The European origins of economic development

Although a large literature argues that European settlement outside of Europe during colonization had an enduring effect on economic development, researchers have been unable to assess these predictions directly because of an absence of data on colonial European settlement. We construct a new database on the European share of the population during colonization and examine its association with economic development today. We find a strong, positive relation between current income per capita and colonial European settlement that is robust to controlling for the current proportion of the population of European descent, as well as many other country characteristics. The results suggest that any adverse effects of extractive institutions associated with small European settlements were, even at low levels of colonial European settlement, more than offset by other things that Europeans brought, such as human capital and technology.     

Sunk Costs and the Entry Decision

This paper considers the role of sunk costs in the decision to enter a market. Its goal is to provide a policy-relevant approach to the question: when are sunk costs so great as to serve as a barrier to entry? To do this, the model presented nests both a model of pure hit-and-run entry and a simple “lottery-ticket” model of long-term entry in which the entrant knows that entry may or may not ultimately prove successful. It illustrates clearly the strategic differences between sunk and nonsunk fixed costs. The paper also considers the incumbent’s problem of choosing between entry deterrence and accommodation. Finally, out of this model comes a measure of the height of the sunk cost barrier to entry that may be useful for competition policy purposes.     

Information processing and innovative choice

In this paper we examine how the information processing of subjects who make an innovative choice (innovators) differs from that of subjects who make a noninnovative choice (noninnovators). The task involves selection of an alternative within a range of prerated product category innovativeness. We propose that subjects who seek 1) impersonal/uncontrollable sources, 2) higher levels of information, 3) more detailed (versus summary) data, and 4) noncomparative (versus comparative) data are more likely to make innovative choices. The research method is a computerized process tracing experiment utilizing Search Monitor (Brucks 1988).The authors wish to express their gratitude to Merrie Brucks for the use of and help with Search Monitor and to Eric Johnson, Dave Schmittlein, and Mita Sujan for helpful comments on an earlier version of this paper.     

The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment

The behavior of many multinational enterprises is not well described by existing models of foreign direct investment (FDI). Firms often follow strategies that involve vertical integration in some countries and horizontal integration in others, a strategy known as complex integration. This paper presents a three-country model that is used to analyze why firms might follow a strategy of complex integration. My analysis reveals that complex integration strategies create complementarities between potential host countries that have important implications for the structure of FDI. The analysis also shows that falling transport cost between countries may increase the importance of complex integration strategies.     

ON-FARM FACTORS INFLUENCING INVESTMENT IN CROP SOWING MACHINERY*

Farmers in grain industries make important decisions about investment in crop sowing machinery. This paper shows how some on-farm factors affect profit-maximising levels of investment in crop sowing machinery. The paper examines the effect on optimal investment of discontinuities in sowing opportunities, varietal portfolios and soil portfolios.     

The three US food policies: An ideological interpretation

Historically, and notably so since 1933, three ideologies have been evident, and in conflict, in the farmfood policies of the USA. The gradual transformation of US agriculture since World War II into an agribusiness industry, and into the dominant world food exporter, has necessitated the modernising of these three ideologies. How the new food politics of the Carter Administration will differ from those of the Nixon-Ford Administration is of worldwide concern. Whether the new food policy ‘agenda’ will be aggressively committed to the development of a neo-Jeffersonian food ideology will be a major US political issue in 1977.