Civil war,public goods and the social wealth of nations

This paper establishes and explores the implications of a somewhat surprising empirical finding. Although civil war adversely affects the performance of social indicators in general, poorer countries lose less, in absolute and relative terms, than richer countries. It is argued that the explanation may lie in the extent to which richer countries have better social (and economic) indicators because of more public goods, and adaptation of economic and social mechanisms to the greater abundance of public goods such as physical infrastructure. Civil war destroys public goods, and therefore damages disproportionately the countries most dependent on them. A further implication of this framework is that the post‐conflict rebound in social indicators should be relatively stronger in poorer countries. The data bear out this prediction. Our results should not of course be read as implying that poorer countries need less support to avoid civil war and to cope with its aftermath. Although their losses are less, they start from a lower base; so even small declines severely impact human well‐being. Properly understood, our results highlight the central role that public goods play in underpinning the social (and economic) wealth of nations.     

The Level of Compliance with the International Code of Marketing of Breast-Milk Substitutes: Does it Matter to Stock Markets?

The present paper explores, theoretically, and empirically, whether compliance with the International Code of marketing of breast-milk substitutes impacts on financial performance measured by stock markets. The empirical analysis, which considers a 20-year period, shows that stock markets are indifferent to the level of compliance by manufacturers with the International Code. Two important issues emerge from this result. Based on our finding that financial performance as measured by stock markets cannot explain the level of compliance, the first issue refers to what alternative types of mechanisms drive manufacturers who comply the least with voluntary codes such as the International Code. Conversely, from our finding that stock markets do not reward the most compliant, the second issue raised is an inherent weakness of stock markets to fully incorporate social and environmental values.     

Strategy choices among internationalizing US airlines

This paper surveys and analyzes the internationalization strategy of US airlines. We first discuss globalization factors acting on the industry, particularly, government actions, the emergence of international markets, competition (including the role of firm specific assets in conferring competitive advantage), and supply cost factors, principally labor, fuel, and aircraft procurement. We then discuss the gains from internationalization, and the recent performance of US airlines, from which we develop internationalization strategy guidelines for airlines, classified as market-oriented and efficiency-oriented. Finally, we trace some broad lessons from the aviation industry for other service sectors facing similar deregulation and globalization pressures.     

Male wages and female welfare: private markets, public goods, and intrahousehold inequality

We show how an apparently welfare improving phenomenon likean increase in the wage of the male member of a family can resultin a seemingly paradoxical result where the entire family isworse off. There is male and female specialization in activitiessuch that the female member is involved in a community levelpublic good. A rise in the male wage leads to adjustment ofhousehold time allocation with the male working more in themarket and less on household activities. In turn, the femaleworks more on household activities and less on the communitypublic good, failing to internalize the negative externalityimposed on other members of the community. Under quite generalconditions the implied negative effect can more than offsetthe positive effect of the male wage raise, and the entire familyis worse off. The theoretical results are consistent with empiricalfindings in the literature.     

Games of fixed rank: a hierarchy of bimatrix games

We propose and investigate a hierarchy of bimatrix games (A, B), whose (entry-wise) sum of the pay-off matrices of the two players is of rank k, where k is a constant. We will say the rank of such a game is k. For every fixed k, the class of rank k-games strictly generalizes the class of zero-sum games, but is a very special case of general bimatrix games. We study both the expressive power and the algorithmic behavior of these games. Specifically, we show that even for k = 1 the set of Nash equilibria of these games can consist of an arbitrarily large number of connected components. While the question of exact polynomial time algorithms to find a Nash equilibrium remains open for games of fixed rank, we present polynomial time algorithms for finding an ε-approximation.     

On extremes of mixtures of distributions

In this article we study the max domains of attraction of mixtures of distributions belonging to the max domain of attraction of max stable laws.     

Informality: Causes,consequences and policy responses

A stylized prediction of the development economics discourse is that informality will disappear with development, and yet in the last 20 years conventional measures of informality, far from declining, have either remained stagnant or have actually increased. This includes countries such as India where economic growth has been at historically high levels. What exactly is informality and what are its magnitudes and trends? What are the causes of informality and why is it not decreasing as predicted by standard theories of development? What are the consequences for inclusive economic growth of a large and increasing informal sector? What are feasible and desirable policy responses to informality? These are the questions that motivate this broad based overview of informality. The questions will be addressed based on recent and ongoing research on India and globally.     

Productivity growth and welfare in a model of allocative inefficiency

We develop a model of learning-by-doing in human capital formation in the presence of allocative inefficiencies. The inefficiencies are a result of lobbying by firms to establish, or prevent, barriers to the perfectly competitive allocation of factors of production (labor). It is shown that lobbying may lead to a static welfare loss depending upon the elasticity of substitution between goods, and the relative lobbying power of firms. Further, productivity growth, via learning by doing, changes the relative lobbying power over time. This may magnify or diminish the static welfare loss in the long-run depending on the level of initial misallocation. Therefore, differences in initial lobbying power and rate of productivity growth between sectors determine the long-run effects of lobbying.     

Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles

We model consumption and dividend growth rates as containing (1) a small long‐run predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin's (1989) preferences, can explain key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better long‐run growth prospects raise equity prices. The model can justify the equity premium, the risk‐free rate, and the volatility of the market return, risk‐free rate, and the price–dividend ratio. As in the data, dividend yields predict returns and the volatility of returns is time‐varying.