Export–Oriented Foreign Direct Investment and Local Content Requirement

We develop a model in which foreign firms locate in a host country and export their produce to another (consuming) country. We consider both exogenous and endogenous numbers of foreign firms. These firms compete with domestic firms in the consuming country under oligopoly. Unemployment exists in both countries. We analyse the conflict of interest between the two countries on the level of local content for the foreign firms. Under free entry of foreign firms, the consuming country may want a less severe restriction on local contents than the host country, but not so when the number of foreign firms is exogenous.     

Can cross–border pollution reduce pollution?

We develop a two–country model of foreign aid and cross–border pollution resulting from production activities in the recipient country. There is both private and public abatement of pollution, the latter being financed through emissions tax revenue and foreign aid. We characterize a Nash equilibrium in which the donor country chooses the amount of aid and the recipient chooses the fraction of aid allocated to pollution abatement and the emission tax rate. At this equilibrium, an increase in the donor’s perceived rate of cross–border pollution reduces emission levels. JEL Classification: Q28, F35, H41 Est–ce que la pollution trans–frontière peut réduire le niveau de pollution? Les auteurs développent un modèle à deux pays d’aide à l’étranger et de pollution trans–frontière résultant d’activités de production dans le pays qui reçoit l’aide. Il existe des efforts privés et publics pour réduire la pollution, ces derniers étant financés par les rentrées fiscales d’une taxe sur la pollution et par l’aide étrangère. On définit un équilibre à la Nash pour lequel le pays donateur choisit le montant de l’aide, et le pays récipiendaire choisit la fraction de l’aide étrangère qu’il allouera à la lutte à la pollution ainsi que le taux de taxation sur la pollution. A cet équilibre, un accroissement dans le taux de pollution trans–frontière perçu par le donataire réduit le taux de pollution.     

Controlling Illegal Immigration: Border Control vs. Domestic Enforcement

This paper presents a two-country general equilibrium model where international mobility of labor is prohibited. Illegal immigration nevertheless occurs. The probability of success at illegal immigration depends on resources allocated to border control and domestic enforcements. We examine the effects of switching resources form border control to domestic enforcement on illegal immigration and on welfare levels. We characterize the allocation of resources between the two methods of immigration control, that minimizes illegal immigration, and find that, starting from this allocation, moving resources from border control to domestic enforcement is unambiguously welfare improving for the destination country.

     

Logic of Aid in an Intertemporal Setting

The paper studies the welfare implications of temporary foreign aid in the context of a simple two‐country model of trade. In addition to its usual effects, a transfer of income in one period is assumed to influence the preferences of the recipient country in the following period. The implied changes in the terms of trade over the two periods are consistent with a number of possible outcomes with respect to the intertemporal welfare of the donor, the recipient, and the world as a whole. Particular attention is devoted to the conditions for strict Pareto improvement and the circumstances under which temporary aid transactions are likely to occur.     

Do Market‐Supporting Institutional Characteristics Explain Firm Performance? Evidence from Emerging Markets

The importance of market‐supporting institutions and their impact on business investment and economic growth has gained the attention of researchers and practitioners alike. In this study, we extend this research by capturing the impact of the quality of regulative institutional characteristics on firm performance in an emerging market context. We use a sample of 26,493 emerging market firms from 91 countries over the years 2003 to 2010 and test for the relationship between government effectiveness, regulatory quality, rule of law and control of corruption, and firm performance. Results indicate that governmental effectiveness and regulatory quality impact performance outcomes positively, while rule of law impacts performance negatively. These findings provide important insights and encourage managers and public policymakers to be cognizant of the impact of these factors and adapt accordingly. © 2014 Wiley Periodicals, Inc.     

Managing internationalization and innovation tradeoffs in entrepreneurial firms: Evidence from transition economies

For entrepreneurial firms (EFs), internationalization and innovation present two major avenues for growth. Prior research, based primarily on EFs from advanced economies, demonstrates mixed insights for the relationship between these strategies. A deeper understanding of the tradeoffs involved in the internationalization-innovation relationship may help better comprehend the issue. In this study, we draw on the organizational learning and capabilities-based literatures to examine the relationship in the context of EFs in transition economies (EFTEs). Our findings suggest that in EFTEs, internationalization is negatively associated with the likelihood of innovation. We also find that three knowledge-based capabilities of EFTEs (absorptive capacity, appropriation capability, and managerial capability) positively moderate the aforementioned negative relationship. We do not find any evidence of reverse causality (EFTE innovation impacting internationalization). Our research provides novel insights to the IE literature by shedding light on the internationalization–innovation tradeoffs that EFTEs experience.     

Smoking Behavior of Older Adults: A Panel Data Analysis Using HRS

Using longitudinal data from Health and Retirement Surveys over 1992–2010, this paper analyzes decisions by older American to continue smoking and the number of cigarettes to consume using two-part hurdle models with correlated effects. We build on the existing literature by incorporating a myriad of factors including cigarette prices, health shocks and smoke-free laws in one econometric framework. Our estimates indicate that higher cigarette prices play an important role in both reducing participation and the intensity of consumption even for this adult population. In addition, health shocks, as measured by newly diagnosed diseases, raise the probability of quitting, highlighting the ‘curative’ aspects of cessation. However, we find very little effect of health on smoking intensity if an older adult does not quit after a health shock. Per capita cigarette consumption in the US declined by over 64% during the period. We show that increased cigarette prices and health shocks together contribute almost equally to explain nearly 86% of the decline, with little that can be attributed to smoking bans and anti-smoking sentiment.

     

Indian business groups: Evolution and transformation

Business groups are an important constituent of many emerging economies. In this paper, we focus on the evolution and transformation of Indian business groups (IBGs) over two economic eras — pre-reform era (pre 1991) and reform era (post 1991). To this end, we analyze IBG behavior during these periods, and explain the implications of such behavior on IBG value creation. Our conceptualization of IBG dynamics utilizes the perspectives of product relatedness and institutional relatedness, and undertakes a broad review of the extant literature.