B Y the spring of I958 the International Bank for Reconstruction and Development, as a part of its work in aiding underdeveloped countries, had sent major economic missions to fifteen countries: British Guiana, Ceylon, Colombia, Cuba, Guatemala, Iraq, Jamaica, Jordan, Malaya, Mexico, Nicaragua, Nigeria, Surinam, Syria, and Turkey.' published reports of these missions comprise the largest single collection of information extant on the problems and characteristics of underdeveloped economies. A careful reader of these reports is impressed with the wealth of detail and the obviously painstaking care with which the material has been assembled. Since more than seven years have now elapsed since the first report, it is appropriate to review this material and to ask how much has been learned about the process of development and also how successful the mission reports have been in diagnosing the key issues and in establishing development programs. What elements might we look for or expect to find in reports of this kind? First, since programs are dependent on good statistics, both to provide a basis on which to make decisions and to evaluate the effects of decisions once taken, some careful attention to the establishment of an effective social accounting system is to be expected. Second, the major outlines of a development program are required: the targets, the operational policies to achieve the objectives, the calculations of probable outcomes, etc. Flexibility is a virtue, but the outline should be internally consistent and unambiguous in showing the connection between the objectives and the means to those objectives. Third, in order for the programs to be implemented, a priority system for projects must be carefully delineated, and it must be shown that the priorities are consistent with fulfilling the development objectives. Fourth, in terms of the paths to development the real alternatives open to the country should be carefully surveyed, including estimation of the pay-offs and costs from alternative courses of action. Fifth, the price effects of development programs, probable inflationary pressures, and the effects on the balance of payments and the capacity to import require analysis. These are major elements which one might expect to find in a good economic development analysis; the list could be extended. In the remainder of this paper it is argued that the mission reports have covered these points inadequately, not at all, or ambiguously, with the result that the reports are unsatisfactory as economic analyses and unsuitable as guides to development programs. Before proceeding to the substantive argument, however, one qualification must be noted. These reports were prepared at different times, by different groups of people, for different countries. They do not all share the same faults or the same virtues. ensuing discussion should make it amply clear that the above criticisms do not apply in toto to all the reports, nor to any one report in particular. * This is a condensation of a report titled The Failures of the World Bank Missions, RAND Corporation, P-I4II, June 24, I958. I am indebted to my research assistant Mrs. Marjorie Hald for her help in surveying the reports. Dr. H. J. Barnett and Dr. Charles Wolf read the original manuscript and made many helpful comments. 'In chronological order the reports on these countries are: Basis of a Development Program for Colombia (I950); Economic Development of Guatemala (I95I); Economy of Turkey (I95I); Report on Cuba (I95I); Surinam: Recommendations for a Ten Year Development Program (I952); Economic Development of Jamaica (I952); Economic Development of Iraq (I952); Economic Development of Ceylon (I953); Economic Development of British Guiana (I953); Economic Development of Nicaragua (I953) ; Economic Development of Mexico (I953); Economic Development of Malaya (I955); Economic Development of Syria (I955); Economic Development of Nigeria (I955); Economic Development of Jordan (I957). Reports on British Honduras, Uruguay, and Somaliland have been issued in mimeograph form, but they are specialized and are not considered here. In June I957, a mission was sent to Thailand; although somewhat different in intent from previous missions, it will issue a report at some time. A summary of some of these reports appears in J. Spengler, IBRD Mission Economic Growth Theory, American Economic Review, XLIV (May I954), 583-99. Hereafter in this paper the reports will be cited by the country name.

The purpose of this paper is to model the legal exposure of auditors and to study the extent to which limitations on this exposure affect auditors' chosen audit intensity and collusion with management. Résumé. L'article qui suit a pour but de modéliser les risques auxquels sont exposés les vérificateurs de par la loi et de voir dans quelle mesure les limites de ce risque influent sur l'intensité de la vérification dont décident les vérificateurs et sur la collusion avec la direction.

[Miller and Modigliani (1961) show that in perfect and complete financial markets a firm's value is unaffected by its dividend policy. Much of the more recent research has demonstrated that dividend policy becomes important in the presence of taxation, asymmetric information, incomplete contracts, institutional constraints, and transaction costs. By examining the effects of dividend policies on 475 British firms existing between 1895 and 1905, and consequently operating in an environment of very low taxation with an absence of institutional constraints, we find strong support for asymmetric information theories of dividend policy, and little support for agency models.]

We investigate the linkage between changes in firm value and changes in capital allocation efficiency resulting from dismantling internal capital markets via spinoffs. We find no evidence of wholesale misallocation of capital pre-spinoff. On the average, excess value increases following spinoffs. Furthermore, changes in excess value are positively linked to changes in capital allocational efficiency following spinoff. We find that spinoff announcement returns are greater (smaller) when the parent allocates capital to the unit to be spun off in a seemingly less (more) efficient manner. Divested division capital expenditures move toward industry levels after spinoff, regardless of their relative investment opportunities.

This paper demonstrates that the behavior of the conventional Phelps-Taylor model of overlapping wage contracts stands in stark contrast with important features of U. S. macro data for inflation and output. In particular, the Phelps-Taylor specification implies far too little inflation persistence. We present a new contracting model, in which agents are concerned with relative real wages, that is data-consistent. In a specification that nests both models, we resoundingly reject the conventional contracting model, but cannot reject the new contracting model.

The authors extend E. Maskin's results on Nash implementation. First, they establish a condition that is both necessary and sufficient for Nash implementability if there are three or more agents (the case covered by Maskin's sufficiency result). Second--and more important--they examine the two-agent case (for which there existed no general sufficiency results). The two-agent model is the leading case for applications to contracting and bargaining. For this case, too, they establish a condition that is both necessary and sufficient. The authors use their theorems to derive simpler sufficiency conditions that are applicable in a wide variety of economic environments. Copyright 1990 by The Econometric Society.

This paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules. It is shown that, in many economic environments, virtually an y choice rule can be implemented. To illustrate the power of this approach, the paper discusses a number of models in which it is possible to implement the first-best (although it wouldn't have been possible to do so without using stage mechanisms). The diversity of these models suggests that subgame perfect implementation may find wide application. Copyright 1988 by The Econometric Society.

We address the monopoly problem of designing and pricing a product line of goods distinguished by different quality and warranty levels. Consumers vary in their evaluations of these attributes, so that the problem is one of screening. It is sufficiently complex that the local approach commonly used does not work. Instead, we use new techniques for dealing with incentive constraints between nonadjacent consumer types. These techniques allow us to characterize optimal allocations that may not be monotonic. In particular, although the more eager types of buyer do pay higher prices and yield the monopoly higher profit, they may receive lower quality or lower warranty coverage. We find preference restrictions that restore monotonicity: concave risk tolerance implies that warranty coverage increases in type, and constant absolute risk aversion implies that quality increases in type.

Although industrialized countries continue to have business cycles, such cycles have changed significantly in character. In what follows I shall describe some of these changes and point to their possible implications for research and policy. Perhaps the most obvious change is that business recessions-periods of actual decline in economic activity -have become less frequent, shorter and milder. Interruptions to a steady rate of growth are more often simply slowdowns rather than actual declines in aggregate economic activity. This kind of shift can be observed in the business recessions identified by the National Bureau of Economic Research. On the whole, the five recessions of 194870 were shorter than the five recessions of 1920-38, produced smaller declines in output, income and employment, and were less widespread in impact. But recent recessions have been accompanied by higher rates of unemployment than might have been expected in view of other evidence attesting to their mildness. One of the factors underlying this shift toward recessions of lesser severity, and one reason why it may be expected to persist, is the trend in the industrial composition of employment. Industries that normally experience larger percentage reductions in employment when recession hits are less important in the overall economic picture nowadays, while industries that often continue to expand right through recession have become more important. Of the eleven major industrial sectors that account for total employment, seven experienced reductions averaging three percent or more during the five recessions of 1948-70 (Table 1). These seven sectors include manufacturing of durable goods like autos and appliances, with an average drop of 12 percent; mining, with an average drop of 10 percent; transportation and utilities, with an average drop of 5 percent; and farming, manufacturing of nondurable goods like textiles, construction, and federal employment, with drops of 3 to 4 percent. Employment in these seven sectors constituted more than half of total employment in 1955, but by 1972 their share had declined to about two-fifths. The other four major sectors--wholesale and retail trade; services; finance, insurance, and real estate; and state and local government -experienced much smaller declines or actual increases in employment during the five most recent recessions. They accounted for slightly less than half of total employment in 1955; by 1972 they accounted for three-fifths of the total. In short, the industries that have coiitributed most to reduced employment during recession have shown little or no growth during the past fifteen years or so, while those that have contributed least to recession have grown much faster. The added stability has reduced the impact of recession upon total employment by something like one-third. If the 1955 distribution of employment among the eleven sectors had prevailed in all five recessions of * Vice-President/Research, National Bureau of Economic Research, Inc., and Senior Research Fellow, Hoover Institution, Stanford University.