Somatic distance,trust and trade

Somatic distance, or differences in physical appearance, proves to be extremely important in the gravity model of bilateral trade in conformity with results in other areas of economics and outside in the social sciences. This is also true independently of survey evidence about bilateral trust. These findings are obtained in a sample of the 15 members of the European Economic Area in 1996. Robustness tests also show that somatic distance, as well as co‐ancestry, has a more reliable influence on bilateral trade than the other customary cultural variables. The article finally discusses the interpretation and breadth of application of these results.     

Optimal Patent Protection in a Two-Sector Economy

This article addresses the issue of optimal patent protection in an economy with a downstream and an upstream sector. The key insight is that higher patent protection in the downstream sector raises the incentives of agents to do R&D in that sector but discourages innovation in the upstream sector because of a market size effect. Hence, higher patent protection in the upstream sector accelerates growth whereas higher patent protection in the downstream sector slows it down. If some innovation is socially desirable, optimal patent protection is necessarily higher in the upstream than in the downstream sector.     

Women's relative wage rate in The Netherlands, 1950–1983: A test of alternative discrimination theories

Summary This article presents the results of an inquiry into the relationship that is to be expected on theoretical grounds between women's wage rate compared to men's on the one hand and some macroeconomic variables on the other. Becker's discrimination theory is confronted with alternative theories. On the base of data for the Netherlands the authors investigate which theory is most suited to explain the development of women's relative wage rate for the period 1950–1983. They conclude that the results of the empirical analysis predominantly support Becker's theory.The authors wish to thank Mr. R. Haagsma and Professor C.K.F. Nieuwenburg for their comments on an earlier draft of this article. Furthermore, they are grateful to Miss M.J.R. Key for computational assistance.     

UNIT MANAGEMENT BUYOUTS, STOCKHOLDER WEALTH, AND SELLING FIRMS' CHARACTERISTICS

Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm's difficulties so they do not pay as large a premium for the assets. Since the unit managers technically are employed by the selling firm shareholders, their bargaining to achieve a better price is an agency cost. Finally, selloff frequency does not affect seller abnormal returns.     

VARIANCE BOUND TESTS OF BOND MARKET EFFICIENCY

In this paper we examine variance bound tests of the joint hypothesis that (1) bond markets are efficient and (2) the term structure is determined by the expectations hypothesis. Both the Singleton and Shiller tests are shown to be seriously biased toward rejecting the joint hypothesis in finite samples. Flavin's test is unbiased but has a very high variance leading to many false rejections of the joint hypothesis. When corrected as suggested by Flavin, Shiller's test is unbiased and has a relatively low variance. Unfortunately, it is also sensitive to measurement error.     

Market efficiency and cointegration: Some evidence in Pacific-Basin black exchange markets

This paper investigates the efficiency of the black exchange markets in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand. The study applies unit root and cointegration tests to examine black exchange market efficiency of Pacific-Basin countries. The generating process of black exchange rates appears to be a random walk. This is consistent with Gupta (1981) and other foreign exchange rate unit root test studies. Johansen cointegration tests are performed for these black exchange markets together with Japan and Singapore. The results suggest that there is at least one unit root among the black market exchange rates. Hence, black exchange markets are not collectively efficient.     

Interdisciplinary economics

Summary Starting from Robbins and Hennipman and with the help of Becker and Lindenberg a theoretical framework has been constructed within which the strong points of economics and sociology are combined,viz,. the formal but relatively bare-bones modelling of economics and the often so much richer, in terms of social content, analysis of sociology. This theoretical framework also appears to enable more balanced analyses of the effectiveness and efficiency of legislation and regulation than the kind of law and economics so much in fashion at the moment, which is often not devoid of economism and in whichhomo econornicus still all too often figures as the prototype of man.(Economic Institute/Centre for Interdisciplinary Research on Labour Market and Distribution Issues (CIAV)); Associate of The Netherlands Interdisciplinary Demographic Institute (NIDI) in The Hague and the Interuniversity Center for Social Science Theory and Methodology (ICS). This article is an adapted version of my inaugural lecture.     

Trust,terrorism, and technology

The development of civilization implies an evolution of complex trust mechanisms which integrate the social system and form bonds which allow individuals to interact, even if they are strangers. Key elements of trust are predictability of consequences and an evaluation of consequences in terms of self-interest or values. Values, ethics, and norms enhance predictability. The terrorist introduces an unpredictable event which has negative consequences, thus destroying trust. However, terrorist-like situations occur in day-to-day activities. Technology itself makes the world more interdependent and less predictable. Furthermore, technological accidents and disasters, which are also unpredictable and negative, may prompt individuals to perceive technology as if it were a terrorist. Louis H. Bluhm is Associate Professor of Sociology at the Mississippi State University. He has written several articles which have been published in Rural Sociology, and with P. M. Shingi he has written a chapter in a book.