Asymmetric Information,Bargaining, and Comparative Advantage in Trade Relationships: An Interactive Game

The concept of comparative advantage is a fundamental tool in economics. Yet, it is a concept that new students of economics frequently find challenging to grasp. In this interactive classroom game, I highlight the three essential lessons of comparative advantage: (i) individuals can have a comparative advantage (and thus benefit from specialization) in an activity despite not having an absolute advantage, (ii) the gains from specialization are greatest when individuals have the most heterogeneous skill sets, and (iii) the extent of each individual's share of the gains from specialization is often left to negotiation, with asymmetric information playing an influential role. This classroom game allows each player to possess a unique production function, thus better resembling the diverse pool of potential trade partners that characterizes real life.     

Systematic risk and the theory of the firm: A reexamination

A recent microeconomic model of the determinants of equity betas (Subrahmanyam and Thomadakis 1980) is generalized by including risky human capital in the market portfolio and allowing a general covariance structure between the model's sources of uncertainty. This provides an explanation of the ambiguous effect of operating leverage on beta by viewing human capital and equity contributors as risk sharers in the firm's output risk. This explanation may help to clarify the apparent conflict with the previous literature. The relationship between systematic risk and monopoly power is rederived and shown to depend upon a plausible condition on the correlation between wage rate and price uncertainty. Finally, the public policy implications of this analysis are presented.     

A study of the impact of direct trade on Taiwan's fishery sector with special reference to the effect of China's WTO accession

After Taiwan became a member of the WTO in 2002, its tariff rates for fishery products decreased by an average of 35.5% from the level in 2001. Direct imports of fishery products from China would be allowed in 2004. These tariff reductions and the relaxation of import restrictions will have a strong effect on Taiwan's fishery sector. In this paper, we present an analysis of how fishery production, prices, input usage, and welfare distribution might react to trade liberalization. In addition to evaluating the overall impact of tariff reduction on Taiwan's fishery sector, we assess the effects of China's WTO accession on the Taiwanese market. We use a fishery sector equilibrium model in which 40 products and 68 fishing activities are identified. The model also includes an import–export subsector, a factor input subsector, and a supply–demand equilibrium condition to analyze the distributions of social welfare due to trade liberalization. Three simulations are conducted to investigate the impact of tariff reductions in 2004, 2 years after Taiwan has jointed the WTO. The results indicate that Taiwan's fishery sector will be adversely affected when it encounters the extremely low import prices of certain fishery products from China. The total production of the fishery sector and its value are predicted to decrease by 4.03% and 9.96%, respectively, in 2004. Aquaculture would suffer the heaviest loss with a 7.48% reduction in the production and a 19.23% reduction in its value. The demand for labor will decrease by 8.71%. The effect is most pronounced in aquaculture in which the demand for labor will go down by 11.40% and the wage rate will decline by 14.28%. To meet the challenge of globalization, the Taiwanese fishery industry will have to diversify, and improve its operational efficiency as well as production and distribution structures for a sustainable development.     

Stock prices and merger movements: Interactive relations

Zusammenfassung Die wechselseitigen Beziehungen zwischen Aktienkursen und Firmenzusammenschlüssen. - Der Aufsatz untersucht die Beziehungen zwischen Firmenzusammenschlüssen und makro?konomischen Variablen. Es werden Kausalit?tstests mit US-Daten der Periode 1919–1979 durchgeführt, die zeigen, da? Zusammenschlüsse und Aktienkurse in derselben Periode aufeinander einwirken und da? keine Lead- oder Lag-Beziehungen bestehen. Die Zeitreihenanalyse deutet darauf hin, da? die Reihe der Zusammenschlüsse einem autoregressiven Proze? 2. Ordnung folgt, die „random walk”-Hypothese also abzulehnen ist.

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Résumé Cours des actions et mouvements de fusion: Relations interactives. - Dans cet article l’auteur examine la relation entre des mouvements de fusion et des variables macro-économiques. Après avoir testé la causalité avec des données des E.U. pour la période 1919–1979, l’évidence démontre que l’activité de fusion et les cours des actions interagissent dans la même période et ne revèlent pas une relation d’avance ou à retard. L’analyse des séries chronologiques indique que la série de fusion suit un processus AR (2), refusant l’hypothèse de ?random walk?.

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Resumen Precios de valores bursátiles y la pauta de fusiones: relaciones interactivas. - En este trabajo se examina la relación entre la pauta de fusiones y variables macroeconómicas. Los resultados de tests de causalidad utilizando datos de los EE UU para el período 1919–1979 muestran que las fusiones y los precios de las acciones interactúan en forma comtemporánea y no revelan rezago o adelanto alguno. El análisis de series de tiempo indica que las series de fusiones responden a un proceso AR(2), lo cual significa un rechazo de la hipótesis del ?random walk?.

     

The research strategy in management of technological innovation

The increasing importance of technology in the application world has imposed high demand on the research community for insightful and useful principles about “management of technological innovation” (MTI). This paper examines the academic legacy in terms of conceptual categories, causal relationships and taxonomy of relevant systems, and asserts from a system perspective that MTI as an applied science is still in its infancy.Based on methodological argument, this paper warns of the danger of hasty compromise of strategically important topics to “popular” definition of “researchability,” and suggests several research guidelines and approaches for this young interdisciplinary discipline:

1. (1)To explore new frontiers, use “proximate variables,” consider contextual factors and causation in broad terms, conceptualize “independently,” and pay more attention to case study method.

2. (2)To understand driving forces, be aware of practice, and focus on internal dynamics.

3. (3)To transcend complexity, adopt a hierarchical structure perspective and state-and-flow concept, and condense findings into configurations.

Finally, this paper urges the formation of an overall research strategy to accelerate the accumulation of MTI grounded knowledge.     

Defense conversion into a global system of proprietary technologies: The case of Taiwan''s aircraft industry

To further industrial development, Taiwan's government has officially targeted the aircraft industry, specifically the Aero Industry Development Center (AIDC)—producer of Taiwan's combat aircraft with a two-and-a-half-decade history. However, despite AIDC's experience in aerodynamics, structure, and engines, redirecting its engineering and production capabilities for commercial jets poses many difficulties. Because military and civilian needs of aircraft design are very different, the commercial benefits of military work on airframes are minimal. In contract manufacturing, one critical factor is efficiency, but AIDC is still relatively weak in scale economies, scope economies, and experience curve. Another critical factor is technology, but most functional and design specifications and standards are imposed by the upper-tier buyers and the integrators. Moreover, neither spin-off nor dual-use strategy can apply effectively, leaving AIDC an enclave isolated from local industry. Overall, the prospect of AIDC's defense conversion is dismal. The military does not have the capability to endorse the transformation; the civilian government is not familiar with the commercial practices; the local firms are not interested in entering this industry; the commercial businesses are largely controlled by the world leading integrators; and, most important, AIDC's core competence is fairly weak. The case typifies a government's futile efforts in a global industry of complex proprietary technological systems.     

A note on board characteristics,ownership structure and default risk in Taiwan

This study applies dynamic generalized method of moments estimation to examine the influences of ownership structure and board characteristics on default risk for a full samples and two subsamples (high‐tech and conventional) of publicly listed firms in Taiwan. Our findings reveal that certain characteristics of corporate governance have explanatory power for default probability, but the impact is not straightforward. In particular, the impact of internal and external governance structures on default risk is industry dependent. Accordingly, governance proposals that encourage higher ownership among directors and large block shareholdings in high‐tech firms or reduce managerial ownership in conventional companies can have a counterproductive effect on corporate governance and result in higher bankruptcy possibility.