Seigniorage and EMU : The fiscal implications of price stability and financial market integration

Disinflation, especially if coupled with financial market liberalisation, has implications for public finances because it lowers the revenue from the inflation tax. There might thus be a trade-off between the criteria on inflation convergence and public finances that were set at Maastricht. This paper measures the effects of lower inflation and financial market integration on the revenue from seigniorage for the EC member countries that have in the past relied most heavily on this source of revenues. The main result is that disinflation alone will reduce the revenue from seigniorage by over 2% of GDP in Greece, but much less than 1% of GDP in the other countries considered here. The overall impact of EMU (i.e. disinflation plus financial market integration) is a loss of seigniorage revenues of 2.9% of GDP in Greece and a little over 1% of GDP in Portugal and Spain. Two different measures of seigniorage yield similar results regarding the overall change, but differ regarding the transitional period and the level.     

Exchange market reform,inflation, and fiscal deficits

This paper examines the effects of exchange market reform on inflation and quasifiscal deficits in developing countries. The first part presents the conceptual framework, which identifies a variety of implicit taxes and subsidies that must be taken into account (in addition to implicit taxes on exports, as emphasized by Pinto (1991)) in assessing the fiscal and inflationary effects of exchange market reform. A formula that attempts to capture explicitly these taxes and subsidies is derived. The second part applies the formula to six countries (Guyana, India, Jamaica, Kenya, Sierra Leone, and Sri Lanka). The results suggest that exchange market reform may lead to a significant reduction in reliance on the inflation tax.     

The institutional change under lobbying and the distribution of power

In this paper, we develop a model of institutional change of land property right in China, which include the influences of lobbying and the political power division in 1978. The model illustrates how extra gains are produced under different institutions and how lobbying and political power division can affect the change. It is clear that the institutional innovation has something to do with the leaders’ legal income, the cost of institutional change and the conversion rate. Given the pattern of leader’s power division, it is the best way for the people in rural areas to change their institutional framework, and it is efficient to mix local and central governmental policies. And lobbying and leading power division can affect the direction and the course of institutional changes that would lead different result among different areas. __________ Translated from Nankai jingji yanjiu 南开经济研究 (Nankai Economic Research), 2007, (6): 17–32     

Engineering solutions to software problems: Some institutional and social factors shaping change

Software is the core of information technology systems, the major factor i n system costs and the main source o f system malfunctions. The software development process is currently characterized as a labour-intmsive craft activity which has resisted automa- tion. Software engineering covers a set of approaches which are intended to address the long-standing twin problems of low productizlity in software development and the poor quality of software products. It encompasses a range of tools, methods and procedures which aim to assert a n engineering culture to displace existing ad hoc processes. Many governments have supported programmer of software engineering R&D. This article argues that the adoption of sotiware engineering is mediated and resisted by social, organizational, cultural and in~titutionat factors. These are identified and their implications discussed.     

Engineering solutions to software problems: Some institutional and social factors shaping change

Software is the core of information technology systems, the major factor i n system costs and the main source o f system malfunctions. The software development process is currently characterized as a labour-intmsive craft activity which has resisted automa- tion. Software engineering covers a set of approaches which are intended to address the long-standing twin problems of low productizlity in software development and the poor quality of software products. It encompasses a range of tools, methods and procedures which aim to assert a n engineering culture to displace existing ad hoc processes. Many governments have supported programmer of software engineering R&D. This article argues that the adoption of sotiware engineering is mediated and resisted by social, organizational, cultural and in~titutionat factors. These are identified and their implications discussed.     

Wedges: Distribution,distortions, and market integration

This paper's model lets an international wedge continuously index a country's capital market integration with the rest of the world, and studies politico-economic determination of a domestic labor wedge that corrects market imperfections and/or redistributes welfare across differently wealthy voters. International integration influences the equilibrium policy, at given country-specific political and structural features, through the strength of factor price effects and through ownership of domestic and foreign capital by the country's citizens. If policy reduces market employment, then it unambiguously does so more strongly when a capital-poor country integrates more tightly with the rest of the world.     

Vertical integration, market foreclosure and quality investment

We study incentives to vertically integrate in an industry with vertically differentiated downstream firms. Vertical integration by one of the firms increases production costs for the rival. Increased production costs negatively affects quality investment both by the integrated firm and the unintegrated rival. Quality investment by both firms decreases under any (vertical integration) scenario. The decrease in quality invesment by both firms softens competition among downstream firms. By integrating first, a firm always produces the high quality good and earns higher profits. A fully integrated industry, with increased product differentiation, is observed in equilibrium. Due to increase in firm profits, social welfare under this structure is greater than under no integration.     

Revisiting structural change and market integration in late 19th century American capital markets

This article draws on a variety of time series tools to more deeply explore issues surrounding the emergence of a national capital market in the late 19th century. Our focus is on the timing of the emergence of a national capital market. Rather than relying on the absolute narrowing of regional interest rate differentials, which is a common approach in this literature, we use Gregory and Hansen cointegration tests, which allow us not only to test for cointegrating relations in the interest rate series but to identify unknown structural change dates as a byproduct. We also use dynamic conditional correlations to determine the dates at which regional interest rate correlations began increasing. Our results suggest that structural changes are centred around the year 1900, which is consistent with Sylla's argument that the lowering of capital requirements by the Gold Standard Act of 1900 increased bank entry and competition and facilitated regional capital market convergence.     

Financial market integration, labor markets, and macroeconomic policies

We used a dynamic two-country optimizing model featuring a labor–market friction to analyze the implications of financial market integration for the propagation of macroeconomic policies in an open economy. Our main result is that the labor–market friction we analyzed substantially reduces the magnitude of the effect of financial market integration on the propagation of macroeconomic policies.     

Tax incidence,majority voting and capital market integration

We re-examine, from a political economy perspective, the standard view that higher capital mobility results in lower capital taxes — a view, in fact, that is not confirmed by the available empirical evidence. We show that when a small economy is opened to capital mobility, the change of incidence of a tax on capital–from capital owners to owners of the immobile factor–may interact in such a way with political decision-making so as to cause a rise in the equilibrium tax. This can happen whether or not the immobile factor (labour) can be taxed, and whether or not savings can be subsided under capital mobility.     

On innovation,social change,and reality

Innovation in social affairs is a far more complex and demanding process than one might believe. Not only are there many excellent general reasons why an apparently “rational” or absolutely “necessary” innovation either fails to be realized or is incorporated in totally unforeseen ways, there are also important specific reasons, associated with individual contexts where innovation is undertaken, that must be taken into account. Ignoring the important idea of the quid pro quo, making facile assumptions about the clarity and importance of the proposed changes, and failing to account for a range of reactions and distortions of implementation may spell disaster to a would-be innovator and his ideas, regardless of the merits of either. To illuminate the concept of innovation is useful. Think of it as a four-step process that includes initiation, reaction or rejection, partial incorporation, and diffusion phases. Each phase presents different problems and opportunities, and each must be considered seriously and explicitly if an innovation is to turn out even remotely as its proponents intended.     

The institutional,economic and social determinants of local government transparency

Interest in transparency is increasing worldwide. Literature on their determinants is evolving but is still in early stages. So far, it has typically focused on national governments while neglecting local governments. This paper examines the economic, social, and institutional determinants of local government transparency in Spain. We broaden the traditional fiscal focus by including corporate, social, contracting, and planning transparency indexes. Our results indicate that large municipalities and left-wing mayors report better transparency indexes; while the worst results are presented by provincial capitals, touristic cities and mayors with absolute majority. The analysis of specific transparency categories generally shows the consistent impact of these determinants.     

Ricardian equivalence,expansionary fiscal contraction and the stock market: a VECM approach

The effect of government taxation on future consumption has been explained in three ways: the Keynesian approach, the Ricardian Equivalence proposition and the German view of Expansionary Fiscal Contraction (EFC). This paper reports empirical evidence on the validity of these explanations by examining the impact of a shock in government taxation upon private consumption, once the effect of the stock market is removed. A vector error-correction model is estimated for the USA, Japan, Germany, France, the UK, Italy and Canada for 1950–1997 and the impulse response functions of a shock in taxation and in expenditure are examined. The responses to an increase in government taxation appear to lend support to the EFC, while the responses to an increase in government expenditure upon consumption suggest that the reaction of private consumption is more in line with the traditional Keynesian approach.     

The influence of special district governments on public spending and debt

Growth in special district governments is examined as a reason behind public sector expansion in the United States. A theoretical model is developed of the optimal mix of government suppliers which predicts how special district governments affect the overall provision of government policies. The hypothesis that expansion of special district governments leads to expansion of the public sector is expirically examined over two time periods.     

略论经济增长方式转换的条件及社会影响

市场经济的资源配置是由厂商完成的,因此要实现经济增长方式的转换,就必须改变企业获得利润的方式:从收入方面讲,它要求建立在收入持续增长基础上的消费层次能够不断地演进,由此产生出对产业升级和结构转换的要求而促使企业创新;从投入方面看,要求各要素的相对短缺与价格上升,由此产生的成本压力和技术变革的巨大潜在利益迫使企业变革.在促使经济增长方式转换时,应特别注意它可能带来的不良社会影响.     

制度变迁中的个人、企业和政府

个人、企业和政府是市场经济运行中三个不同的行为主体,有着各自的目标函数。本文通过论述三个行为主体目标函数的一致性与冲突性,试图从制度变迁的路径中揭示出行为主体相互作用或相互博弈的经济学问题。一、市场经济条件下行为主体目标函数的一致性在市场经济条件下,个人的目标函数是收入最大化,企业的目标函数是利润最大化,政府的目标函数是发展最大化(经济发展是对政府的充分就业、物价稳定和经济增长三个目标的概括)。这三个行为主体的目标函数具有一致性,表现在两个方面:一是相互的制度界定是其发展的必要条件;二是共享的价值理念是其发展的充分条件。     

Interethnic relations,informal trading networks,and social integration: imitation,habits, and social evolution

The ethnically homogeneous middleman groups (EHMGs), which are informal trading networks, are ubiquitous in less-developed economies where the legal infrastructure for contract enforcement is not well developed. This paper develops a formal model of social interaction among members of the EHMG as well as in more general situations in a multi-ethnic or multi-cultural society consisting of identifiable ethnic or linguistic groups. Behavioral patterns are transmitted between generations and altered via imitation in social contacts. The model demonstrates how different discriminatory behavioral patterns can evolve and persist over time. One result is that the trust between such groups can increase due to a higher frequency of inter-group contacts. In concluding the paper, we speculate about how the model can be expanded to include changes in legal structures, especially contract law. This could lead to an increase in the trust between the different groups.     

Race,competition, and institutional change in J.R. Commons

This article examines the contribution of J.R. Commons to race relations, competition, and institutional change. One result of our study is that, in his analysis of institutional dynamics in the United States, Commons’ rejection of laissez-faire is derived from a racist analytical framework: the “superior races” should be protected from the “inferior races”. Another result is that Commons adopts a neo-Lamarckian framework which takes education as the basis for the assimilation of “inferior races”. This article then shows that policies often defended as progressives, as education policies, may be derived from racist foundations. The final remarks single out the ambiguous connection between race and culture revealed by Commons’ approach.