The creation of regional blocs in the world economy

International economic relations today show a rather pessimistic picture, with high non-tariff barriers, international trade frictions and a serious crisis in the GATT. The following article analyses present tendencies towards the creation of regional economic blocs and the threats to the world economy which these involve.     

Input versus output taxation in an experimental international economy

This paper presents the results of a policy oriented macroeconomic experiment involving an ‘international’ economy with a relatively small ‘home’ country and a large ‘foreign’ country. It compares the economic performance of two alternative tax systems: a wage tax system and a sales-tax-cum-labor-subsidy system. The two systems are applied to the small country, while the wage tax system always obtains in the large country. The main result is that the sales tax system outperforms the wage tax system, using standard economic indicators. Moreover, it turns out that under the sales tax system economic activities appear to be moving toward the ‘better’ of two theoretical equilibria. It is argued that producers’ reluctance to incur costs up-front while being uncertain about product prices can explain these results. Several pieces of evidence are provided to support this claim. The results strongly suggest that behavioral aspects should be taken into account also in applied macroeconomic models.     

True indexes and rational habit formation

In this paper we discuss the construction of true indexes when tastes change endogenously. True indexes take the substitution possibilities of the consumer to a changing economic situation into account when equating the utility level of a particular period to the utility level attained in the base period through an appropriate change in income or the wage level. When tastes change endogenously, the current decision depends on the past history of consumption but, by the same token, the future path of consumption will depend on the current choice. In a true index, these intertemporal links of the current decision have to be taken into account. For a particular specification of the habit formation process, this is achieved by an appropriate transformation of prices and expenditures. A true intertemporal wage index is computed for the period 1946–1967 in the U.S. Because of increasing needs and intertemporal rationality, this index is roughly constant and equal to 1: real wages remained constant!     

Destructive behavior in a Fragile Public Good game

Socially destructive behavior in a public good environment–like damaging public goods–is an underexposed phenomenon in economics. In an experiment we investigate whether such behavior can be influenced by the very nature of an environment. To that purpose we use a Fragile Public Good (FPG) game which puts the opportunity for destructive behavior (taking) on a level playing field with constructive behavior (contributing). We find substantial evidence of destructive decisions, sometimes leading to sour relationships characterized by persistent hurtful behavior. While positive framing induces fewer destructive decisions, shifting the selfish Nash towards minimal taking doubles its share to more than 20%.     

An experimental investigation of wage taxation and unemployment in closed and open economies

We investigate experimentally the economic effects of wage taxation to finance unemployment benefits for a closed economy and an international economy. The main findings are the following. (i) There is clear evidence of a vicious circle in the dynamic interaction between the wage tax and unemployment. (ii) Employment is boosted by budget deficits but subsequent tax rate adjustments to balance the budget lead to employment levels substantially lower than theoretically predicted. (iii) A sales risk for producers due to price uncertainty on output markets appears to cause a downward pressure on factor employment. For labor the wage tax exacerbates this adverse effect.     

Performance expectations of small firms considering radical product innovation

Performance expectations influence business decisions such as investment decisions and demand for supplies, particularly in small firms with limited strategic planning. Despite widespread use of performance expectations by firms and governments when making sales forecasts and economic outlooks, surprisingly little research exists about how small firms form performance expectations. This paper contributes to reduce this knowledge gap by analyzing performance expectations of small firm managers operating in markets with radical product innovations. This paper proposes a model and hypotheses, which explain performance expectations of small firm managers based on firms' current success, radical product innovation, and variables that indicate firms' ability to respond to customer needs for radical product innovation. Data from 200 decision-makers in a real decision-making context support the model. The results show that performance expectations in small firms are only to a limited extent a naïve extrapolation of current success: radical product innovation and small firm's ability to respond to customer needs for radical product innovation influence performance expectations.     

Methodological Issues in Negotiation Research: A State-of-the-Art-Review

This study provides insight into the dominant methodological practices that have shaped the field of negotiation over the past four decades and sheds light on possible gaps and trade-offs. We content analyzed 941 peer-reviewed negotiation articles (published between 1965 and 2004) and identified the most important methodological trends over time. The results reveal significant changes in reliability, validity, and triangulation issues. In addition, the rise of multivariate statistics and multiple data sources displays positive evolution towards more sophisticated methodologies. Despite these positive evolutions, we want to encourage current and future researchers to conduct more longitudinal and qualitative research to further advance our knowledge on negotiation.     

New Belgian Stock Market Returns: 1832–1914

The limited availability of high quality and computer readable data seriously impedes research in history and finance. We introduce a new monthly return series for Belgian owned equity based on Brussels Stock Market data for the period 1832–1914 as an improvement to the popular Drappier index. Over this period, our dataset includes 446,374 prices, 23,976 dividends, 371 stock and reverse splits (or other capital operations) on 2037 stocks of 1387 (foreign and Belgian) companies. Our dataset includes all shares and bonds but also high-quality information on prices, dividends, shares outstanding and market capitalization. In addition, company, country and sector information is available. We construct value weighted, price weighted and equally weighted indices as well as dividend yields. We find three important results. First, total nominal returns hover between 3.29% and 5.35% per annum, depending on how individual stocks are aggregated into the index. Second, dividend income constitutes the major part of total return and dividend distributions have a clear seasonal pattern. Third, the results highlight several drawbacks of the Drappier indices, especially an upward bias in expected equity performance.     

Market Orientation, Innovativeness, Product Innovation, and Performance in Small Firms

Most research on market orientation, innovation and performance is related to big enterprises and small and medium-sized enterprises (SMEs). In this study a model is developed to investigate the combined effect of market orientation and innovativeness on product innovation and company performance, for small firms. A specific feature of our research is that we use an objective measure for product innovation in contrast to the self-reported measures commonly used in research on innovation. To test our model data from 152 rose growers were used. This study's results show that the owner's innovativeness permeates all variables in the model and has a positive influence on market orientation, innovation, and performance. An interesting research result is also that customer market intelligence influences product innovation positively or negatively, depending on whether the innovativeness of the owner in the new product domain is weak or strong.