Foreign Direct Investment,Regulations and Growth

The paper explores the linkage between income growth rates and foreign direct investment (FDI) inflows. So far the evidence is rather mixed, as no robust relationship between FDI and income growth has been established. We argue that countries need a sound business environment in the form of good government regulations to be able to benefit from FDI. Using a comprehensive data set for regulations, we test this hypothesis and find evidence that excessive regulations restrict growth through FDI only in the most regulated economies. This result is robust to different specifications of the econometric model.     

OBSERVABLE MANAGERIAL INCENTIVES AND SPATIAL COMPETITION

In this paper we investigate the relationship between product market competition and managerial incentives within a circular city model with observable agency contracts. With respect to the case of unobservability studied by Raith (2003 ), we find that optimal managerial contracts provide lower incentives, and that equilibrium expected prices and profits are higher. Changes in competition fundamentals have ambiguous effects, but observable contracts alleviate their impact on incentives. Finally, observability involves three major implications: managerial incentives are higher under price regulation than under competition; prices may increase with the number of firms; consumer welfare may diminish when competition increases.     

On the role of retaliation in trade agreements

This paper analyzes the role of retaliation in trade agreements. It shows that, in the presence of private information, retaliation can always be used to increase the welfare derived from such agreements by the participating governments. In particular, it is shown that retaliation is a necessary feature of any efficient equilibrium.We argue that retaliation would not be necessary if governments could resort to international transfers or export subsidies to compensate for terms-of-trade externalities. Within the current world trading system, though, in which transfers are seldom observed whereas export subsidies are prohibited, the use of the remaining trade instruments in a retaliatory fashion might be optimal. The model is used to interpret the retaliatory use of antidumping observed in the last decades, and the proliferation of these measures relative to other trade remedies.     

Multivariate partial adjustment of financial ratios: a Bayesian hierarchical approach

In this paper we propose a multivariate extension of the partial adjustment model of financial ratios. To that end, we use a dynamic factor model which assumes that financial ratios measuring, essentially, the same economic–financial dimension of the firm evolve in a similar way, reflecting the evolution of the common factor. The proposed model is hierarchical with three levels. The first describes the relationship between each ratio and its common factor; the second describes the evolution of the common factors over time by means of Lev's ( 1969 ) partial adjustment model; and the third analyzes the similarity of firms' adjustment coefficients, taking into account their characteristics. The methodology is applied to the analysis of a set of financial ratios related to the business and financial structure of the firm. Copyright © 2008 John Wiley & Sons, Ltd.     

Income inequality and colonialism

This paper proposes that colonialism is a major explanation behind today's differences in income inequality across countries. We argue that income inequality has been higher in the colonies where the percentage of European settlers to total population was higher, as long as Europeans remained a minority. The countries where Europeans became the majority of the population did not suffer from high inequality. These initial differences continue to hold today. The empirical evidence we provide strongly supports our thesis.     

Mozambique Metical Exchange Rate Dynamics: Evidence of Fractional Co‐Integration in the USA and South African Rates

This paper studies the exchange rate dynamics of the Mozambique metical with respect to the US dollar and the South African rand. However, instead of using standard I(0)/I(1) techniques, we use long memory and fractionally integrated and co‐integrated models. Our results indicate that the two exchange rates are highly persistent, with orders of integration equal to or above 1. They also seem to be co‐integrated, with an order of integration close to albeit above 0 but with an AR coefficient very close to 1. Thus, although the two series seem to be fractionally co‐integrated, shocks in the long‐run relationship between the two variables are persistent and take a long time to disappear.     

WELFARE ENHANCING COORDINATION IN CONSUMER COOPERATIVES UNDER MIXED OLIGOPOLY

The recent globalization of world economies has led the retail markets of developed countries towards increasing levels of integration and strategic interdependence. A non negligible share of retail and food markets is currently served by co‐operative societies. Consistently with this trend, the consumer cooperatives have recently experienced increasing levels of integration. The main aim of this paper is to study the welfare effects of coordination among consumer cooperatives competing in quantities in a mixed oligopoly against profit‐maximizing firms. We show that, in absence of agency problems, under increasing or constant returns to scale a higher output coordination of the consumer cooperatives does not affect the total welfare as long as a nonnegative profit constraint holds in these firms. On the other hand, under decreasing returns to scale, the consumer cooperatives contribute more to social welfare when acting on behalf of all consumers. This is because, by coordinating consumers’ preferences, these firms can reduce their market output, thus helping the market to come closer to the first best. All together these results seem to provide an argument in favour of the recent process of integration involving consumer cooperatives in many developed countries.