Global apparel production and sweatshop labour: can raising retail prices finance living wages?

This paper provides some empirical evidence on issues raisedby the global anti-sweatshop movement. We first consider therelationship between wage and employment growth, finding noconsistent trade-off between them. We then measure the shareof labour costs in the production of garments in the US andMexico. We find that the retail price increases necessary toabsorb the costs of raising wages substantially are small, wellwithin the range of price increases that polls suggest US consumersare willing to pay. We close by considering some implicationsof these results.     

Reward design and CEO succession in the UK

Previous research has shown that top executives often rise to the peak of their organizations after a long-term employment relationship, and that internal promotion to the top is reflected in enhanced baseline salaries. Using data from a representative sample of UK companies, the links between the fixed and variable elements of the Chief Executive Officer's compensation package are examined and whether the appointment has been promoted internally or recruited from outside of the company. From this analysis, it is concluded that the positive impact on basic pay of elevation to the top job from within the company is not present in total compensation or the structure of pay. It also emerges that although tenure does not significantly impact on the structure of pay, it does alter total reward through its impact on the value of options granted: longer company tenure reduces both the award of share options and the total value of the remuneration package; job tenure, on the other hand, raises the executive's reward primarily through its positive impact on baseline salary. Though share ownership reduces the performance sensitivity of earnings, increases in baseline salary are reflected in greater exposure to the use of share options.     

Niche Entry as a Route to Mainstream Innovation: Learning from the Phosphoric Acid Fuel Cell in Stationary Power

The paper charts the efforts to establish a successful niche position for the phosphoric acid fuel cell (PAFC) in stationary power generation, as a precursor to wider technological system and regime change. Market entry depends on matching price/performance characteristics to a niche, and improving performance through increasing returns, the most important and immediate of which are ‘learning effects’. The paper identifies five types of learning effect: (i) migrating the technology to other niches and into the mainstream; (ii) opening the way for other technologies that may have greater scope for migration; (iii) transferring learning within the pioneering company to other technologies or products; (iv) transferring experience to others in the industry; and (v) enabling users to learn. Although PAFC may be perceived as a failure in some respects, a wider perspective suggests it has made a positive and useful contribution to learning.     

Ramsey pricing and competition: The consequences of myopic regulation

This paper addresses the welfare consequences of applying the Ramsey rule when the regulated firm is not a monopolist in all of its markets. The partially regulated optimum and the outcome of myopic regulation, the Short-Sighted Ramsey Equilibrium (SSRE), are examined in a differentiated duopoly model. In the optimum, the markup of competitive substitute goods is relatively high. In the SSRE, the regulator is likely to set the price of competitive substitute goods lower than optimal, and complementary goods higher than optimal. Strategic reactions by a competitor may reverse the result.I thank Kenneth Train, Michael Crew (the editor), seminar participants at the University of California, Berkeley, and an anonymous referee for comments and suggestions. The usual disclaimer applies.     

Does Foreign Aid Promote Growth? Exploring the Role of Financial Liberalization

This paper examines the impact of foreign aid on the process of economic development in India by controlling for the degree of financial liberalization. A composite index is constructed using the method of principal component analysis to capture the joint influence of various financial sector policies. The results show that while foreign aid exerts a direct negative influence on output expansion, its indirect effect via financial liberalization is positive. Therefore, an important implication of the findings in this paper is that adequate liberalization in the financial system of the host country is a crucial requirement for effective foreign aid. Our results are robust to a number of control variables and estimation techniques.     

Costly pollution abatement, competitiveness and plant location decisions

The NAFTA debate included assertions that were used as arguments against trade and investment liberalization. (1) Trade liberalization increases production sensitivity to environmental restrictions (‘environmental dumping’?). (2) Investment liberalization, leading to multinational firms, similarly increases the production and welfare response to costly environmental restrictions. I find that: (1) Trade liberalization increases production sensitivity to costly environmental restrictions, but arguments against liberal trade on welfare grounds do not follow. (2) Multinationals do not increase the production-reallocation effect caused by environmental restrictions or regulations. In addition, I find a great difference between restrictions that fall on fixed costs and restrictions that fall on marginal costs.     

Using the gravity equation to differentiate among alternative theories of trade

The simple gravity equation explains a great deal about the data on bilateral trade flows and is consistent with several theoretical models of trade. We argue that alternative theories nevertheless predict subtle differences in key parameter values, depending on whether goods are homogeneous or differentiated and whether or not there are barriers to entry. Our empirical work for differentiated goods delivers results consistent with the theoretical predictions of the monopolistic-competition model, or a reciprocal-dumping model with free entry. Homogeneous goods are described by a model with national (Armington) product differentiation or by a reciprocal-dumping model with barriers to entry. JEL Classification: F10, F12
Equation de gravité et différenciation entre diverses théories du commerce international. La simple équation de gravité fournit une bonne part d'explication des flux de commerce bilatéraux et donne des résultats compatibles avec plusieurs modèles de commerce international. Les auteurs suggèrent que les diverses théories prédisent néanmoins des différences subtiles dans les valeurs de paramètres clés, selon que les biens sont homogènes ou différenciés, et qu'il y a barrières ou non à l'entrée. Le travail empirique des auteurs livre des résultats compatibles avec les prévisions théoriques du modèle de concurrence monopolistique ou du modèle de dumping réciproque avec entrée libre. On décrit les flux de biens homogènes à l'aide d'un modèle de différenciation nationale de produit à la Armington ou par un modèle de dumping réciproque avec barrières à l'entrée.     

Tax noncompliance: The role of tax morale in smokers' behavior

Measuring and predicting compliance with tax obligations is an important but challenging task. Survey data from California smokers show that several forms of tax avoidance and evasion were common. The analysis shows that 43% of smokers avoided taxes by purchasing cigarettes from out-of-state sources in the past year, 15% admitted to evading taxes through cross-border purchases, and 26% reported purchasing likely or certainly untaxed cigarettes in the state in the past month. Attitudinal factors related to tax morale explain much more of the variance in compliance rates than demographic or law-and-economics factors. The implications for policy are discussed.     

Value Orientations, Income and Displacement Effects, and Voluntary Contributions

Identifying the value orientations of subjects participating in market or non-market decisions by having them participate in a ring game may be helpful in understanding the behaviour of these subjects. This experiment presents the results of changes in the centre and the radius of a value orientations ring in an attempt to discover if the measured value orientations exhibit income or displacement effects. Neither significant income effects nor displacement effects are identified. An external validity check with a voluntary contribution game provides evidence that value orientations from rings centred around the origin of the decision-space explain significant portions of voluntary contributions while value orientations from displaced rings do not.