International migration,non-traded goods and economic welfare in a two-class economy: A reply

This paper sketches a formal model of an economy producing traded and non-traded goods in which two classes of individuals are differentiated, each owning different endowments of capital and labor and allocating different proportions of their income to the consumption of each commudity. The effects of emigration on prices, income distribution and the real income of each class is then examined.     

Towards endogenous science and technology for another development

Basing his arguments on a historical survey of the development of science and technology, the author argues for the strengthening of the autonomous S and T capacity of the Third World and gives special attention to the need for a recovery and development of traditional technologies. Such a policy would call for a reorientation of production away from an imitative pattern of consumption that favors a great diversity of goods for higher-income groups, and thus requires a widespread importation of technologies. A different productive structure, based on the satisfaction of basic human needs and with greater emphasis on collective rather than individual consumption, could reduce substantially the need for imported technology and lead to an increased demand for local scientific and technological activities.     

DIVESTITURE TO UNIT MANAGERS AND SHAREHOLDER WEALTH

The impact on shareholder wealth from selling units to management is examined. The two-day announcement period average abnormal return for parent firms divesting units to managers of those units is positive (0.80 percent) and significant. On average, the impact on shareholder wealth of parent firms divesting assets to managers of the unit is similar to the shareholder wealth effect for divestiture to third parties.     

Growth outside the stable path: Lessons from the European reconstruction

This paper exploits a natural experiment, the large destruction of capital in continental Europe during World War II, to characterize the transitional dynamics of an economy that begins with a capital stock below its steady state level. We use these regularities as a benchmark to discriminate among competing growth specifications. A model that combines non-separabilities in preferences with a technology that restricts the degree of substitutability between inputs outperforms the widely used AK and Cobb–Douglas specifications with time-separable preferences. Our results suggest that policy evaluations based in growth models that overlook non-separabilities in preferences or impose strong restrictions on the technological structure might be grossly misleading.     

The political economy of seigniorage

While most economists agree that seigniorage is one way governments finance deficits, there is less agreement about the political, institutional and economic reasons for relying on it. This paper investigates the main political and institutional determinants of seigniorage using panel data on about 100 countries, for the period 1960–1999. Estimates show that greater political instability leads to higher seigniorage, especially in developing, less democratic and socially-polarized countries, with high inflation, low access to domestic and external debt financing and with higher turnover of central bank presidents. One important policy implication of this study is the need to develop institutions conducive to greater political stability as a means to reduce the reliance on seigniorage financing of public deficits.     

Do Colored Photographs Affect Willingness to Pay Responses for Endangered Species Conservation?

The NOAA panel suggested that use of photographs should be pre-tested to explore their effects on subjects (Arrow et al. 1993). For this paper, a modification to the test suggested by the NOAA Panel was made. We tested whether use of colored, as opposed to black and white (B & W), photographs influence respondents’ valuation of the environmental commodity in question. The context of the test is a CVM study valuing the benefits from protecting the national bird. This was performed using two drop-off surveys that were identical except for the color of the photographs incorporated in the survey instrument. The dichotomous choice logit equations were statistically different between the two treatments of the questionnaire, indicating the significant effect of colored photographs on the respondents’ WTP. The findings support the NOAA Panel recommendation of careful pre-testing and scrutiny of the photographs integrated in the questionnaire since ‘packaging’ of the environmental good (i.e., endangered species protection) matters in valuing benefits associated with it. Since colored photographs are found to be value-enhancing, to simply use B & W photos as an attempt to reduce cost associated with implementing the contingent valuation (CV) survey, especially when limited research money is involved, would result to lower the estimated value of the environmental good.     

Does context matter more for hypothetical than for actual contributions? Evidence from a natural field experiment

We investigated the importance of the social context for people’s voluntary contributions to a national park in Costa Rica, using a natural field experiment. Some subjects make actual contributions while others state their hypothetical contribution. Both the degree of anonymity and information provided about the contributions of others influence subject contributions in the hypothesized direction. We found a substantial hypothetical bias with regard to the amount contributed. However, the influence of the social contexts is about the same when the subjects make actual monetary contributions as when they state their hypothetical contributions. Our results have important implications for validity testing of stated preference methods: a comparison between hypothetical and actual behavior should be done for a given social context.      

The internal capital markets of business groups: Evidence from intra-group loans

We study business groups? internal capital markets using a unique data set on intra-group lending in Chile (1990–2009). In line with groups? financing advantage, firms that borrow internally have higher investment, leverage, and return on equity (ROE) than other firms. At the margin, controlling shareholders have higher cash-flow rights in borrowing firms than in lending firms. However, there is no robust evidence of minority shareholders losing out from intra-group loans as tunneling predicts. Our evidence is consistent with the idea that strict regulation and disclosure requirements for intra-group loans, which are features of the Chilean market, reduce the risk of expropriation in pyramids.