Foreign direct investment and host country policies: A rationale for using ownership restrictions

This paper examines host governments' motivation for restricting ownership shares of multinational firms (MNFs) in foreign direct investment (FDI) projects. An MNF with a productivity advantage is willing to invest in a host country. The host government wants to capture the MNF's surplus yet cannot observe it due to the MNF's private information about its firm-specific advantage. In contrast, a joint venture (JV) partner might observe this surplus depending on its ownership share. The host government can alleviate its informational constraints by using ownership restrictions to force a JV. This calls into question the wisdom of calls for ‘liberalizing’ FDI flows by the wholesale elimination of domestic JV requirements. We show that the optimal mechanism involves ownership restrictions that decrease as the size of the MNF's firm-specific advantage increases.     

INVESTMENT BEHAVIOUR,CORPORATE CONTROL,AND PRIVATE BENEFITS OF CONTROL: EVIDENCE FROM A SURVEY OF UKRAINIAN FIRMS

We analyse the impact of ownership and corporate control on firms’ investment using the 2001 survey of Yacoub et al. on Ukrainian firms. The model explains investment by output, financial and soft budget constraints, and corporate control (and ownership) categories potentially enjoying private benefits of control. We find that the corporate control model fits better than the ownership model, a negative relationship between state and employee control and firms’ investment, and evidence for the presence of soft budget constraints. A negative relationship between firms’ investment and the relative size of non‐monetary transactions strengthens the conclusion of private benefits of control impacting investment.     

Separating the Hawks from the Doves: Evidence from continuous time laboratory games

Human players in our laboratory experiment received flow payoffs over 120 seconds each period from a standard Hawk–Dove bimatrix game played in continuous time. Play converged closely to the symmetric mixed Nash equilibrium under a one-population matching protocol. When the same players were matched in a two-population protocol with the same bimatrix, they showed clear movement towards an asymmetric (and very inequitable) pure Nash equilibrium of the game. These findings support distinctive predictions of evolutionary game theory.     

Grants-in-aid and election outcomes in recipient jurisdictions: The impact of EU funds on mayoral elections in Poland

We analyze the impact of EU funds on the outcomes of Polish mayoral elections in 2010 and 2014. We employ an instrumental variable approach to account for the endogeneity of EU funds. Our instruments approximate the availability of EU funds. The first instrument builds on the alignment of the local electorate with the regional donor government. The second instrument uses the funds spent in municipalities in the same sub-region dropped from the sample because the mayors do not run again. We do not find convincing empirical evidence in favor of the notion that EU funds increase the vote shares of mayors. We go on to test whether the electoral effect of EU funds is conditional on the attitude towards the donor institution among the population in the recipient population. This conditional factor is under-researched and politically virulent – given citizens’ skepticism towards the EU that Krastev (2017) describes for Central and Eastern European EU members. Our results are affirmative. EU funds increase the vote shares of mayors in municipalities where Krastev (2017) predicts the degree of EU skepticism to be low while they are not found to do so in municipalities where EU skepticism is predicted to be widespread. These results suggest that citizens’ attitudes towards the donor of vertical grants determine the political gains of recipients from using them.     

考虑终止权的两阶段研发投资激励和合同设计

针对产品研发过程中的投资激励问题,分别建立了存在终止权和不存在终止权两种情况下的两阶段研发投资决策模型,并利用逆向归纳法讨论了委托方的偿付合同设计。研究结果表明:当第一阶段的研发结果为高质量时,代理人在第二阶段的投资积极性更高,代理人在第一阶段的投资水平和委托方支付的最优偿付都随着低质量时研发成功的比例系数而单调递减;研发活动的终止威胁导致代理人的投资积极性降低;在一定范围内,或有终止权偿付合同能够缓解信息不对称时的投资不足问题、提高双方的研发合作效率。     

The Most Beautiful Variations on Fair Wages and the Phillips Curve

This paper explores the connection between inflation and unemployment in two different models with fair wages in both the short and the long runs. Under customary assumptions regarding the sign of the parameters of the effort function, more inflation lowers the unemployment rate, albeit to a declining extent. This is because firms respond to inflation—which spurs effort by decreasing the reference wage—by increasing employment, thus maintaining the effort level constant as implied by the Solow condition. A stronger short‐run effect of inflation on unemployment is produced under varying as opposed to fixed capital, given that in the former case the boom produced by a monetary expansion is reinforced by an increase in investment. Therefore, I provide a new theoretical foundation for recent empirical contributions that find negative long‐ and short‐run effects of inflation on unemployment.     

N‐FIRM OLIGOPOLY WITH GENERAL ISO‐ELASTIC DEMAND

In this note oligopoly with iso‐elastic demand is analysed. Unlike previous studies we consider general iso‐elastic demand rather than the case of unit elasticity. An n‐firm Nash‐Cournot equilibrium for the case of heterogeneous constant marginal costs is derived. The main result is a closed‐form solution that shows the dependency of the equilibrium on the elasticity of demand and the share of industry costs. The result has applications to a wide range of areas in oligopoly theory by allowing comparisons across markets with different elasticities of demand.     

Revenue equivalence in asymmetric auctions

The Revenue Equivalence Theorem is generalized to the case of asymmetric auctions in which each player's valuation is drawn independently from a common support according to his/her distribution function.     

Bank incentives, contract design and bank runs

We study the Diamond-Dybvig [Bank runs, deposit insurance, and liquidity, J. Polit. Econ. 91 (1983) 401-419] model as developed in Green and Lin [Implementing efficient allocations in a model of financial intermediation, J. Econ. Theory 109 (2003) 1-23] and Peck and Shell [Equilibrium bank runs, J. Polit. Econ. 111 (2003) 103-123]. We dispense with the notion of a bank as a coalition of depositors. Instead, our bank is a self-interested agent with a technological advantage in record-keeping. We examine the implications of the resulting agency problem for the design of bank contracts and the possibility of bank-run equilibria. For a special case, we discover that the agency problem may or may not simplify the qualitative structure of bank liabilities. We also find that the uniqueness result in Green and Lin [Implementing efficient allocations in a model of financial intermediation, J. Econ. Theory 109 (2003) 1-23] is robust to our form of agency, but that the non-uniqueness result in Peck and Shell [Equilibrium bank runs, J. Polit. Econ. 111 (2003) 103-123] is not.     

Quality growth: New evidence from Japanese household-level data

This article estimates quality Engel curves for 52 durable goods used to measure quality upgrading in the Japanese CPI between 1990 and 2004. The estimation shows that the unmeasured quality growth is averaging less than 0.1% annually.