Organizational forms in the knowledge economy: a comparative institutional analysis

This paper provides a framework with which to analyze organizational forms in the knowledge economy. We focus on an important trade-off facing modern firms: firms can acquire the property of all the innovations developed by their employees and can greatly increase their profits, yet this type of private intellectual property rights regime can discourage the innovative effort of the very same workers. Allowing workers to carry their knowledge outside the firm eliminates this disincentive. Hence, strategic complementarities may exist between innovative partners and a disclosure driven intellectual property rights regime, and passive employees and a private intellectual property rights regime. An evolutionary game theoretic model demonstrates these strategic complementarities and shows when economies tend towards disclosure driven or private intellectual property rights regimes.     

New EU member states and the Euro: economic readiness,benefits and costs

All of the new EU member states (NMSs) have made a commitment to adopt the Euro. This essay considers the countries’ economic readiness to adopt the Euro as well as the economic benefits and costs of adoption. Paper applies a method suggested by Bayoumi and Eichengreen (1997) and finds that the changes of real effective exchange rates between the Euro area and the new EU member states follow the pattern predicted by the optimum currency area theory. This finding allows the construction of the readiness for adoption index for every NMS. The tangible benefits (for NMSs) of adoption are also examined in this essay. Analyses suggest that the costs of currency exchange and hedging against the uncertainty in foreign exchange markets account for about 0.08–0.012% of the countries’ GDP. In addition, countries that adopt the Euro might expect lower inflation and interest rates. This essay also examines the possible costs of adoption. These are in the forms of the lost ability to use monetary policy tools and set the level of seigniorage. Analysis suggests that many countries had given up their independence over monetary policy even before the accession to the EU. In addition, bigger NMSs have not used seigniorage as the source of fiscal income. However, they used exchange rate flexibility to depreciate their currencies during the recent crisis.     

Modeling Cyclical Asymmetries in European Imports

This paper applies smooth transition models to capture the nonlinear behavior in the imports data of six major European economies and to assess whether such nonlinearities are related to business cycle asymmetries. Two classes of switch between regimes are considered: endogenously determined transition that assumes nonlinearities are generated by idiosyncratic components specific to foreign trade, and exogenous transition based on GDP growth as a more direct indicator of the cyclical state of the economy. The results support the proposition that the dynamics of imports are nonlinear. In Belgium, France, Spain, and the United Kingdom, regimes change over the business cycle, while in Germany and Italy the switch between regimes is endogenous. National characteristics play a role in defining the position of extreme regimes, the smoothness of the transition, and local dynamics within each state.Previous versions of this article have been presented at the 57th International Atlantic Economic Conference (Lisbon, Portugal, March 10–14, 2004) and at the VII Encuentro de Economía Aplicada (Vigo, Spain, June 3–5, 2004). The authors thank the conference participants and an anonymous referee for their comments.     

The effect of nonreciprocal preferential trade agreements on benefactors’ exports

Over the last decades, developed countries have provided developing countries with preferential market access via trade policies in the form of nonreciprocal preferential trade agreements (NRPTAs). Despite the lack of reciprocity of this kind of agreements, certain criteria for designating eligible countries refer to the commercial interests of benefactor countries. This paper examines for the first time the effect of NRPTAs on benefactors’ exports to beneficiary countries. Using recent developments in the econometric analysis of the gravity equation, we find robust evidence that nonreciprocal agreements have had an economically significant effect on exports not only for beneficiary countries but also for benefactor countries.     

Trust and reciprocity: extensions and robustness of triadic design

Our paper reconsiders the triadic design proposed by Cox (Games and Economic Behavior 46:260–281, 2004) to identify trust and reciprocity in investment games. Specifically, we extend the design in two directions. First, we collect information on investors’ choices by using both the direct-response (as does Cox) and strategy methods. Using the latter, we are able to condition reciprocity on initial inequality, which is endogenous when investigating reciprocity. We demonstrate that the triadic design provides evidence for reciprocity once that initial inequality is considered. Second, we elicit expectations and test their coherence with the triadic outcomes. By examining the relationship between trust actions and expected gains, we analyze whether investors’ expectations are consistent with their behavior. Finally, we test for the existence of an emotional bias, i.e., whether expectation mismatches induce trustees to change actual choices from the planned ones.     

Minsky Goes to Buffalo—and Takes on the Economics Establishment

This essay is based on remarks presented by the author at The Fourth Bi-Annual Cross-Border Post Keynesian Conference, Buffalo State College, on October 9, 2009. It addresses the economic challenges facing Buffalo, New York, and countless other American cities, especially in the Northeast and Midwest; draws on the writings of Hyman Minsky to offer an interpretation of what many now call the Great Recession, which began in late 2007; and challenges the image of Minsky presented by mainstream economists and journalists, with special attention to a recent lecture by Paul Krugman. The essay closes by returning to Buffalo, where—as Minsky anticipated in the 1990s—the economic fate of working families depends largely on the outcome of a national struggle over the shape of future U.S. economic transformation.     

Do people really want to be nudged towards healthy lifestyles?

This paper assesses Thaler and Sunstein’s claim that policies that nudge individuals towards healthy lifestyles promote the welfare of those individuals, as judged by themselves. I argue that Thaler and Sunstein switch between two different interpretations of that clause. One interpretation gives the clause a wide range of applicability, but drains it of its content as a repudiation of paternalism. The other interpretation makes it more meaningful to say that people want to make the choices they are being nudged towards, but applies to a much narrower range of cases than Thaler and Sunstein have in mind.     

A quantitative explanation of the low productivity in South–Eastern European economies: the role of misallocations

It is well known that southeast Europe is the least developed area in Europe. Using a methodology based on the idea of heterogeneous firms, this paper studies the degree to which firm heterogeneity and resource misallocation can explain the lower TFP in southeast Europe. The results show a significant degree of heterogeneity and resource misallocation, although the results are sensitive to the calibration used. There is evidence that firm-level productivity depends on firm size, while taxation negatively influences it. There is also some evidence that foreign-owned firms are more competitive, as are exporting firms. Results are generally robust across the various specifications used, but less so relative to the measure of productivity used. Additional evidence suggests that infrastructure-related obstacles as well as institutional instability drive the output distortion, while no factor is underlined as a significant driver of capital distortions, suggesting the need for better data sources for the latter.     

Dynamic pricing of electricity in the mid-Atlantic region: econometric results from the Baltimore gas and electric company experiment

The Baltimore Gas and Electric Company (BGE) undertook a dynamic pricing experiment to test customer price responsiveness to different dynamic pricing options. The pilot ran during the summers of 2008 and 2009 and was called the Smart Energy Pricing (SEP) Pilot. In 2008, it tested two types of dynamic pricing tariffs: critical peak pricing (CPP) and peak time rebate (PTR) tariffs. About a thousand customers were randomly placed on these tariffs and some of them were paired with one of two enabling technologies, a device known as the Energy Orb and a switch for cycling central air conditioners. The usage of a randomly chosen control group of customers was also monitored during the same time period. In 2009, BGE repeated the pilot program with the same customers who participated in the 2008 pilot, but this time it only tested the PTR tariff. In this paper, we estimate a constant elasticity of substitution (CES) model on the SEP pilot’s hourly consumption, pricing and weather data. We derive substitution and daily price elasticities and predictive equations for estimating the magnitude of demand response under a variety of dynamic prices. We also test for the persistence of impacts across the two summers. In addition, we report average peak demand reduction for each of the treatment cells in the SEP pilot and compare the findings with those reported from earlier pilots. These results show conclusively that it is possible to incentivize customers to reduce their peak period loads using price signals. More importantly, these reductions do not wear off when the pricing plans are implemented over two consecutive summers. Our analyses reveal that SEP participants reduced their peak usages in the range of 18 to 33% in the first summer of the SEP pilot and continued these reductions in the second summer.     

Economic globalization and the change of electoral rules

This paper takes up an argument from Ronald Rogowski about the “natural affinity” between trade and an electoral system with proportional representation. We draw on literature on the historical determinants of electoral system choice to advance the general argument that trade integration and PR are related because the adoption of PR helps to secure gains from trade. Our specific model of electoral rule changes in the age of globalization predicts that the likelihood of electoral rule change towards more proportionality increases with levels of trade integration in the world economy. The theoretical model draws on a micro model of the distributive effects of increased economic integration. Because more proportional systems are more credibly able to commit to compensate the losers of globalization processes, there will be increased demand to change the electoral system towards more proportionality under economic circumstances that increase the costs of maintaining a closed economy. In accordance with our model, our empirical tests find a positive association between (a) trade integration and the proportionality of the electoral system, (b) proportionality and social spending, and (c) global integration levels and the probability of electoral rules changes that render voting rules more proportional.