Information Structure and the Tragedy of the Commons in Resource Extraction

Synopsis This paper considers the well-known Levhari-Mirman discrete-time model of resource extraction, and investigates the effects of the information structure of the dynamic game – open-loop, Markovian or history-dependent – on the equilibrium consumption path and the overall utility of the agents. Due to the special structure of the model, the open-loop regime yields a Pareto-optimal outcome. The Markovian regime leads to the most pronounced version of the tragedy of the commons. History-dependent behavior yields an outcome set that is intermediate between the other two cases, and that may include the Pareto-optimal outcome in some cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information the agents’ extraction strategies are based on. The analysis suggests that in environments characterized by a dynamic (and no market) externality, forcing agents to commit to open-loop behavior would constitute welfare-improving regulation.     

Ownership and Productive Efficiency: Evidence from Estonia

Privatization in Estonia has produced varied ownership configurations. This enables hypotheses on the productivity effects of different ownership forms to be tested. Findings are based on fixed-effects production function models and are estimated using a large, random sample of firms. Depending on the particular specification (and relative to state ownership), (i) private ownership is 13–22% more efficient; and (ii) all types of private ownership are more productive, though managerial ownership has the biggest effects (21–32%) and ownership by domestic outsiders has the smallest impact (0–15%). The joint hypothesis that privatization coefficients are equal is rejected. Findings are robust with respect to choice of technology and the use of instrumental variable estimates. These results provide only partial support for the standard theory of privatization, but stronger support for theorists who argue that some forms of insider ownership may constitute preferable forms of corporate governance in some circumstances.     

Strategic Environmental Policy Under Incomplete Information

This paper introduces incomplete information into recent analyses of strategic environmental policy. It is shown how asymmetric information between planners and producers affects national incentives to impose strategic environmental standards on domestic industries in international oligopolistic competition. Relative to the full-information case, incomplete information is likely to mitigate allocative distortions originating from strategic behaviour. A countervailing effect, tending to raise distortion, is however revealed from the analysis. This effect is absent when governments intervene in free trade through direct production subsidies. The results suggest that incentives to capture foreign rents are less reduced due to private information, when environmental standards, rather than direct production subsidies, are the strategic instrument.     

Malthus in cointegration space: evidence of a post-Malthusian pre-industrial England

This paper re-examines the interaction between population growth and income per capita in pre-industrial England. Our results suggest that, as early as two centuries preceding the Industrial Revolution, England had already escaped the Malthusian Epoch and entered a post-Malthusian regime, where income per capita continued to spur population growth but was no longer stagnant. Our formulation of a post-Malthusian hypothesis implies cointegration between vital rates (birth- and death rates) and income and builds explicitly on a simple model of Malthusian stagnation. We show that this hypothesis can be interpreted as an extension of the latter model where the negative Malthusian feedback effect from population on income, as implied by diminishing returns to labor, is offset by a positive Boserupian and/or Smithian scale effect of population on technology.     

Choice of Ownership Structure and Firm Performance: Evidence from Estonia

This article uses panel data for a representative sample of Estonian enterprises to analyse diverse issues related to the determinants of ownership structures and ownership changes after privatisation. A key focus is to determine whether ownership changes are related to economic efficiency. While employee-owned firms are found to be much more prone than other firms to switch ownership categories, often ‘employee-owned’ firms remain ‘insider-owned’ as ownership passes from current employees to managers and former employees. Logit analysis of the determinants of ownership structures and ownership changes provides mixed support for several hypotheses. As predicted: (i) wealth and resource constraints play a crucial role in the determination of ownership, with foreigners buying firms with the highest equity levels and insiders buying firms with the lowest equity valuations; (ii) risk aversion explains subsequent ownership changes, especially away from employee ownership; (iii) allocation of ownership depends on the pre-privatisation origin and location of the firm, and these factors also influence subsequent ownership changes. Our findings provide mixed support for the hypothesis that ownership changes are related to economic efficiency.     

Twenty-five years of Living Under Contract: Contract farming and agrarian change in the developing world

The expansion of contract farming schemes through regions of the developing world in the era of the globalization of agriculture raises questions that are central to the study of agrarian political economy. Contract farming has extended the footprint of commodity production and integrated land and labour not otherwise captured in forms of direct production and marketing. 25 years after the publication of Living Under Contract: Contract Farming and Agrarian Transformation in Sub-Saharan Africa, a foundational collection edited by Peter Little and Michael Watts, it is necessary to take stock of the most prominent developments in the practice of contract farming and in the political economy literature studying it. The ultimate contribution of Living Under Contract was framing contract farming as expressing the unevenness of power relations in agriculture and grounding it in specific political, historical and social contexts that were not examined in the mainstream accounts. This introduction to the special issue revisits the questions that have remained relevant or re-emerged in the political economy literature on contract farming; it raises new questions that reflect contemporary developments and it explains how the papers in this collection contribute to the expansion of the theoretical and empirical horizons of the research on contemporary contract farming in low and middle-income countries.     

Institutions,entrepreneurship, and economic growth in Europe

Institutions have a decisive impact on the prevalence and nature of entrepreneurship. To date, the impact of institutions on (productive) entrepreneurship and the effects of entrepreneurship on economic growth have largely been investigated in isolation. In this paper, we bring together institutions, entrepreneurship, and economic growth using a parsimonious growth model in a 3SLS specification. In our first stage, we regress multiple measures of entrepreneurial activity on institutional proxies that are known to correlate with more productive forms of entrepreneurial activity. Using the fitted values of this first-stage regression as our proxy for productive entrepreneurship, we can then estimate a panel growth regression following Islam (1995) in a second stage. The third stage then optimizes the estimation of the two equations simultaneously. Our results show that productive entrepreneurship contributes to economic growth. In our set of proxies for institutional quality, financial stability, small government, and perceived start-up skills are the most important predictors of such productive entrepreneurship.