On efficiency of the ratio estimator

Summary The exact mean square error for the ratio estimator of a finite population total based on simple random sampling without replacement is shown to have an expected value less than that of the variance of the ratio estimator based on Midzuno’s scheme, under a usual super-population model.     

Tariffs, licensing and market structure

This paper challenges the conventional wisdom that exclusive owners of an advanced technology are always better off when producing as a monopolist than when competing against another firm. Competition against a less-efficient firm weakens the power that a host country can exert on the incumbent in the form of its tariff policy. We show that this gives a motive for a monopolist to license its technology to another foreign firm. A host country gains more from increased competition if it can induce the foreign incumbent to transfer technology to the host country firm. We show that the host country can do so by tariff commitment. We also discuss the implications of bargaining under licensing and Bertrand competition in the product market. Hence, this paper qualifies and extends the recent work of Kabiraj and Marjit [Protecting consumers through protection: The role of tariff-induced technology transfer. European Economic Review 47, 113-124].     

An experimental study of strategic information transmission

Summary We examine strategic information transmission in an experiment. Senders are privately informed about a state. They send messages to Receivers, who choose actions resulting in payoffs to Senders and Receivers. The payoffs depend on the action and the state. We vary the degree to which the Receivers' and the Senders' preferences diverge. We examine the relationship between the Senders' messages and the true state as well as that between actions and the true state and contrast the ability of different equilibrium message sets to explain the data.When preferences are closely aligned Senders disclose more. We assess two comparative statics: (i) as preferences diverge, state and action are less frequently matched, and (ii) messages tend to become less informative as preferences diverge. The first result is weakly confirmed for adjacent treatments but is considerably stronger when non-adjacent treatments are compared. We find that as preferences diverge messages become less informative. While the ex-ante Pareto-optimal Bayesian Nash Equilibrium does not explain our conditions, the equilibrium message sets supported by the data are similar to the ex-ante Pareto Optimal message sets.We would like to thank seminar participants at the Economic Science Association meetings, the University of Iowa, the University of Minnesota, Northwestern University and the Society for the Advancement of Economic Theory meetings for their comments. We would like to thank Beth Allen, Joyce Berg, Robert Forsythe, Yong-Gwan Kim, Antonio Merlo, Leonard Mirman, In-Uck Park, Charles Plott, Jennifer Reinganum and an anonymous referee for their suggestions. Financial support from the Accounting Research Center at the University of Minnesota is also acknowledge.     

Geography,Informal Information Flows and Mutual Fund Portfolios

This paper explores how informal information channels impact mutual fund performance. We measure the strengths of two location‐based information channels: 1) information transfers among fund managers (fund‐fund links) and 2) transfers between managers and the companies in which they invest (fund‐company links). We find that each channel increases investment performance in the absence of the other, but decreases it when acting in combination. Stock selection associated with the presence of one channel, but the absence of the other, earns positive future returns. Our results indicate that the economic benefits of informal information channels depend critically on the nature of their interactions.     

Does technology licensing matter for privatization?

In mixed oligopolies, technology licensing from a cost‐efficient firm to a cost‐inefficient firm has been widely observed. This paper examines the relationship between privatization and licensing (by public or private firms) with the consideration of either a domestic or a foreign private firm. We find that (a) in the case of a domestic private firm, public licensing facilitates privatization, but private licensing hinders privatization; (b) in the case of a foreign private firm, both public and private licensing facilitate privatization. Our results yield important policy implications on privatization.     

Profit Raising Entry

Common wisdom suggests that entry reduces profits of incumbent firms. On the contrary, we demonstrate that if the incumbents differ in marginal costs and the entrants behave like Stackelberg followers, then entry may benefit the cost efficient incumbents while hurting the cost inefficient ones. And the total outputs of all incumbents may be higher under entry.     

Productivity growth in Indian agriculture: is there evidence of convergence across states?

This paper explores the question of convergence in total factor productivity (TFP) in agriculture across fourteen major agricultural states of India. Using a Törnqvist–Theil index for TFP growth for the period 1973–1993, we find no evidence to support convergence to a single TFP level (σ‐convergence). After grouping the various states on the basis of their productivity performance, we find that the high‐performing states show a gradual movement towards the trend, whereas the low‐performing states generally show more volatility. Testing for long‐run convergence in levels of agricultural productivity, we find evidence of conditional beta‐convergence after controlling for state‐specific factors and idiosyncratic year‐specific volatility. The results are robust to alternative specifications of tests of unit root in panel data developed recently.     

Host-country policy – commitment or no-commitment: a theoretical analysis

This paper develops a model of foreign entry strategy and examines welfare of the host-country under two situations - (i) where host-country government commits to the tax policy, (ii) where host-country government does not commit to the tax policy. It turns out that under the non-committed government policy the foreign firm does not prefer to hold equity share in the domestic project. The host-country welfare, however, is more under the committed government policy than the non-committed government policy when the foreign firm has sufficiently higher bargaining power. The possibility of technology choice by the foreign firm reduces the range of bargaining power of the foreign firm over which the host-country welfare is more under the committed policy compared to the non-committed policy.     

Privatization, Incentive Delegation and Foreign Direct Investment

Despite the empirical relevance, the privatization literature paid little attention to the effects of the owner-manager relationship and the implications of foreign direct investment (FDI). We focus on these aspects, and show the relationship between privatization and greenfield FDI when the owners design strategic managerial incentive contracts. We show that there is complementarity between privatization and greenfield FDI. Whether incentive delegation (compared to no incentive delegation) increases the degree of privatization in the presence of FDI is ambiguous; it depends on whether the degree of privatization that attracts FDI is higher or lower than the degree of privatization that maximizes domestic welfare under FDI.     

The Asymptotic Optimality of Residual Income Maximization

Residual income subtracts from operating income an interest charge for invested capital. Residual income can be calculated each period from current accounting information, unlike discounted cash flow (DCF), which requires the knowledge of future cash flows. This paper provides a normative justification for residual-income maximization by showing that if investment decisions are made myopically each period to maximize residual income, the resulting path asymptotically maximizes discounted cash flow. Thus, under the assumptions of the model, residual-income maximization is a heuristic that leads to the long-run DCF-optimum.