Investment in the absence of property rights; the role of incumbency advantages

In many situations the individuals who can generate some output must enter a contest for appropriating this output. This paper analyses the investment incentives of such agents and the role of incumbency advantages in the contest. Depending on the advantages, an increase in the productivity of the investment can decrease or increase the amount of investment. The results are applied to autocrats’ investment behavior and job specific investment in organizations.     

General equilibrium models of monopolistic competition: A new approach

We analyze a class of ‘large group’ Chamberlinian monopolistic competition models by applying different concepts of functional separability to the same set of first-order conditions for utility maximization. We show that multiplicatively quasi-separable (MQS) functions yield ‘constant relative risk aversion’ (CRRA), and, therefore ‘constant elasticity of substitution’ (CES), functions, whereas additively quasi-separable (AQS) functions yield ‘constant absolute risk aversion’ (CARA) functions. We then show that the CARA specification sheds new light on: (i) pro-competitive effects, i.e., profit-maximizing prices are decreasing in the mass of competing firms; and (ii) a competitive limit, i.e., profit-maximizing prices converge to marginal costs when the mass of competing firms becomes arbitrarily large.     

新世纪前20年我国经济建设的宏观布局

在本世纪头20年的经济建设宏观布局中，要抓住现代化进程的重点，走新型工业化之路；解决全面建设小康社会的难点，繁荣农村经济；调整地区经济协调发展的均衡点，积极推进西部大开发；磨合国内经济与国际经济的对接点，全面提高对外开放水平；紧扣经济建设的根本出发点和归宿点，不断改善人民生活；优化发展与改革的聚合点，革除一切影响发展的体制性弊端。     

Wage inequality, technology, and trade

The recent widening of wage inequality has been attributed by some to skill-biased-technical-change and by others to trade liberalization. This paper examines the two explanations within a unified model and also presents a new modeling of skill-biased-technical-change, where skilled workers replace unskilled ones. As a result technology adoption is endogenous and does not occur in all countries. Hence, wages for both types of workers, trade patterns and also factor productivities in all countries are endogenously determined. The model sheds light on the relationship between technology and trade, on the reasons for global productivity differences and on the causes for the recent rise in wage inequality.     

Financial liberalization,financial sector development and growth: Evidence from Malaysia

The objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of Malaysia. Using time series data from 1960 to 2001, we conduct cointegration and causality tests to assess the finance-growth link by taking the real interest rate and financial repression into account. The empirical evidence suggests that financial liberalization, through removing the repressionist policies, has a favorable effect in stimulating financial sector development. Financial depth and economic development are positively related; but contrary to the conventional findings, our results support Robinson's view that output growth leads to higher financial depth in the long-run.     

Gender differences in self‐employment

This paper examines the factors that influence transitions into self‐employment, paying particular attention to gender differences. We find that: (i) men are more responsive to the wage differential between wage/salaried employment and self‐employment; (ii) liquidity constraints are more important for men; and (iii) the link between father's self‐employment status and the probability of self‐employment is stronger for men. Taken together, these results suggest that, for women, self‐employment is a closer substitute for part‐time work and labour‐market inactivity than it is for men. We attribute such differences to the different labour market opportunities and occupational strategies of women.     

Politics and economics in weak and strong states

While much research in political economy points out the benefits of “limited government,” political scientists have long emphasized the problems created in many less-developed nations by “weak states,” which lack the power to tax and regulate the economy and to withstand the political and social challenges from non-state actors. I construct a model in which the state apparatus is controlled by a self-interested ruler, who tries to divert resources for his own consumption, but who can also invest in socially productive public goods. Both weak and strong states create distortions. When the state is excessively strong, the ruler imposes such high taxes that economic activity is stifled. When the state is excessively weak, the ruler anticipates that he will not be able to extract rents in the future and underinvests in public goods. I show that the same conclusion applies in the analysis of both the economic power of the state (i.e., its ability to raise taxes) and its political power (i.e., its ability to remain entrenched from the citizens). I also discuss how under certain circumstances a different type of equilibrium, which I refer to as “consensually strong state equilibrium,” can emerge whereby the state is politically weak but is allowed to impose high taxes as long as a sufficient fraction of the proceeds are invested in public goods. The consensually strong state might best correspond to the state in OECD countries where taxes are high despite significant control by the society over the government.     

Corruption, inequality, and fairness

Bigger governments raise the possibilities for corruption; more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption. We formalize these insights in a simple dynamic model. A positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair, or when the ability to engage in corruption is unevenly distributed in the population. This feedback introduces persistence in the size of the government and the levels of corruption and inequality. Multiple steady states exist in some cases.     

Social networks in the global banking sector

We show that banks with shared social connections partner more often in the global syndicated loan market and that central banks in the network play dominant roles in various interbank transactions, indicating that social connections facilitate business connections. However, more centralized banks in the network also contribute significantly to the global systemic risk. Moreover, we find the soft information generated by social networks is particularly valuable when potential partners operate under different accounting and regulatory standards. Finally, we show that the recent banking crisis significantly limited the positive soft information effects of social networks in the global banking system.     

Managers’ segment disclosure choices under IFRS 8: EU evidence

We examine the impact of proprietary and agency cost motives on segment disclosure quality and quantity and how the adoption of the principle IFRS 8 affects this impact. By using hand-collected data, our results show that proprietary and agency costs play a relevant role in determining the quality and quantity of segment disclosure. We find that proprietary costs are a particularly relevant reason for providing lower segment disclosure quality post-IFRS 8. Our results also suggest that firms’ segment disclosure choice is dependent on disclosure dimension. These results contribute to the ongoing debate regarding IFRS 8 and have valuable implications for accounting regulators.