The Internationalization of the World Economy and its Implication for National Welfare

There is no generally accepted definition of internationalization or globalization. The present paper offers three alternative definitions, in terms of (i) an enlargement of the set of trading countries, (ii) an enlargement of the set of traded commodities, or (iii) the international sharing of technology. It is shown that if each country adopts a Paretian scheme of internal compensation then internationalization in each sense leaves at least one country better off, and that if international compensation is admitted then internationalization in each sense makes every country better off.     

Mind over matter? The inability to counteract contrast effects despite conscious effort

The nature of contrast effects is equivocal. Prior research has conceptualized contrast effects as emerging from an effortful attempt to counteract the natural tendency to assimilate to relevant contextual information. Others have suggested that contrast effects can be the natural, default outcome if the context stimulus is extreme relative to the target. Even with this latter perspective, however, individuals are believed to be sufficiently aware of the contextual influence so as to be able to counteract it if so motivated. These conceptualizations call into question the extent to which contrast effects can occur automatically, without awareness. By using an opposition paradigm that pits automatic influences against conscious influences, unequivocal evidence is provided that contrast effects can occur automatically; contrast effects emerged even when the contextual information was not accessible from memory and study participants were explicitly trying to avoid the influence of contextual information. Explanations are proffered as to why evaluations driven by automatic contrast effects could be inconsistent with preference judgments. © 2005 Wiley Periodicals, Inc.     

Adverse Selection and Pay Compression

A fundamental result of the principal-agent literature is that pay will be linked to performance when it is difficult for the principal to monitor the agent's actions. However, performance pay can lead to adverse incentives. In these models, high-powered incentives encourage workers to neglect some aspects of their job or to sabotage their coworkers' efforts. This paper offers another explanation for the weak link between pay and performance: worker heterogeneity. When workers are heterogeneous and labor contracts are contests, the Nash equilibrium often pools workers. I show that this implies that the link between pay and performance is weaker than would be the case if firms could observe workers' types before contracting and offer each type their respective optimal contests.     

Trade Liberalisation,Market Structure and the Incentive to Merge

In this article, we consider whether a movement towards freer international trade generates incentives for firms to merge and if so what forms of merger are most profitable. In a linear Cournot framework, we show that a reduction in trade costs may, but will not necessarily, encourage mergers. Both market structure and the level to which trade costs fall are shown to play a decisive role. Domestic mergers will be encouraged only if the product market is not highly concentrated and trade costs fall below a threshold level. International mergers can be encouraged in any market structure, and are generally more profitable than domestic mergers.