Export uncertainty in centrally planned economies and administered protection

The paper examines the price decision making process of a state foreign trade organization under threat of antidumping tariffs. Given the peculiar application of the antidumping law to centrally planned economy exporters, the paper formally outlines the parameters guiding the state exporter's price decision and attempts to estimate the degree of uncertainty it faces. The exporter's optimal price is shown to depend on its subjective probability distributions of numerous foreign prices and alternative methodologies for calculating a centrally planned economy exporter's “fair price.”     

Further evidence on the PPP analysis of the Australian dollar: Non-linearities, fractional integration and structural changes

The aim of this paper is to analyse the empirical fulfilment of the Purchasing Power Parity (PPP) theory for the Australian dollar. In order to do so we have applied recently developed unit root tests that account for asymmetric adjustment towards the equilibrium [Kapetanios, G., Shin, Y., Snell, A., 2003. “Testing for a unit root in the nonlinear STAR framework”, Journal of Econometrics, 112, 359–379] and fractional integration in the context of structural changes [Robinson, P.M., 1994. “Efficient tests of nonstationary hypotheses”, Journal of the American Statistical Association, 89, 1420–1437; Gil-Alana, L.A., 2008. “Fractional integration and structural breaks at unknown periods of time”, Journal of Time Series Analysis, 29, 163–185]. Although our results point to the rejection of the PPP hypothesis, we find that the degree of persistence of shocks to the Australian dollar decreases after the 1985 currency crisis.     

Exchange rate changes and endogenous terms of trade effects in a small open economy

This paper shows that the small-country assumption of dependent-economy models is unlikely to hold for many of the cases in which this class of models is used, for example, in the analysis of a terms of trade shock in the “commodity currency” models. When a shock affects most or all of the small countries exporting a commodity, the combined exchange rate effects will result in endogenous terms of trade changes even for those countries too small to individually affect world markets. The paper also explores the possible implications of these secondary terms of trade changes for the dependent-economy models.     

Increasing returns and the share economy

Under imperfect competition, profit maximization by firms results in the market price exceeding the marginal cost of production; Weitzman terms this “excess supply” Weitzman wishes to replicate in the cost function (in terms of labor) the properties of the revenue function (in terms of output), thus generating “excess demand” for labor. A revenue-sharing scheme will achieve this if and only if there are decreasing returns to scale. Hence increasing returns apparently play no role in Weitzman's analysis.     

Healthy food, unhealthy food and obesity

We examine whether the latent behavioral mechanisms embedded in two “price effects” explanations of the obesity problem are operative. Our findings lend support to the hypothesis that falling food price is one likely cause of the obesity epidemic.     

Results on the bias and inconsistency of ordinary least squares for the linear probability model

This note formalizes bias and inconsistency results for ordinary least squares (OLS) on the linear probability model and provides sufficient conditions for unbiasedness and consistency to hold. The conditions suggest that a “trimming estimator” may reduce OLS bias.     

Tax revenues, fiscal corruption and “shame” costs

In this paper we explore tax revenues in a regime of widespread fiscal corruption in a static framework. We prove that the relationship between the tax rate and tax revenues depends on the relevance of the “shame effect” of being detected in a corrupt transaction. In countries with a “low shame” effect, tax revenues grow as the tax rate increases. Moreover, there is a critical tax rate where the growth rate of tax revenues begins to reduce. In countries with a high “shame effect” tax revenues increase up to a threshold value and then decrease.     

Noncooperative foundations of the nucleolus in majority games

This paper studies coalition formation, payoff division and expected payoffs in a “divide the dollar by majority rule” game with random proposers. A power index is called self-confirming if it can be obtained as an equilibrium of the game using the index itself as probability vector. Unlike the Shapley value and other commonly used power indices, the nucleolus has this property. The proof uses a weak version of Kohlberg's [SIAM J. Appl. Math. 20 (1971) 62] balancedness result reinterpreting the balancing weights as probabilities in a mixed strategy equilibrium.     

Fixed versus variable supply in the public provision of goods

Using discriminatory price auctions with variable supply, we explore a situation in which a corruptible public employee is in charge of producing and allocating a finite number of goods among consumers with uniformly distributed valuations. The negative effects of corruption are lower when the employee‘s task is to “provide at least q₀ goods” than when the employee is required to “provide exactly q₀ goods”.     

Monopolists and viscous demand

We characterize the optimal dynamic price policy of a monopolist who faces “viscous” demand for its services. Demand is viscous if it adjusts relatively slowly to price changes. We show that with the optimal policy the monopolist stops short of achieving 100% market penetration, even when all of the consumers have the same long-run willingness to pay for the service. Furthermore, for certain parameter values in the model, the price policy requires rapid oscillations of the price path.     

Socialist and world market prices: An ingrowth?

This paper presents tests of the relationship between East-West trade prices and intra-Council for Mutual Economic Assistance (CMEA) prices for transferable ruble transactions for two sets of Hungarian data. A special test on the significance of the introduction of the Moscow modification of 1975 is executed where feasible. This is relevant for more than half of the commodities studied. Well-behaved relationships between world and CMEA prices are obtained for the majority of commodities, but frequently the elasticities diverge significantly from unity. This suggests that changes in average East-West trade prices are transmitted into the CMEA price formula only partly. For those products for which the relationship is statistically weak, other determinants of CMEA prices should be explored.     

Can Japan succeed in “Chigyo-ka” (intelprise-formation)?

There are two aspects in today's information revolution that started in the late 1970s. The first is an aspect referred to as “the third industrial revolution,” which triggers the transition to the “21st century system of Industrialization.” The information revolution in this sense brings the creation of new “breakthrough industries (new multimedia industries).” And the second aspect of the information revolution possesses the characteristics of both a technological revolution and a social revolution and brings about the arrival of the third phase of the historical evolutionary process of the modern civilization, which proceeds through three phases, namely “militarization, industrialization, and then informatization.”If the bearers of modern industrialization are a “group of enterprises” that have been engaged in the race in order to gain “wealth” (generalized means of exchange/exploitation power), and if these enterprises' activities have been exercised in the world market where their products have been sold, then it is appropriate to call the bearers of informatization a “group of intelprises.” They will be engaged in the race to gain “wisdom” (generalized means of persuasion/induction power), then stages of their activities can be called a “global intelplace” where “sharables,” that is, information and knowledge, will be disseminated. And now, toward the 21st century, the third phase of modernization, which can be called the “informatization/intelprise formation” or the “wisdom game” (intellectualism), is about to begin.Japan's “ie society (a society based on the ie principle—literally, it means “house” but here it is interpreted as cultural principle for organizing a society), which has been going through the process of evolution on the Japan Archipelago, has developed a network-based organization with little stratification within its infrastructure. In this sense, Japanese society can be characterized as a “network-oriented society” in which intelprises and an intelplace in the broad sense have functioned as the essential components of the society since Middle Ages. In general, an intelplace and intelprises that operate actively within this framework serve as the flexible bases for different types of social relations and institutions, such as states and markets and eventually integrate these into the society to a certain extent. In fact, it took place quite regularly during the modernization “in the narrow sense,” or Westernization of Japanese society after the Meiji Restoration. There exist some problems, however. Some of the characteristics found in Japanese society may become obstacles to activities aimed at the sharing and promotion of information and knowledge in the global intelplace and Japanese participation in the “wisdom game.” Badly needed are serious efforts for Japanese intelprise-formation to reduce these obstacles as much as possible.     

Influence of decision styles on use of decision models

This article discusses how the “decision style” of an administrator influences the adoption and use of particular decision models. Several “interactive” and “analytical” decision models often used to guide decision making are described and critiqued to point out their virtues and deficiencies. Propositions are suggested that contend that “systematic,” “judicial”, “speculative”, and “intuitive” styles have clear-cut preferences for a particular decision model. This model seems to be used, even when another would be more suitable. Effective decision makers are postulated to adapt their styles, or at least to see the benefits of different styles. Mixed-mode models are proposed that seem to simulate the behavior of successful decision makers.     

Perpetual youth and endogenous labor supply: A problem and a possible solution

In the “perpetual youth” overlapping-generations model of Blanchard and Yaari, if leisure is a “normal” good then some agents will have negative labor supply. We suggest a solution to this problem by using a modified version of Greenwood, Hercowitz and Huffman’s utility function. The modification incorporates real money balances, so that the model may be used to analyze monetary as well as fiscal policy. In a Walrasian version of the economy, we show that increased government debt and increased government spending raise the interest rate and lower output, while an open-market operation to increase the money supply lowers the interest rate and raises output.     

Government spending, capital accumulation and the optimal policy rule: The role of public service capital

In this paper, we modify the Djajić [Djajić, S., 1987. “Government Spending and the Optimal Rates of Consumption and Capital Accumulation,” Canadian Journal of Economics 20, 544–554.] model in such a way that government consumption expenditure provides utility to households via the total stock of government services rather than the government consumption flow alone. By using such a framework, we show that the optimality condition for the public service capital stock is the marginal rate of substitution between public service capital and consumption that equals the intertemporal marginal rate of transformation between the two goods. In addition, we show that the relationship between private consumption and public service capital in a household's utility plays an important role in determining the transitional behavior of relevant variables. We also examine the second-best government consumption expenditure policy. By contrast, in the standard flow specification, e.g., Turnovsky and Brock [Turnovsky, S.J. and Brock, W.A., 1980. “Time Consistency and Optimal Government Policies in Perfect Foresight Equilibrium,” Journal of Public Economics 13, 183–212.], Ihori [Ihori, T., 1990. “Government Spending and Private Consumption,” Canadian Journal of Economics 23, 60–69.], and Turnovsky and Fisher [Turnovsky, S.J. and Fisher, W.H., 1995. “The Composition of Government Expenditure and its Consequences for Macroeconomic Performance,” Journal of Economic Dynamics and Control 19, 747–786.], the second-best government consumption expenditure is decided on the basis that the marginal utility of consumption is equal to the discounted sum of the marginal utility of the government's flow spending.     

Microeconomic modeling of parallel markets: The case of agricultural goods in the USSR

In a centrally planned economy, non-market-clearing prices fixed by the state cannot be used directly to estimate consumer behavior models. This paper represents an attempt to overcome this problem by utilizing prices in a parallel “free” market. An equilibrium model incorporating parallel markets is discussed and a demand curve arising from this model is estimated using data for the markets for meat and milk in the USSR. the price and income elasticities of demand for these goods are found to be significantly higher than those estimated for the United States.     

Monetary transmission mechanism in Turkey under free float using a small-scale macroeconomic model

This study analyzes the monetary transmission mechanism in the Turkish economy following the switch to free float under informal inflation targeting scheme in the aftermath of the February 2001 crisis. A small-scale macroeconomic model is simulated using equations for output gap, exchange rate, sub-items of inflation, short-term policy rate, government borrowing rate, “Embi+ Turkey” and inflation expectations. The preliminary results indicate that, despite some slight departures, both static and dynamic simulations capture the dynamics of the fundamental economic variables. The results also show that at a time of weak domestic demand, output gap has been seemingly less significant in determining inflation. Furthermore, risk premium as measured by “Embi+ Turkey” has a high explanatory power in shaping government borrowing rate and exchange rate. Finally, forward-looking component of inflation has been effective in determining non-administered prices.