The role of government aid to firms during the transition to a market economy: Russia 1992-1994

The paper develops two economic grounds for gradualism in the context of the Russian move toward a market economy: one for the support of output through subsidies, another for similar support through credit. The first argument relates to the usual case for softening the blow to a sector hit by an adverse, permanent shock. The other argument depends on the absence of a well-functioning capital market. Having presented the two arguments, we discuss the extent to which they justify the course of Russian policy. Essentially we show that the arguments support much less gradualism than actually took place in Russia in 1992 and 1993.     

The welfare case for the European Monetary System

This paper argues that the European Monetary System can be interpreted as a cooperative game yielding benefits to its members. A simple model is set up in which it is shown that the EMS solution is superior to Nash. If the menber countries differ, this superiority to Nash may require an occasional realignment. It will also then require that there be no sterilization of foreign exchange interventions, since otherwise the system would collpase. The EMS is interpreted in this paper as an arrangement manner, and not o Bretton-Woods type of arrangement when there is a leader-follower relationship inside.     

The effects of workers' participation on enterprise performance: Empirical evidence from French cooperatives

The results of estimating production functions augmented by various measures of workers' participation on a large enterprise level data set of French cooperatives are reported. Value added is found to be an increasing function of participation in profits, in collective membership and in ownership, even when a wide assortment of enterprise specific and environmental factors are taken into account. This finding is very robust, surviving tests between alternative specifications of technology, for reverse causality, for simultaneous equation bias and for multicollinearity. The typical productivity effect from participation, however, is small, around 5% of output. The results suggest that Western policymakers should investigate ways to increase workers' participation in capital stakes and profit shares.     

Monetary instability and share-market risk: Canadian evidence

This note presents Canadian evidence on the linkage between the level of risk exhibited by the share market and instability in monetary policy. Recent findings for the US financial market which establish such a relationship are corroborated using this new data set.     

BVAR models with economic priors: An application to the propagation of U.S. regional cycles to Canada

To overcome the over-parameterization problems typically associated with the estimation of large VAR systems, Litterman (1979, 1986) and Doan, Litterman, and Sims (1984) have proposed the inclusion ofstatistical a priori information. In this paper, we investigate how economica priori information based on regional input-output tables and trade flows statistics could help estimate a large U.S.-Canadian regional model. Instead of relying on the usual Choleski factorization, we present the variance decomposition based on a national-regional unobservable variables model. Using monthly series (total employment, 1966:1-1986:12) on five Canadian regions and four U.S. ones, we are able to characterize the north-south propagation mechanism.     

Business services: Markets and transactions

Tertiary activities and among them business services represent an increasingly dominant share of GDP. The main purpose of this paper is to show that the concepts and theories which have been developed mainly with reference to industrial, essentially material, activities are not relevant for service, dominantly non-material, activities, more particularly for informational business services. These-the way they operate, the relations between the actors, the processes through which values are created and prices are determined...-are substantially different, and would thus seem to require substantially, or even radically different approaches and theories.     

Panel data estimates of the production function and product and labor market imperfections

Consistent with two models of imperfect competition in the labor market—the efficient bargaining model and the monopsony model—we provide two extensions of a microeconomic version of Hall's framework for estimating price‐cost margins. We show that both product and labor market imperfections generate a wedge between factor elasticities in the production function and their corresponding shares in revenue, which can be characterized by a ‘joint market imperfections parameter’. Using an unbalanced panel of 10,646 French firms in 38 manufacturing industries over the period 1978–2001, we can classify these industries into six different regimes depending on the type of competition in the product and the labor market. By far the most predominant regime is one of imperfect competition in the product market and efficient bargaining in the labor market (IC‐EB), followed by a regime of imperfect competition in the product market and perfect competition or right‐to‐manage bargaining in the labor market (IC‐PR), and by a regime of perfect competition in the product market and monopsony in the labor market (PC‐MO). For each of these three predominant regimes, we assess within‐regime firm differences in the estimated average price‐cost mark‐up and rent sharing or labor supply elasticity parameters, following the Swamy methodology to determine the degree of true firm dispersion. To assess the plausibility of our findings in the case of the dominant regime (IC‐EB), we also relate our industry and firm‐level estimates of price‐cost mark‐up and extent of rent sharing to industry characteristics and firm‐specific variables respectively. Copyright © 2011 John Wiley & Sons, Ltd.