A development strategy for the 1990s

The United Nations Committee for Development Planning (CDP) in its annual report has attempted to formulate a development strategy for the 1990s. We have asked Udo E. Simonis, a member of the CDP, to summarize the main findings and recommendations of that report. The full report will be issued asOfficial Records of the Economic and Social Council of the United Nations.     

Transparency in the interbank market and the volume of bank intermediated loans

In the present paper we study the equilibrium interaction through which the interbank market is related to the public lending and borrowing market. It turns out that this interaction is affected by the transparency in the interbank market. Interbank market transparency is modeled by means of more informative signals about future interbank rates. We find that more transparency might increase or decrease the volume of bank intermediated loans in the public market. In particular, the impact of more transparency on the volume of loans depends on the curvature of the marginal cost function of the banking firm. Furthermore, we find that expected profits of the bank are higher when the interbank market is more transparent.     

Export Flexibility and Hedging

The paper considers a risk-averse international firm which sells its output in either the domestic or the foreign market. The firm possesses export flexibility, and so it can choose between the domestic and export markets after considering the foreign exchange rate. It is shown that a separation property holds if the proper hedging instrument is used: the firm's production depends on market prices and technology and does not depend on its attitude towards risk nor on its expectations. A full-hedge proposition is derived.     

The Inside Track: On the Important (But Neglected) Role of Customers in the Resource‐Based View of Strategy and Firm Growth*

abstract This paper argues for the important role of customers as a source of competitive advantage and firm growth, an issue which has been largely neglected in the resource‐based view of the firm. It conceptualizes Penrose's (1959 ) notion of an ‘inside track’ and illustrates how in‐depth knowledge about established customers combines with joint problem‐solving activities and the rapid assimilation of new and previously unexploited skills and resources. It is suggested that the inside track represents a distinct and perhaps underestimated way of generating rents and securing long‐term growth. This also implies that the sources of sustainable competitive advantage in important respects can be sought in idiosyncratic interfirm relationships rather than within the firm itself.     

Welfare Effects of Foreign Direct Investment: Cost Saving vs. Signaling

We compare the effects of two types of foreign direct investment (FDI) (viz., FDI for trade cost saving and FDI for signaling foreign cost of production) on consumer surplus, profit of the host-country firm and host-country welfare. We show that the effects are dramatically different. If the reason for FDI is to save trade cost, FDI (compared to export) always makes the consumers better off and the host-country producer worse off, while the effect on host-country welfare is ambiguous. However, if the FDI is to signal the foreign cost of production, FDI (compared to export) always makes the host-country producer better off and increases host-country welfare, while it makes the consumers almost always worse off.     

A general recurrence relation for moments of order statistics in a class of probability distributions and characterizations

Summary In a class of distribution functions, including exponential, power function, Pareto, Lomax, and logistic distributions, a general recurrence relation for moments of order statistics is given. The validity of this identity for certain constants and some sequence of order statistics leads to characterizations of probability distributions. Several recurrence relations and characterization results known from the literature are particular cases of the theorems stated.     

Developing countries in the environmental crisis

It is not only the economic gap between “North” and “South” which has dramatically widened: the same is true of the ecological gap. However, because the Earth is one ecological unit, the progressively worsening environmental crisis in the developing countries is of significance for the whole world.     

Exact welfare measures and economic index numbers

Summary Welfare measures and economic index numbers are usually defined by formulae or by verbal definitions. This paper develops characterizations of some important measures and corresponding index numbers by an axiomatic approach. These results facilitate the choice between different welfare indicators, and they show the strength of assumptions like MM and RM. Indeed these properties rule out CI and yield the Hicksian measures EV and CV, and their dual counterparts, respectively. At the same time one can conclude that these measures have to be used very carefully, if one considers the limitations implied by these properties.The author would like to thank Dieter Elixmann, Sigrid Müller, and an anonymous referee for valuable suggestions and criticism.