Marcelo Diamand’s contributions to economic theory through the lens of the classical Keynesian approach: a formal representation of unbalanced productive structures

Abstract:

We examine both conceptually and in formal terms the contributions by the structuralist economist Marcelo Diamand, which all revolve around the notion of unbalanced productive structure, and its implications on income distribution, the general price level, and output dynamics in Latin American countries, with a special focus on Argentina. We argue that Diamand’s work provides a very useful framework to understand why institutionally and historically determined real wage and real exchange rates can, on the one hand, explain the relatively low productivity of the industrial sector and, on the other hand, cause devaluations to be both inflationary and contractionary, as has been the case in many Latin American countries that attempted to initiate an industrialization process by import substitution.     

Initial endowments and economic reform in 27 post-socialist countries

This study explores how initial endowments at the start of transition have shaped reform outcomes and reform trajectories in 27 former communist countries in Europe and Central Asia. Countries of the former Russian Empire that had a large resources sector at the start of transition underperformed other countries in terms of the speed and the depth of economic reforms. The effect is particularly strong for privatization, enterprise restructuring and competition policy. Within country, Ottoman or Russian provinces that had a large natural resources sector in 1989 have a lower share of entrepreneurs and of small and medium sized enterprises today and also experience endemic corruption. Our results indicate that the propensity, or ability, of special interest groups to capture the reform process that would erode their rents were facilitated by the quality of institutions whose foundations go back centuries; and that the effects on the local economy are real.     

The curse of wealth and power

We study a model in which being more powerful does not necessarily imply being wealthier.     

R&D personnel and human resource management in multinational companies: between homogenization and differentiation

This paper discusses the impact of globalization processes on models of R&D personnel management in multinational companies operating in Europe. Existing literature focuses on the globalization of R&D activity, on the one hand, and on national systems of innovation, on the other. By contrast, there are few studies of the linkage between the globalization of R&D and its impact on HRM. Drawing on the practices of multinationals in four sectors (pharmaceuticals, chemicals, computer hardware and software), the paper examines whether the hold of national differences in the area of HRM has been significantly weakened in the face of new models of competitiveness and management in multinationals. It focuses on two dimensions: recruitment and mobility. The studies highlight two major trends. The ‘internationalization’ of R&D clearly has effects on HRM models but not as great as might be expected. HRM policies such as recruitment and pay systems continue to be nationally based, reflecting legal and institutional differences. At the same time, in conjunction with new forms of R&D organization such as projects, the standardization of HRM tools may be observed. But this is partial and affects only a limited number of tools, notably individual evaluation.     

Flexible Water Sharing within an International River Basin

Increasing scarcity of water resources, and greatervariability in available water supply, are causingacute difficulties for allocation agreements amongusers of water bodies. One cause of controversy,especially for river waters, is the inability of mostallocation operations to accommodate variations inconditions. In this paper we develop a flexiblemechanism that produces a Pareto-efficient allocationfor every possible flow volume in a river. Extensionsto accommodate other kinds of variation, such as waterdemand, are feasible. The mechanism is demonstratedusing historical water flow data for the Ganges, basedon stylized water demand relationships for India andBangladesh. Quantitative comparison between fixed andvariable allocation suggests that variable allocationsubstantially outperforms fixed allocation, improvingregional welfare by at least ten percent.     

10 Q&A: Experienced Advice for “Lost” Graduate Students in Economics

Editor's Note: Oftentimes economic theorists have insightful things to say about methodology and policy as they relate to teaching, but those insights are often lost to more pedagogically-focused professors who do not follow theoretical developments. This section is the first in a series of occasional pieces by economic theorists and researchers that the editors believe may be of general interest. These informal comments are those of Ariel Rubinstein delivered at a Wine and Cheese party at NYU, October 28, 2011, and were expanded on by the author at the invitation of the editors (revised January 2013). Readers who find Rubinstein's comments interesting are encouraged to go to his Web site, http://arielrubinstein.tau.ac.il, and to look at his new book, Economic Fables, which raises a number of issues directly related to teaching. Readers with suggestions for additional pieces for this series are encouraged to e-mail: Colander@Middlebury.edu.     

A Cost Function for the Natural Gas Transmission Industry

This article estimates the parameters of a cost function for the process of gas transmission based on the two basic capital inputs to the process: pipe and compressors. This in turn allows us to assess the combination of capital, operating, and maintenance costs that minimize the total cost of a natural gas transportation system. We further show that the industry's production technology exhibits increasing returns to scale. That is, we find that the long-run marginal cost is lower than the long-run average cost per unit. The natural gas transmission cost function derived is consistent with the engineering aspects of the industry and may be used to find the minimal cost of a system to transport natural gas.     

THE PURE CHARACTERISTICS DEMAND MODEL*

In this article, we consider a class of discrete choice models in which consumers care about a finite set of product characteristics. These models have been used extensively in the theoretical literature on product differentiation and the goal of this article is to translate them into a form that is useful for empirical work. Most recent econometric applications of discrete choice models implicitly let the dimension of the characteristic space increase with the number of products (they have “tastes for products”). The two models have different theoretical properties, and these, in turn, can have quite pronounced implications for both substitution patterns and for the welfare impacts of changes in the number and characteristics of the goods marketed. After developing those properties, we provide alternative algorithms for estimating the parameters of the pure characteristic model and compare their properties to those of the algorithm for estimating the model with tastes for products. We conclude with a series of Monte Carlo results. These are designed to illustrate: (i) the computational properties of the alternative algorithms for computing the pure characteristic model, and (ii) the differences in the implications of the pure characteristic model from the models with tastes for products.     

Auditor Fees and Fraud Firms

The issue of whether auditor fees affect auditor independence has been extensively debated by regulators, investors, investment professionals, auditors, and researchers. The revised Securities and Exchange Commission (SEC) requirements that resulted from the implementation of the Sarbanes‐Oxley Act (2002) limit nonaudit services (NAS) and mandate NAS fee disclosure. The SEC's requirements are based on the argument that auditor independence could be impaired—and hence audit quality may be reduced—when auditors become economically dependent on their clients or audit their own work. Economic bonding leads to reduced independence, which can lead to reduced audit quality. We study a sample of firms sanctioned by the SEC for fraudulent financial reporting in Accounting and Auditing Enforcement Releases (SEC‐sanctioned fraud firms) and examine whether there is a relationship between auditor fee variables and the likelihood of being sanctioned by the SEC for fraud. We use SEC sanction as a measure of audit quality that has not previously been used in the auditor fee literature and is more precise than some of the other proxies used for flawed financial/auditor reporting. We find, in univariate tests, that fraud firms paid significantly higher (total, audit, and NAS) fees. However, in multivariate tests, when controlling for other fraud determinants and endogeneity among the fraud, NAS, and audit fee variables, we find that while NAS fees and total fees are positively and significantly related to the likelihood of being sanctioned by the SEC for fraud, audit fees are not. These findings suggest that higher NAS fees may cause economic bonding, thereby leading to reduced audit quality. Our findings of significantly higher NAS fees and total fees in fraud firms hold after controlling for latent size effects and other rigorous testing. These results contribute to the literature that examines the SEC's concerns regarding NAS and can be used by policy makers for additional consideration.     

Containing conflict: a relational approach to the study of high-involvement work practices in the health-care setting

This study extends strategic human resource management research by focusing on the effects of high-involvement work practices (HIWPs) on relational outcomes with customers (patients). The authors provide evidence that relational dynamics among employees act as a mediating mechanism for the relationship between workplace practices and these outcomes. In particular, we propose that human resource management practices designed to increase employees' involvement at work reduce the level of organizational conflict among employees, which, in turn, affect employees' conflict with patients and their families. Using a two-wave longitudinal survey of 378 patient care providers at 20 nursing homes, the authors argue that the effect of HIWPs on conflict between nursing home staff and patients and their family members is mediated by task and relationship conflict among employees. The results provide strong support for the mediating role of organizational conflict among employees by documenting that the negative effect of HIWPs on employees' conflict with patients and their families is mediated by the reduced levels of task conflict and relationship conflict among employees. The study's findings shed new light on the relational mechanism through which HR practices affect employees and customers. Scholarly and practical implications are discussed.