Unilateral and bilateral trade policies for a minimum-wage economy

This paper considers optimal commercial policy for a trading economy which departs from neo-classical characteristics only in that a minimum-wage constraint gives rise to unemployment. Although for a flexible-wage fully employed economy the Baldwin envelope yields dominant domestic production-cum-trade possibilities, unilateral imposition of an optimum tariff is shown not necessarily to be optimal commercial policy for the minimum-wage economy. Rather, there exists an envelope, derived from foreigners' trade indifference and attained via bilateral trade policy, which dominates the Baldwin envelope when the optimum tariff is zero (as Brecher has shown it can be for a minimum-wage economy), and can still yield superior production-cum-trade possibilities when the optimum tariff is non-zero.     

Corporate political strategies and firm performance: indications of firm‐specific benefits from personal service in the U.S. government

Firms employ a variety of political strategies (e.g., lobbying, contributions) in an attempt to gain influence or access to the public policy process. A variety of benefits may accrue to firms that are successful in creating a linkage with the government: information, access, influence, reduced uncertainty and transaction costs, etc. However, the direct benefits of such strategies are difficult to observe. One political strategy is studied here—personal service (having a firm representative serve in a political capacity). Event‐study methodology results show that such linkages with the government positively affect firm value. These findings indicate that firm‐specific benefits may result from political strategies. Copyright © 1999 John Wiley & Sons, Ltd.     

Enduring rents

Rent seeking is often studied with reference to a contemporaneous rent evaluated at a point in time. We study the social cost of rent seeking when rents endure over time, but may have to be re-contested because of imperfect rent protection, or may disappear because of deregulation. The present value of a contested rent measures the social cost of rent seeking, irrespective of imperfect rent protection and the prospect of deregulation. Rent seeking is discouraged by the inability of governments to commit to protect rents and by their inability to commit to rent-generating regulations and policies. Moreover, lasting deregulation can preempt a substantial fraction of the potential rent seeking cost.     

The Resource Dependence Role of Corporate Directors: Strategic Adaptation of Board Composition in Response to Environmental Change

Most research on corporate directors has focused on two roles: agency and resource dependence. While these two roles are theoretically and practically distinct, previous research has used the same classification scheme for measuring board composition regardless of role examined. Our paper examines the resource dependence role of directors and posits that the widely used insider/outsider categorizations do not adequately capture this role of directors. A taxonomy of directors is presented specifically for studying the resource dependence role. We then apply the taxonomy to a sample of US airline firms undergoing deregulation, and examine how board composition changes parallel the changing resource dependence needs of the firms. We conclude that the board's function as a link to the external environment is an important one, and that firms respond to significant changes in their external environment by altering board composition.     

Healthier futures: primary care nurses’ food knowledge and patient advice

In Finland there are valid questions being asked about the sustainability of the current provision in state healthcare systems. Structurally, lower birth rates and greater longevity mean that populations age and present the challenge of chronic illness management in later life for a larger proportion of the population. Culturally, some 50 years after the introduction of a state healthcare system, ageing populations will have greater expectations of service quality than their predecessors. Paradoxically, they will also have a greater engagement with lifestyles which themselves will bring new challenges to long‐term health status. There is no single solution to the complex problem of service sustainability but undoubtedly health education provides some potential to limit future demands. Diet‐related illness and incapacity are specific health challenges for the coming decades but the problems can be substantially reduced by changing current behaviour. To make such changes possible, knowledge needs to be communicated effectively in terms of simplicity, accuracy and with appropriate timing. Health education can make a major contribution to service sustainability. This paper reports a study of primary care nurses (n = 50) in the Tampere area and examines their capacity to provide healthy eating advice. In this sample, nurses often demonstrated good levels of nutritional knowledge on which to base patient advice, but there was considerable variation. Arguably, focused in‐service training would provide updating on theory and practice for more consistent advice and better prospects for behavioural change.     

Foreign Investment and Endogenous Protection with Protectionist Quid Pro Quo

The literature on quid pro quo foreign direct investment describes how unwarranted investment may be undertaken because of the endogeneity of trade policy. The quid pro quo is that foreign producers, who are exporters to the host economy, invest in return for a liberal trade policy. We describe converse circumstances. The nexus between foreign investment and endogeneity of trade policy is implicit (not explicit as in quid pro quo investment), and a government with socially correct objectives (perhaps imposed by international-agency conditionality) wishes (i) to privatize a domestic firm by sale to a foreign investor who can provide technology improvement for domestic production and (ii) to pursue a liberal trade policy. The government is electorally constrained by needs of political popularity. The outcome is that efficient private investments may not be undertaken—in contrast with the quid pro quo case where in efficient investments are undertaken. While our model is general, the conditions we describe appear to be in particular present in post-socialist economies. Our model offers a contributing explanation for the slow pace of progress in many such economies, which rely on foreign technological transfer to improve the technology and product quality of post-socialist industry, but fail to receive the requisite foreign investment despite governments' good intentions.     

Trade liberalization through asset markets

Political-economy expositions of trade policy have traditionally described asset or factor ownership as not subject to change. Asset markets, however, allow individuals to change the composition of income sources. We consider an economy with stochastic productivity to show how the equilibrium composition of asset portfolios influences individual attitudes toward free trade. The model links financial market completeness and trade liberalization in the second half of the 20th century and provides a contributing answer to why governments in poorer countries without well-developed financial markets have failed to liberalize trade.     

A theory of permissible illegal immigration

In many countries laws are not enforced against visibly present illegal immigrants. The visibly present illegal immigrants also tend to be concentrated in particular sectors. We explain such permissible illegal immigration in an endogenous-policy model where selective sector-specific illegality transforms illegal immigrants from non-sectorally specialized to sector-specific factors of production. Under initial conditions where no immigrants are present, the median voter opposes immigration. When, however, a population of illegal immigrants has accumulated, ongoing illegal immigration becomes an endogenous equilibrium policy, at the same time that a majority of voters opposes legal immigration and opposes amnesty that would legalize the immigrants' presence. We also establish a basis for domestic voters preferring that illegal immigrants be employed in service rather than traded-goods sectors.