Dancing to the Donors' Tune? Policy Choice in Aid‐Dependent Countries

Current aid rhetoric emphasizes the selective allocation of otherwise unconditional funds in support of the recipients' own plans, in contrast to the old donor practice of bundling money and policies. I show that when recipients have private information, policies reflecting their preferences and knowledge might result in such a regime. However, generous transfers can also induce them to conform to the outcome‐oriented expectations of donors at the expense of lower aid impact. Such behaviour is consistent with an abundance of case‐study evidence. Moderate disagreements over what the optimal policy is could actually produce better results. Certain forms of both donor competition and coordination might also eliminate this distortion, while a donor concern for need only removes incentives for aid‐seeking in the least needy countries. In summary, optimal aid policies are highly context‐specific, and donors should thus concentrate their efforts to practise more informed selectivity.     

International Capital Flows in the Model with Limited Commitment and Incomplete Markets

Recent literature has proposed two alternative types of financial frictions, i.e., limited commitment and incomplete markets, to explain the empirical patterns of international capital flows between developed and developing countries in the past two decades. This paper integrates these two frictions into a two-country overlapping-generations framework to facilitate a direct comparison of their respective effects. In our model, limited commitment distorts the investment made by agents with different productivity, which creates a wedge between the interest rates on equity capital vs. credit capital; while incomplete markets distort the investment among projects with different riskiness, which creates a wedge between the risk-free rate and the mean rate of return to risky capital. We show that the two approaches are observationally equivalent with respect to their implications for international capital flows, production efficiency, and aggregate output.     

Investigating the gap between citizens' sustainability attitudes and food purchasing behaviour: empirical evidence from Brazilian pork consumers

Consumers worldwide are increasingly concerned with sustainable production and consumption. Recently, a comprehensive study ranked 17 countries in regard to their environmentally friendly behaviour among consumers. Brazil was one of the top countries in the list. Yet, several studies highlight significant differences between consumers' intentions to consume ethically, and their actual purchase behaviour: the so‐called ‘Attitude‐Behaviour Gap’. In developing countries, few studies have been conducted on this issue. The objective of this study is therefore to investigate the gap between citizens' sustainability‐related attitudes and food purchasing behaviour using empirical data from Brazil. To this end, Brazilian citizens' attitudes towards pig production systems were mapped through conjoint analysis and their coexistence with relevant pork product‐related purchasing behaviour of consumers was investigated through cluster analysis. The conjoint experiment was carried out with empirical data collected from 475 respondents surveyed in the South and Center‐West regions of Brazil. The results of the conjoint analysis were used for a subsequent cluster analysis in order to identify clusters of Brazilian citizens with diversified attitudes towards pig production systems, using socio‐demographics, attitudes towards sustainability‐related themes that are expected to influence the way they evaluate pig production systems, and consumption frequency of various pork products as clusters' background information. Three clusters were identified as ‘indifferent’, ‘environmental conscious’ and ‘sustainability‐oriented’ citizens. Although attitudes towards environment and nature had indeed an influence on citizens' specific attitudes towards pig farming at the cluster level, the relationship between ‘citizenship’ and consumption behaviour was found to be weak. This finding is similar to previous research conducted with European consumers: what people (in their role of citizens) think about pig production systems does not appear to significantly influence their pork consumption choices. Improvements in the integrated management of this chain would better meet consumers' sustainability‐related expectations towards pig production systems.     

Empirical determination of aggregate demand and supply curves: The example of the RWI Business Cycle Model

Macroeconometric models are often criticised for being too complex and difficult to read in theoretical terms. To overcome these difficulties, Hickman suggested the calculation of a model's implicit aggregate demand/supply (AD/AS) structure. The method helps to understand models and their main properties in theoretical terms and facilitates detailed model comparisons. This paper uses the AD/AS–IS/LM apparatus to analyse the simulation properties of the RWI (Rheinisch-Westfälisches Institut für Wirtschaftsforschung) Business Cycle Model, a medium-sized short-term macroeconometric model for Germany. The results confirm theoretical expectations for AD and AS elasticities and reveal particular reactions linked to peculiar model specifications such as an endogenous government sector. The results are also much in line with a previous study in a multi-country model context.     

Exchange rate determination: a theory of the decisive role of central bank cooperation and conflict

Economists’ faith that variable exchange rates benevolently equilibrate has been empirically disconfirmed. That faith is here tackled at its theoretical core with an exchange rate model that although ultra abstract, includes the undeniable fundamentals of market power and differential goals of central bankers and large-scale private players. It permits a game theoretic analysis under the assumption that all agents maximize their payoffs. The paper then relaxes the assumption of maximising agents, allowing for a more complex and thus realistic second version of the model that is interpretable within SKAT, the Stages of Knowledge Ahead Theory of risk and uncertainty. In an experimental setting, this second version of the model points to: a) the inability of agents in central banks, governments and the private real and financial sectors to operate in maximising ways; b) destructive central bank conflict; and c) the widely discrepant outcomes arising from the dynamics of individual personality differences. The paper’s theoretical and empirical findings thus both point to the merits of a single world currency.     

Organizational dissidence: The case of whistle-blowing

Research on whistle-blowing has been hampered by a lack of a sound theoretical base. In this paper, we draw upon existing theories of motivation and power relationships to propose a model of the whistle-blowing process. This model focuses on decisions made by organization members who believe they have evidence of organizational wrongdoing, and the reactions of organization authorities. Based on a review of the sparse empirical literature, we suggest variables that may affect both the members' decisions and the organization's responses.     

Reforming Budgetary Institutions in Latin America: The Case for a National Fiscal Council

Latin America's economies have made tremendous improvements in recent years. Following the lost decade of the 1980s, economic growth has resumed. But the fruits of this progress remain to be consolidated. The political consensus supporting reform is fragile, and the economies of the region are still susceptible to destabilizing shocks, as recent events have underscored. Even well-devised economic policy strategies can be thrown off course by disturbances. This article proposes an institutional reform—a National Fiscal Council—designed to allow Latin American countries to break out of this vicious circle.