Resource Curse or Not: A Question of Appropriability*

Whether natural resources are good or bad for a country's development are shown to depend on the interaction between institutional setting and, crucially, the types of resources possessed by the country. Some natural resources are, for economical and technical reasons, more likely to cause problems such as rent‐seeking and conflicts than others. This potential problem can, however, be countered by good institutional quality. In contrast to the traditional resource curse hypothesis, we show the impact of natural resources on economic growth to be non‐monotonic in institutional quality, and increasingly so for certain types of resources. In particular, countries rich in minerals are cursed only if they have low‐quality institutions, while the curse is reversed if institutions are sufficiently good. Furthermore, if countries are rich in diamonds and precious metals, these effects—both positive and negative—are larger.     

Adapting consumer products to lesser-developed markets

Different types of modern consumer products require substantially different amounts and types of adaptation in preparing them for marketing in Lesser-Developed Countries (LDCs). This study reports conclusions drawn from an empirical study of 174 products marketed by 61 subsidiaries of multinational corporations operating in 22 different LDCs. Some product categories, such as foods and drinks, require adapting to fit them more appropriately for LDC marketing conditions. Other categories, such as cosmetics, undergo few adaptations, as their makers seek to reap the benefit of their products' established images in LDCs. Still other categories, such as pharmaceuticals, undergo minimal adaptations, because of the substantial advantages their makers attach to global standardization.     

On the Segregation of Genetically Modified,Conventional and Organic Products in European Agriculture: A Multi‐market Equilibrium Analysis

Evaluating the possible benefits of the introduction of genetically modified (GM) crops must address the issue of consumer resistance as well as the complex regulation that has ensued. In the European Union (EU), this regulation envisions the co‐existence of GM food with conventional and quality‐enhanced products, mandates the labelling and traceability of GM products and allows only a stringent adventitious presence of GM content in other products. All these elements are brought together within a partial equilibrium model of the EU agricultural food sector. The model comprises conventional, GM and organic food. Demand is modelled in a novel fashion, whereby organic and conventional products are treated as horizontally differentiated but GM products are vertically differentiated (weakly inferior) relative to conventional ones. Supply accounts explicitly for the land constraint at the sector level and for the need for additional resources to produce organic food. Model calibration and simulation allow insights into the qualitative and quantitative effects of the large‐scale introduction of GM products in the EU market. We find that the introduction of GM food reduces overall EU welfare, mostly because of the associated need for costly segregation of non‐GM products, but the producers of quality‐enhanced products actually benefit.     

THE RELATIONSHIP BETWEEN FINANCIAL INCENTIVES FOR COMPANY PRESIDENTS AND FIRM PERFORMANCE IN JAPAN*

Kaplan (1994 ) concludes that the relationship between top pay and stock performance in Japan is similar to that in the USA. Using a new and comprehensive data set that includes presidents’ stock and their stock option holdings, this study estimates the sensitivity of Japanese presidents’ wealth to shareholder wealth in the period 1977–2000. Contrary to the commonly held belief that Japanese corporate governance is becoming more like that in the USA, the results show that pay–performance sensitivity actually decreased substantially after 1990. In 2000, Japanese presidents received $US22,100 when stock returns increased from ?2.1% to 14.8%.     

Why do countries matter so much for corporate governance?

This paper develops and tests a model of how country characteristics, such as legal protections for minority investors and the level of economic and financial development, influence firms’ costs and benefits in implementing measures to improve their own governance and transparency. We find that country characteristics explain much more of the variance in governance ratings (ranging from 39% to 73%) than observable firm characteristics (ranging from 4% to 22%). Further, we show that firm characteristics explain almost none of the variation in governance ratings in less-developed countries and that access to global capital markets sharpens firms’ incentives for better governance.     

Private value of European patents

I examine the joint patent designation-renewal behavior of the European Patent Office (EPO) patent applicants during 1978-1996, using both nonparametric techniques and a parametric model. The European patents granted through the EPO are substantially more valuable than those through the national route. Value distribution of patents is highly skewed, and even more so for the EPO patent families. The value of patent rights increases with the economic size of the country and exhibits modestly increasing returns to scale. Model estimation also reveals significant institutional differences across EPO member countries in patent protection.     

From Experience: Demystify Creativity, Enhance Innovation

Creativity need not be a chance occurrence. The authors of this article believe there is a technology that facilitates creativity. It is a technology that can be learned and applied and managed. They describe the specific steps that they followed in helping a group of R&D professionals learn, apply, and manage the creative processes in the lab. It is a story of practical steps that dealt with the everyday realities of managing in a large corporation.     

Economic growth, liquidity, and bank runs

We construct an endogenous growth model in which bank runs occur with positive probability in equilibrium. In this setting, a bank run has a permanent effect on the levels of the capital stock and of output. In addition, the possibility of a run changes the portfolio choices of depositors and of banks, and thereby affects the long-run growth rate. These facts imply that both the occurrence of a run and the mere possibility of runs in a given period have a large impact on all future periods. A bank run in our model is triggered by sunspots, and we consider two different equilibrium selection rules. In the first, a run occurs with a fixed, exogenous probability, while in the second the probability of a run is influenced by banks’ portfolio choices. We show that when the choices of an individual bank affect the probability of a run on that bank, the economy both grows faster and experiences fewer runs.     

Social Affiliation and the Demand for Health Services: Caste and Child Health in South India

This paper assesses the role of social affiliation, measured by caste, in shaping investments in child health. The special setting that we have chosen for the analysis - tea estates in the South Indian High Range - allows us to control nonparametrically for differences in income, access to health services, and patterns of morbidity across low caste and high caste households. In this controlled setting, low caste households spend more on their children's health than high caste households, reversing the pattern we would expect to find elsewhere in India. Moreover, health expenditures do not vary by gender within either caste group, in contrast once again with the male preference documented throughout the country. A simple explanation, based on differences in the returns to human capital across castes in the tea estates is proposed to explain these striking results.     

PRIVATE AND PUBLIC EDUCATION: HUMAN CAPITAL ACCUMULATION UNDER PARENTAL TEACHING*

This paper examines a simple overlapping generations model of human capital accumulation under both the public and private education regimes. Both young individuals and their parents allocate time to human capital accumulation. Under the public education regime, the government collects tax to finance expenditure for education resources. We show that there exists a level of tax which maximizes the speed of human capital accumulation because of parental teaching; and, if the government chooses tax rates adequately, human capital grows faster and welfare levels become higher under the public education regime than under the private.