China and India in the global economy

The purpose of this overview paper is to present the economic growth in China and India over the last three decades with a specific focus on the integration of these countries into the global economy. In the first part, we briefly review the long-run process of growth and institutional change, emphasizing the reforms leading to the “opening” of the two economies. Then, we focus on key structural features and compare the recent development processes of the two countries. At the end, there are some hints about certain persisting imbalances and the sustainability of the growth processes.     

Towards a non-Darwinian Theory of Institutional Change

The paper emphasizes two flaws in mainstream economics: the failure to understand actual human behavior in many real contexts and the failure to take account of transaction costs. By emphasizing the role of knowledge, institutions, transaction costs and path dependence, new institutional economics has provided a powerful answer to these shortcomings. Nevertheless, a number of questions remain open. In particular, path dependence is far from being a continuous process. Its dynamics and its irregularities are by and large unexplained. Hence, a strong need for a convincing evolutionary theory of environmental change. This article does not deny the validity of the Darwinian view applied to the theory of the firm and of competition in a free-market economy. The paper, however, maintains that the natural-selection process that characterizes the Darwinian approach is ill suited to describe economic evolutionary processes. It is shown that a combination of functional analysis and natural selection may indeed be a better solution, for it solves some of the puzzles raised by public choice theory without violating the fundamental tenets of the new institutional economics approach. Still, although this combined view may well explain why the institutional features are retained by the system, it does not clarify why they are introduced in the first place. A third possibility is put forward in the second part of the paper, where a new evolutionary theory is suggested. Within this framework, agents are assumed to behave according to their preferences within the existing rules of the game. At the same time, new ideas and sometimes new ideologies may influence their behavioral patterns. The combination between needs and ideologies generates environmental change, especially if so-called ideological entrepreneurs are able to transform latent and shared beliefs into an institutional project and enforce it.     

Two remarks on the inner core

For the case of smooth concave exchange economies, we provide a characterization of the inner core as the set of feasible allocations such that no coalition can improve on it, even if coalitions are allowed to use some random plans. For the case of compactly generated games, we discuss Myerson's definition of the inner core, and we characterize it using lexicographic utility weight systems.     

On the existence of involuntary unemployment equilibria

Conclusion We have proved the existence of equilibria implying involuntary unemployment of labour in non-competitive economies with fixed wage rate. We notice that model (II) and its extensions have not been presented as aninterpretation of Keynes' theory. We may define them as Keynesian models only in the sense that they admit involuntary unemployment equilibrium, which concept is basic to Keynes' theory. In any case, we think that these models are a first step in the development of more realistic microeconomic foundations for short-run macroeconomic theory.A first draft of this paper was presented in December 1972 at the Institute of Political Economy, Faculty of Economics and Banking, Siena University.     

Risk sharing in supplier relations: an agency model for the Italian air‐conditioning industry

This study of risk sharing in the Italian high precision air conditioning (AC) industry confirms agency theory predictions that buyers absorb risk to a non‐negligible degree, and that they absorb more risk (a) the greater the supplier's environmental uncertainty, (b) the more risk averse the supplier, and (c) the less severe the supplier's moral hazard. The analyzed buyers accommodate for unforeseen and uncontracted‐for cost fluctuations, which is consistent with relational contract theory. The study clarifies the relationship between risk sharing and the supplier's size, technological capability, financial stability, and cost fluctuation. It also suggests how buyers may adjust their risk‐sharing strategy as suppliers grow, develop technological capabilities, and change financial structure. Copyright © 2007 John Wiley & Sons, Ltd.     

Beta Regimes for the Yield Curve

We propose an affine term structure model which accommodatesnonlinearities in the drift and volatility function of the short-terminterest rate. Such nonlinearities are a consequence of discretebeta-distributed regime shifts constructed on multiple thresholds.We derive iterative closed-form formula for the whole yieldcurve dynamics that can be estimated using a linearized Kalmanfilter. Fitting the model on US data, we collect empirical evidenceof its potential in estimating conditional volatility and correlationacross yields.     

Criteri di sensitività in problemi di dominanza stocastica

Questo lavoro fornisce condizioni di dominanza stocastica di 1°, 2° e 3° ordine per problemi di decisione in condizioni d'incertezza, quando sia nota la funzione d'utilità solo in un numero finito di punti e quando le funzioni di ripartizione dei guadagni aleatori s'intersecano più d'una volta.     

On Sraffa's Standard commodity

The necessity of expressing the relative price of a commodityin terms of another commodity makes it impossible to distinguishthat part of any change that can be ascribed to the characteristicsof the commodity itself from the part of that change that isto be ascribed to the characteristics of the commodity of reference,i.e., the numéraire. Ricardo (1817) was the first topoint out this problem and the need to find an ‘invariablemeasure of value’, but he was not able to solve the problem.In 1960, Sraffa suggested using a bundle of commodities, thathe called ‘Standard commodity’, to accomplish thisfunction, claiming that it was a standard of value invariantwith respect to changes in the distribution of income. But inSraffa's book there is no explicit proof of this claim. Thisgave rise to many misunderstandings about the Standard commodityand its role as invariable measure of value. This paper proposesa proper definition of an ‘invariable measure of value’,and then proves that the Sraffa ‘Standard commodity’does fulfil the requirements of this definition.