Emission taxes and the market for abatement goods and services

This paper examines the effect of emission taxes on pollution abatement and social welfare, when abatement goods and services are provided by a Cournot oligopoly with free-entry. We point out initially that a higher tax not only increases demand for abatement; it also makes polluters less sensitive to price. This attracts a larger number of abatement suppliers while possibly inducing each one of them to produce less. Total abatement always goes up, however, when the delivery of abatement goods and services exhibits decreasing returns to scale. We then calculate the welfare-maximizing emission tax and compare it to the Pigouvian tax.     

Trade in services and returns on multinational activity

Conclusion This note has attempted to clarify both the theoretical and empirical reasons why the returns on the performance of a foreign subsidiary’s operations ought to be seen as returns on firm-specific knowledge (FSKs) which should be included in discussion of trade in services. This difficult task was not accomplished in a satisfactory manner by Ramstetter and Lee. It is entirely inappropriate to unbundle the activities of MNEs into returns on financial investment and a residual used to proxy payments for FSK. Rugman [1987] did not assume that the opportunity cost of financial capital is zero; rather that the “investment” activity of the MNE cannot be divorced from its FSK. The MNE uses internal markets as an integrated process to transfer FSK across national borders, raising theoretical and empirical issues for the international accounting of trade in services.     

Fertility and Financial Incentives in France

The increase in births in France since 1995 has often been linkedby commentators to more generous family benefits. We study hereempirically the link between fertility and financial incentivesby estimating and simulating a joint structural model of participationand fertility on a sample of French women. The results reportedhere, while preliminary, suggest that fertility responds toincentives in a non-negligible way. However, they also havesome puzzling features: financial incentives appear to havemuch stronger effects on low-parity births. (JEL I38, J13, J22)     

Capital markets and capital allocation: Implications for economies in transition*

Recent work showing that a sounder financial system is associated with faster economic growth has important implications for transition economies. Stock prices in developed economies move in highly firm‐specific ways that convey information about changes in firms’ marginal value of investment. This information facilitates the rapid flow of capital to its highest value uses. In contrast, stock prices in low‐income countries tend to move up and down en masse, and thus are of scant use for microeconomic capital allocation. Some transition economy markets are coming to resemble those of developed economies, others those of low‐income countries. Stock return asynchronicity is highly correlated with the strength of private property rights in general and public shareholders’ rights in particular. Other recent work suggests that small entrenched elites in low‐income countries preserve their sweeping control over the corporate sectors of their economies by using political influence to undermine the financial system and deprive entrants of capital. The lack of cross‐sectional independence in some transition economies’ stock returns may be a warning of such economic entrenchment. Sound property rights, solid shareholder rights, stock market transparency, and capital account openness appear to check this, and thus contribute to efficient capital allocation and economic growth.     

A SYNTHESIS OF POVERTY LINE DEFINITIONS*

A fundamental point of discussion in poverty research is whether poverty is an absolute or a relative concept. If poverty is seen to be a situation of absolute deprivation, a poverty line will usually be defined to be independent of the general style of living in society. If poverty is considered to be a situation of relative deprivation, a poverty line will be defined in relation to the general style of living in society. The choice for one of these two approaches has important consequences for social policy, as absolute poverty may be reduced by economic growth, while relative poverty will only decrease when income inequality decreases. This paper suggests a poverty line definition that is not a priori meant to be either absolute or relative, but depends on the perception of poverty in society. If the poverty line is higher in countries with higher median income (as an indicator of “general style of living”) the poverty line is said to be relative; if the poverty line does not vary with median income, it is said to be absolute. The poverty line definition suggested appears to be a generalization of almost all well-known poverty line definitions. Poverty lines thus defined are estimated for eight European countries on the basis of a 1979 survey. The resulting lines appear to have an elasticity with respect to median income of 0.51, and hence can be said to be halfway on the scale between absolute and relative.     

Forward exchange,short term capital flows and monetary policy: A comment

Summary In this comment it is argued that the theoretical explanation of Coulbois and Prissert of the functioning of the forward exchange market (the cambist theory) is nothing but a simplified version of the interest parity theory, because in their theory the horizontal arbitrage function implicitly plays a dominant role.Further some critical remarks are made concerning the role of non-bank arbitrages and the influence of interest arbitrage on the spot rate, on the size of the international short-term capital movements and on the domestic money supply.They want to thank Mr. William Schep for his helpful comments with regard to the translation into English of the original text.     

Microworlds and Simuworlds: Practice fields for the learning organization

Management is one of the few professions, the authors note, in which members have no formal “rehearsal space” for honing their skills. In response to this need, organizations such as The Center for Creative Leadership, MIT's Learning Center, and The Stern School of Business at New York University have created a brave new world of management simulations—“practice fields” for the learning organization. Some of these new games (“simuworlds”) use computer programs to replicate an entire industry and give participants an opportunity to play out one company's strategy in that setting. Other simulations (“microworlds”) engage participants in complex behavioral role playing, based on scenarios that typically develop within a company. Still other simulations combine both approaches. The authors take their point of departure from Peter Senge's definition of the “learning barriers” that develop in any organization: solving fragmented “problems” rather than dealing with systemic issues; overemphasis on competition at the expense of cooperation; and a failure to innovate until forced to do so. The new simulations, the authors argue, are particularly useful in helping managers learn how to overcome these barriers.     

Convergence in international output

This paper proposes and tests new definitions of convergence and common trends for per capita output. We define convergence for a group of countries to mean that each country has identical long-run trends, either stochastic or deterministic, while common trends allow for proportionality of the stochastic elements. These definitions lead naturally to the use of cointegration techniques in testing. Using century-long time series for 15 OECD economies, we reject convergence but find substantial evidence for common trends. Smaller samples of European countries also reject convergence but are driven by a lower number of common stochastic trends.