FOREIGN DIRECT INVESTMENT IN A TWO‐TIER OLIGOPOLY: COORDINATION,VERTICAL INTEGRATION,AND WELFARE*

We study foreign direct investment (FDI) by two independent investors/entrants into a two‐tiered oligopolistic industry. An FDI subsidy at a single stage of production can be sufficient to resolve the coordination problem facing investors thereby inducing entry at both stages. However, due to linkage offsetting, FDI at both stages may yield lower domestic welfare than FDI at a single stage. Vertical integration not only solves the coordination problem, it also eliminates double marginalization. But since the integrated multinational does not sell the intermediate to local firms, its entry generates no vertical linkages and can yield lower welfare than FDI by independent firms.     

The MFN clause,welfare, and multilateral cooperation between countries of unequal size

This paper analyzes MFN in a “competing exporters” model of trade between three countries with unequal endowments and shows that MFN yields higher aggregate welfare than tariff discrimination even as it makes low income countries worse off. Furthermore, in a repeated game of tariff cooperation, multilateral free trade is easier to sustain under MFN punishments relative to discriminatory ones. This conclusion holds even when tariff discrimination takes the form of bilateral trade agreements. Overall, the analysis shows that from the viewpoint of low income countries, MFN and multilateral tariff cooperation are complementary in nature.     

Hospital costs associated with intraoperative hypotension among non-cardiac surgical patients in the US: a simulation model

Objective: Recent studies indicate intraoperative hypotension, common in non-cardiac surgical patients, is associated with myocardial injury, acute kidney injury, and mortality. This study extends on these findings by quantifying the association between intraoperative hypotension and hospital expenditures in the US.

Methods: Monte Carlo simulations (10,000 trial per simulation) based on current epidemiological and cost outcomes literature were developed for both acute kidney injury (AKI) and myocardial injury in non-cardiac surgery (MINS). For AKI, three models with different epidemiological assumptions (two models based on observational studies and one model based on a randomized control trial [RCT]) estimate the marginal probability of AKI conditional on intraoperative hypotension status. Similar models are also developed for MINS (except for the RCT case). Marginal probabilities of AKI and MINS sequelae (myocardial infarction, congestive heart failure, stroke, cardiac catheterization, and percutaneous coronary intervention) are multiplied by marginal cost estimates for each outcome to evaluate costs associated with intraoperative hypotension.

Results: The unadjusted (adjusted) model found hypotension control lowers the absolute probability of AKI by 2.2% (0.7%). Multiplying these probabilities by the marginal cost of AKI, the unadjusted (adjusted) AKI model estimated a cost reduction of $272 [95% CI?=?$223–$321] ($86 [95% CI?=?$47–$127]) per patient. The AKI model based on relative risks from the RCT had a mean cost reduction estimate of $281 (95% CI?=?–$346–$750). The unadjusted (adjusted) MINS model yielded a cost reduction of $186 [95% CI?=?$73–$393] ($33 [95% CI?=?$10–$77]) per patient.

Conclusions: The model results suggest improved intraoperative hypotension control in a hospital with an annual volume of 10,000 non-cardiac surgical patients is associated with mean cost reductions ranging from $1.2–$4.6 million per year. Since the magnitude of the RCT mean estimate is similar to the unadjusted observational model, the institutional costs are likely at the upper end of this range.     

Habitus,doxa, and ethics: insights from advertising in emerging markets in the Middle East and North Africa

The advertising industry influences culture through its pervasive messages that reflect and shape culture and through the role that advertising practitioners play as cultural intermediaries. As such, the manner in which advertising practitioners confront ethical issues is important. Drawing on Bourdieu's theory of practice, this paper examines how the perceptions, practices, and discourses of advertising practitioners in the Middle East and North Africa influence the advertising field's habitus and doxa. It demonstrates that understanding ethical problems is enhanced by examining them as macro, meso, and micro phenomena. However, that is not enough. Understanding how factors at the three levels interrelate, interact, and reinforce one another is critical to understanding the habitus. Underlying biases that shape the doxa can be explained by ideas central to behavioral ethics. A better understanding of the forces that shape the habitus and doxa with respect to ethics is key to moving toward a culture that encourages ethical advertising practices.     

Trade liberalisation and labour shares in China

We estimate the extent to which firms responded to tariff reductions associated with China's WTO entry by altering labour's share of value. Firm‐level regressions indicate that firms in industries subject to tariff cuts raised labour's share relative to economy‐wide trends, both through input choices and rent sharing. Our estimates suggest that, on average, an industry that experienced no reductions in output or input tariffs would have a 15.7% lower labour share of value in 2007 than it actually did, assuming the same economy‐wide trends. There is significant variation across firms: the impact attenuates with geographic remoteness and union presence and strengthens with foreign ownership.     

Examining the Relationship Between Advertising Expenditures and Sales of Quick-Service Restaurants in the United States

The United States fast-food industry represents an important business sector with respect to national and international economics. Due to the low levels of product differentiation and high industry competition, fast-food companies heavily engage in advertising and branding activities. Quick-service restaurants (QSR) are the largest and growing segment of the fast-food industry. The current study examined the longitudinal relationship between advertising expenditures and sales revenues for the QSR industry and leading QSR brands in the United States from 1986 to 2007. Hypotheses were tested using a time-series regression analysis. Managerial, research, and policy implications of the results are provided.     

Tariff retaliation versus financial compensation in the enforcement of international trade agreements

We analyze whether financial compensation is preferable to the WTO's current dispute settlement system that permits injured member countries to impose retaliatory tariffs. We show that, ex-post, monetary fines are more efficient than tariffs in terms of granting compensation to injured parties but fines suffer from an enforcement problem since they must be paid by the violating country. If fines must ultimately be supported by the threat of tariffs, they fail to yield a more cooperative outcome than the use of tariffs alone. Furthermore, the exchange of bonds between symmetric countries also does not improve enforcement relative to retaliatory tariffs.     

Origin of Foreign Direct Investment and Firm Performance: Evidence from Foreign Acquisitions of Chinese Domestic Firms

Using a newly created panel of domestic Chinese firms who receive foreign direct investment (FDI), this paper finds that Organisation of Economic Cooperation and Development (OECD)‐acquired firms outperform those acquired by investors from Hong Kong, Macao and Taiwan (HMT). To control for possible endogeneity of the FDI decision, I employ propensity score matching combined with a difference‐in‐differences approach. The results indicate that relative to HMT‐acquired firms, OECD‐acquired firms experience significantly higher productivity in the initial year of acquisition and this productivity differential persists in subsequent years, reaching 27.8 per cent by the third year. Further, OECD‐acquired firms exhibit higher profits, average wages and capital per worker compared to HMT‐acquired firms. These results suggest that the origin of the foreign investor differentially affects target firm performance.