Protection of the weak consumer under product liability rules

The author examines how the weak consumer is treated in one of the main areas of consumer protection, namely product liability. One should distinguish between the weak consumer in a physical sense, especially children, elderly or disabled persons, and in an intellectual sense, namely people with insufficient education or illiterates. If the judge in product liability cases uses the model of the average consumer as a standard to determine the defectiveness of a product, weak consumers will be underprotected. The author suggests that, if the product may be used by a set of weak consumers, the producer should provide for adequate safety measures directed at this group. On the other hand, there is a third kind of weak consumer, namely the weak consumer in an economic sense. The raising of producer's liability may result in an increase in prices for products harmful to low income consumers. Therefore, consumer policy should aim at a reduction in social inequalities.

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Schutz des schwachen Verbrauchers im Produkthaftungsrecht

Zusammenfassung Der Autor untersucht die Stellung des schwachen Verbrauchers in einem der zentralen Gebiete des Verbraucherschutzrechts, nämlich der Produkthaftung. Dabei sollte man zwei Typen von Schwäche unterscheiden: einmal in einem physischen Sinne, etwa Kinder, ältere Menschen, Behinderte, dann in einem intellektuellen Sinn, etwa Menschen mit unzureichender Schulbildung, Analphabeten, in gewisser Weise auch der Landessprache nicht mächtige Ausländer. Wenn der Richter in Produkthaftungsstreitigkeiten den Durchschnittsverbraucher als Maßstab zur Bestimmung der Sorgfaltspflicht des Herstellers verwendet, so ist der schwache Verbraucher nur unzureichend geschützt. Der Autor schlägt vor, daß in den Fällen, in denen ein Produkt auch zum Gebrauch einer Gruppe von schwachen Verbrauchern bestimmt ist, der Hersteller hinreichende Schutzmaßnahmen auch und gerade für diese spezifische Verbrauchergruppe unternimmt. Dies mag zu einem Preisanstieg für solche Produkte führen, was gerade den ärmeren Verbrauchern Nachteile bringt. Aus diesem Grunde muß die Verbraucherpolitik soziale Disparitäten beseitigen.

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Santiago Cavanillas Múgica is Professor of Private Law at the University of the Balearic Isles, c/Miguel de los Santos Oliver, 2, E-07012 Palma de Mallorca, Spain.     

Banking merchants and banking houses: the hidden key to the workings of the Spanish banking system in the nineteenth century

The historical study of the Spanish nineteenth-century banking system has been almost exclusively carried out through a consideration of the experiences of the joint-stock banks. But the very scarce number of these, and their territorial distribution, makes it necessary for us to look for other financial intermediaries who were able to satisfy the demand for banking services in that time and place. We demonstrate that this role was fulfilled by the banking merchants and banking houses operating through individual firms and partnerships. The object of this work is to make their activities better known and vindicate their importance. The sources used for the study are mainly the accounting documents of several banking houses.     

When does universal peace prevail? Secession and group formation in conflict

This paper analyzes secession and group formation in the general model of contests due to Esteban and Ray (1999). This model encompasses as special cases rent seeking contests and policy conflicts, where agents lobby over the choice of a policy in a one-dimensional policy space. We show that in both models the grand coalition is the efficient coalition structure and agents are always better off in the grand coalition than in a contest among singletons. Individual agents (in the rent seeking contest) and extremists (in the policy conflict) only have an incentive to secede when they anticipate that their secession will not be followed by additional secessions. Incentives to secede are lower when agents cooperate inside groups. The grand coalition emerges as the unique subgame perfect equilibrium outcome of a sequential game of coalition formation in rent seeking contests. Received: March 2004, Accepted: October 2004, JEL Classification: D72, D74 We thank Joan Maria Esteban, Kai Konrad, Debraj Ray, Stergios Skaperdas and two anonymous referees for helpful comments on the paper. We also benefitted from comments by seminar participants in Barcelona, Istanbul, Paris and WZB Berlin.     

Profit Margins in Mexico's Manufacturing Industry: an Econometric Study

Prices, wages and profit margins in Mexico have varied considerably. The purpose of this study is to analyze the evolution of profit margins in the Mexican manufacturing industry during the last two decades and to provide an explanation for the changes. The econometric study shows that surges in the exchange rate provoke increases in prices, both because imported input costs rise and because pressures from foreign competition are relaxed when domestic prices of imported goods rise. A second factor influencing margins is trade openness. Third, the level of profit margins also depends positively on the level of labor costs. An increase in labor costs tends to be passed along in a more than proportional manner to prices. Finally, an increase in interest rates seems to stimulate increases in profit margins, at least in some manufacturing divisions.     

Optimal growth and land preservation

A model of optimal economic growth with a constant population subject to a constraint on the availability of land is presented. It takes account of the dual character of land as a production factor and as a consumption good (environmental amenities) by determining the optimal intertemporal allocation of land between productive and recreational uses. An extension of the analysis for the case of a growing population with endogenous growth based on human capital accumulation shows that if the rate of discount is not very low, then there exists a set of balanced growth paths compatible with a constant allocation of land.     

Does ‘Protection for Sale’ Apply to the US Food Industries?

This paper tests the Protection for Sale model in terms of the structure of protection and how realistic the estimated domestic welfare weight is relative to campaign contributions. Using data from US food manufacturing, empirical results support the key predictions for the structure of protection when either all food manufacturing industries or most of the general population is assumed to be politically organised. The domestic welfare weight is estimated as low as 0.837, the lowest econometric estimate to date, underlining that protection is for sale and that, with a qualified ‘yes’, the model fits the data for these industries.     

Imperfect Competition and Total Factor Productivity Growth

This article examines the role of imperfect competition in determining total factor productivity growth (TFPG) by bringing together a New Empirical Industrial Organization (NEIO) model and the TFPG model of Good, Nadiri and Sickles (1999). Application of the integrated model to 1973–1992 data from 29 food processing industries revealed that, overall, changes in markups, economies of scale, and demand growth contributed positively to TFPG while the disembodied technical change was a negative contributor. Furthermore, the factors underlying the TFPG estimates are interactive and their net effects are starkly different from the conventional Solow (1957) residual TFPG measures, underscoring the need to account for imperfect competition, returns to scale, and demand growth in analyses of this type.     

Assistance to poor households when income is not observed: targeted in-kind and in-cash transfers

Policymakers frequently design self-targeting programs or target poor areas to assist poor families when income is not observed. Self-targeting schemes take advantage of differences in participation costs in assistance programs across households. Geographic targeting assumes that transfers are solely determined by the region of residence: to receive the benefits, households not initially present in the targeted areas must relocate away from their original place of residence and live with the poor, which entails a cost that can also be interpreted as a participation cost in the assistance program. The paper shows that a combination of in-kind and in-cash transfers tied to the consumption of a publicly provided private good targeted to the poor becomes very useful when non-poor households have different participation costs. By distinguishing users and non-users of public facilities additional in-cash transfers can be directed to the poor more effectively. The paper demonstrates that the publicly provided good ends up being undersupplied, and the distortion becomes less important as participation costs rise. More importantly, it shows that this kind of redistributive program dominates a pure in-cash scheme.     

THE IMPACT OF FISCAL DECENTRALIZATION: A SURVEY

In this paper, we offer a comprehensive and updated review of the impact of fiscal decentralization on the economy, society and politics. Our first target is the examination of two crucial and yet unsolved issues in the empirical literature on decentralization: the proper measurement of decentralization itself and its potential endogeneity in econometric estimates. Then, we discuss the main existing findings on the effects of decentralization on a relevant list of socio-economic issues. The impact of fiscal decentralization reforms on political institutions and public policies is also considered. Complete answers on the impact of fiscal decentralization are not likely to be certain but, overall, there are reasons to be optimistic about the net positive result. Our survey by necessity has to be selective but it presents a balanced view of what is known and what is not yet known opening room for further research and practice on fiscal decentralization.