidered

In this study a large data base of individual contract data is used to analyse the impact of wage controls on different groups in the Canadian unionized private sector. Of particular interest is the behavior of the controlled relative to the uncotrolled sector. Statistically significant reductions in wage inflation are discerned both sectors with the effect in the controlled sector being, approximately, twice large as that in the uncontrolled sector.     

Competition policy vs. industrial policy as a growth strategy

ABSTRACT

This paper shows that competition policy, rather than industrial policy, generated the rapid economic growth in post-war Japan. It also reveals that Japan’s growth rate was lowered from the mid-1970s due to newly introduced industrial policies and paucity of further competition policy. The current Abe government recognises the need for competition policies in Japan to recover from the low-growth period. The paper describes the types of competition policy carried out under Abenomics, especially in National Strategic Special Zones.Abbreviations: METI: Ministry of Economy, Trade, and Industry NSSZ: National Strategic Special Zones     

The interaction between macroprudential policy and monetary policy: Overview

This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential policy in determining international bank lending. We give an overview on the data, empirical specifications and results of the seven papers from the initiative. The papers are from a range of core and smaller advanced economies, and emerging markets . The main findings are as follows. First, there is evidence that macroprudential policy in recipient countries can partly offset the spillover effects of monetary policy conducted in core countries. Meanwhile, domestic macroprudential policy in core countries can also affect the cross‐border transmission of domestic monetary policy via lending abroad, by limiting the increase in lending by less strongly capitalized banks. Second, the findings highlight that studying heterogeneities across banks provides complementary insights to studies using more aggregate data and focusing on average effects. In particular, we find that individual bank characteristics such as bank size or GSIB status play a first‐order role in the transmission of these policies. Finally, the impacts differ considerably across prudential policy instruments, which also suggests the importance of more granular analysis.     

A policy model to analyze macroprudential regulations and monetary policy

We construct a small‐open‐economy, new Keynesian dynamic stochastic general‐equilibrium model with real financial linkages to analyze the effects of financial shocks and macroprudential policies on the Canadian economy. The model incorporates rich interactions between the balance sheets of households, firms and banks, long‐term household and business debt, macroprudential policy instruments and nominal and real rigidities and is calibrated to match dynamics in Canadian macroeconomic and financial data. We study the transmission of monetary policy and financial and real shocks in the model economy and analyze the effectiveness of various policies in simultaneously achieving macroeconomic and financial stability. We find that, in terms of reducing household debt, more targeted tools such as loan‐to‐value regulations are the most effective and least costly, followed by bank capital regulations and monetary policy, respectively.     

Austrian economic policy

Zusammenfassung Die österreichische Wirtschaftspolitik wird in Österreich vielfach als austro-keynesianisch etikettiert. Der vorliegende aufsatz versucht zu zeigen, daß das Keynesianische dieser Politik nicht in einer Stop-and-go-Politik besteht, was üblicherweise als Keynesianismus bezeichnet wird. Vielmehr zielt die österreichische Wirtschaftspolitk darauf ab, intrinsische Instabilitäten des Marktprozesses als Folge von Unsicherheiten oder wechselnden Erwartungen durch gesamtwirtschaftliche Arrangements zu reduzieren: Sozialpartnerschaft, stabiler Finanzsektor, Unabhängigkeit der Investitionsentscheidungen von monetären Faktoren sowie Dominanz automatischer Stabilisatoren. Diese Reduktion von Marktinstabilitäten kann als fundamentale Politikempfehlung Keynes' angesehen werden.Der Terminus Austro in der Bezeichnung der österreichischen Wirtschaftspolitik weist darauf hin, daß es ein hausgemachtes Konzept ist, welches neben keynesianischen Elementen auch klassische Relikte, neoklassische Erweiterungen, monetaristische Vermutungen oder einfach Wirtschaftspolitik à la Hausverstand beinhaltet. Dies gilt insbesondere für eine Vielzahl von selektiven Eingriffen wie Investitions-, Spar- oder Exportförderung. Gemeinsam ist diesen selektiven Eingriffen, daß sie üblicherweise als Erklärungen für die Erfolge der österreichischen Wirtschaftspolitik herangezogen werden; der konkrete Beweis hiefür steht jedoch aus.Der Aufsatz unternimmt den Versuch, das austro-keynesianische Konzept theoretisch wie auch empirisch kritisch zu prüfen.

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Revised joint version of two papers presented at the Premier colloque du Club européen des associations d'économistes: Les politiques économiques des années 1980, Paris, March 1983. The conference volume will be published under the editorship of P. Maillet, Association Française de Science Economique.     

Immigration policy index

The immigration policy index is based on three types of entry visa restrictions: visa required, visa not required for short stays and visa not required. I identify country pairs which changed their visa regime during 2000–2010 and find that the weakening of visa policy is associated with a 10 percent increase in migrant stocks and a significant shift towards male and less skilled migration from policy affected source countries. In contrast, the tightening of visa policy is not related to a significant change in migrant stocks, their gender or skill composition. The result suggests the existence of immigration policy hysteresis.     

European technology policy

European countries do less research than Japan and the United States. But their lower level of research effort has more to do with the smaller markets facing European inventors than with lower research productivity. Europe has substantial research potential, in that increasing research effort in most European countries generates bigger income benefits there than increasing research effort in the United States and Japan by equivalent amounts. Research subsidies, enhanced patent protection, support for public research, higher educational achievement and increased integration are alternative routes towards exploiting this potential. These policies increase productivity not only in Europe, but also elsewhere. One problem with implementing such policies at the national level is the potential for free riding. A second possible problem with policies to promote research concerns their distributional consequences. While all countries within the European Union would benefit from increased research output, the countries that are already best at doing research, which tend to be the richer members, do best. The benefits of policies that facilitate the adoption of innovations are more evenly spread among richer and poorer countries.