The New Accountability? Devolution and Expenditure Politics in Scotland

Devolution is seen to be a means for enhancing democratic control and accountability in the British political system (Scottish Office, 1997). Proponents of such change have presented it as offering the prospect of a more consensual, transparent and inclusive form of governance, in effect a 'new politics', with less executive dominance than at Westminster. This would be delivered in part by proportional representation, by strengthening the role of the legislature, and by adopting a more consultative approach to decision-making (Scottish Constitutional Convention, 1995). This article focuses on expenditure politics in the budget and audit processes of the Scottish Parliament.     

Variable Specific Factors and the “X-Efficiency Cost” of Protection *

This paper analyzes the effects of protection on X-efficiency using a general equilibrium Ricardo-Viner model with variable sector-specific effort. As in earlier models, it is found that protection only reduces effort if the income effect is sufficiently strong. It is also shown that, provided the correct compensated import demand curve is used, all welfare effects attributable to changes in effort are captured in the standard “triangle” measure of deadweight loss. Moreover, any protection-induced fall in effort will reduce the overall cost of protection, suggesting that policy-induced “X-inefficiency” may be beneficial.     

The Effects of Trade Liberalization On Cost-Reducing Horizontal Mergers*

This paper analyzes the effects of tariff reductions on horizontal mergers in a Cournot oligopoly in a two-country world. It is shown that for mergers between two domestic firms and for cross-border mergers which supply both markets from a foreign plant, unilateral tariff reduction encourages mergers which concentrate market power at the expense of mergers which reduce cost, while bilateral tariff reductions have the opposite effect, encouraging mergers which significantly reduce cost. Cross-border mergers which continue to supply each market from a local plant are discouraged by both unilateral and bilateral tariff reduction.     

Circuit Breakers with Uncertainty about the Presence of Informed Agents: I Know What You Know … I Think

This study conducts experimental asset markets to examine the effects of circuit breaker rules on market behavior when agents are uncertain about the presence of private information. Our results unequivocally indicate that circuit breakers fail to temper unwarranted price movements in periods without private information. Agents appear to mistakenly infer that others possess private information, causing price to move away from fundamental value. Allocative efficiencies in our markets are high across all regimes. Circuit breakers perform no useful function in our experimental asset markets.     

EUROPE AND CHINA: THE FATAL CONCEIT1

China's recent economic growth has been driven by an apparent acceptance by the Chinese government of many of the key insights of Hayek's economic and social thought. Current Chinese economic policies stand in stark contrast to those being pursued by the EU and many European countries, where interventionist policies of the kind Hayek predicted would lead to relative impoverishment and declining freedom are being pursued. The long‐term consequence of these two trends is likely to be the economic dominance of China over Europe in the present century.     

Deposit Insurance,Banking Reform,and Financial Sector Development in Several Nations of Southeastern Europe

Deposit insurance has spread to many sections of the world. In the newly formed nations of the former Yugoslavia, this has occurred under conditions of post‐conflict reconstruction, hyperinflation, and several different governmental structures. Three cases are examined; Bosnia and Herzegovina, Croatia, and Serbia and Montenegro. They all have developed deposit insurance programs. The implementation process was compared to “best practice” recommendations. It is found that the situation in Bosnia and Herzegovina was difficult due to the fractured nature of the Dayton Accord government structure on the one hand but easier to the strong international presence supporting required actions. In the case of Croatia, a unified state emerged from the war, but it was somewhat isolated. Its bank restructuring was costly, and a fragmented deposit insurance program was introduced in the middle of a banking crisis. In the case of Serbia and Montenegro, the bank restructuring process is still underway, and implementation of a functioning deposit insurance program properly awaits its completion.     

Why Manufacture Offshore? An Empirical Analysis of Valuation Effects

In this study, announcements by U.S. firms of offshore joint venture manufacturing during the 1980s are used to provide more comprehensive evidence than past studies on the wealth effects of offshore joint ventures. Evidence shows that the target country's level of economic development and political stability, currency strength of the originating country (U.S. in this study) relative to that of the target country, U.S. firm's mode of entry, and the relative value of the U.S. firm's investment in the joint venture affect the wealth of U.S. firms which engage in offshore joint ventures. The target country's level of economic development, its political stability, and the currency strength of the originating country relative to the target country are shown to be the dominant economic factors. Of particular importance, evidence indicates that the target country's level of economic development is a more important determinant of excess returns than is its political stability.