Secondary currency: An empirical analysis

Many cases exist of multiple currency usage throughout history. As two leading examples, secondary currencies were widespread during both the Great Depression in the United States and the 2002 recession in Argentina. What are the determinants of multiple currency usage and what is the effect on economic activity? Both issues are empirically addressed using individual-level surveys collected by the authors in Argentina during 2002 and 2003. The evidence supports the theoretically predicted determinants of secondary currency acceptability put forth in monetary theory. In particular, findings show that the acceptability of the secondary currency increases when the supply of national currency is low, the relative transaction cost of the secondary currency is low, and the individual trading technologies are less effective. Moreover the acceptability of the secondary currency has real effects on economic activity. Among those who use the secondary currency the monthly income gain is more than 15% of the average Argentine's monthly income. Excluding trades of used goods, this amounts to a 0.6% increase in GDP.     

Financial liberalization,bureaucratic corruption and economic development

We study the effect of international financial integration on economic development when the quality of governance may be compromised by corruption. Our analysis is based on a dynamic general equilibrium model of a small economy in which growth is driven by capital accumulation and public policy is administered by government-appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds, an opportunity that is made more attractive by financial liberalization which, at the same time, raises efficiency in capital production. Our main results may be summarized as follows: (1) corruption is always bad for economic development, but its effect is worse if the economy is open than if it is closed; (2) the incidence of corruption may, itself, be affected by both the development and openness of the economy; (3) financial liberalization is good for development when governance is good, but may be bad for development when governance is bad; and (4) corruption and poverty may coexist as permanent, rather than just transitory, fixtures of an economy.     

Employers' pay practices and potential responses to “comparable worth” litigation an identification of research issues

Comparable worth is a controversial compensation strategy. In this paper, research issues that arise when employers perform point-based job evaluations, but deviate from them because of market factors, are discussed. Greater research attention to the actual operation of markets and to the consequences of conflicts in equity perceptions is encouraged. Marcia P. Miceli is Associate Professor of Management and Human Resources at Ohio State University. Her research interests are in the areas of compensation administration, professional dissent and whistle-blowing, and employee selection and recruitment. Her previous works in these areas have been published in Academy of Management Review, Administrative Science Quarterly, Journal of Applied Psychology, and Journal of Business Ethics. John D. Blackburn is Associate Professor at the College of Business at Ohio State University. He has won the Best Article Award — American Business Law Journal. He is the co-author (with Julius Getman) of Labor Relations: Law, Practice and Policy. Stephen L. Mangum is Assistant Professor of Management and Human Resources at Ohio State University. His research has been in the areas of economic development, employment and training programs, pay equity, and military manpower and has appeared in such journals as Journal of Development Economics, Journal of Collective Negotiations in the Public Sector, Armed Forces and Society and Challenge. He is author (with Dr. C. Y. Hsieh) of A Search for Synthesis in Economic Theory (New York: M. E. Sharpe, 1986).An earlier version of this paper was presented at a meeting of the Academy of Management. The authors thank Jerry Greenberg and Arnon Reichers for their helpful comments on an earlier draft.     

MACROECONOMIC POLICY EVALUATION AND OPTIMAL CONTROL THEORY: A CRITICAL REVIEW OF SOME RECENT DEVELOPMENTS

Abstract. This survey addresses the recent literature on the application of optimal control theory and game theory to macroeconomic policy evaluation and design. This literature focuses on strategic interactions between governments and private agents engaged in dynamic non-cooperative games and emphasizes such issues as precommitment, credibility and reputation as important and endemic aspects of optimal policy design. A dominant theme is the problem of dynamic inconsistency and the inferiority of an equilibrium in single-stage full-information games without commitment. This may be alleviated in repeated games involving reputation effects and threat strategies designed to coerce rivals into pursuing particular strategies and to sustain a sequential equilibrium. The type and characteristics of a sequential equilibrium also depend importantly upon the information structure conditioning players'beliefs under uncertainty. Included here are separating and pooling equilibria, involving notions of learning, signalling and information revelation. Additional dimensions exist in stochastic systems which introduce other forms of uncertainty. Optimal control and game theory have also been applied to international macroeconomic policy design, with emphasis on the potential costs and benefits of non-cooperative and cooperative behaviour between countries and problems of international policy coordination.     

Endogenous Growth and Trade Liberalization

We develop an endogenous growth model in which trade liberalization has a positive effect on growth. This effect does not depend on marginal re-allocations nor on knowledge-spillovers. Rather, it is due solely to the increase in market size following the integration of product markets. Our result contradicts a widely-help view that trade on physical goodsper sehas no consequences for long-run growth.[F15]