Do We Really Know That the WTO Increases Trade? Comment by Michael Tomz, Judith L. Goldstein and Douglas Rivers. Published in volume 97, issue 5, pages 2005-2018 of American Economic Review, December 2007
“More than half the people of the world are living in conditions approaching misery … For the first time in history, humanity possesses the knowledge and the skill to relieve the suffering of these people. ” Harry S. Truman, Inaugural Address, 1949 “We have the opportunity in the coming decade to cut world poverty by half. Billions more people could enjoy the fruits of the global economy…And for the first time, the cost is utterly affordable. ” United Nations Millennium Project, 2005 The repetition of virtually the same language after more than half a century and $2.5 trillion worth of development assistance (in today’s dollars) is not encouraging for its promise to achieve the reduction of poverty and misery. This paper argues that development assistance as originally conceived and still largely conceived today, was a mistake. This is not based on any original research undertaken for this paper, it is just drawing the natural implication of a large body of literature quickly surveyed here. 1 The conclusion of the paper will argue that foreign aid could still accomplish some good things for poor people, even if it cannot fulfill the purpose of “development assistance.”
A new 45-industry, 23-year, dataset for Japan is used to investigate the duration of industry leadership. A new scaling relationship linking a firm's current market share with the standard deviation of market share changes is reported. This relationship discriminates in a powerful way between rival candidate theoretical models of market share dynamics. It also makes possible a useful simplification in testing a benchmark model of a Markovian kind. Relative to that model, it is found that at least some industries display a “Chandlerian” bias toward longer durations of leadership than would be present in the benchmark model.
The War for Independence (1775-1783) left the federal government deeply in debt. The spoils from winning that war also gave it an empire of land. So, post-1783 was the federal government solvent, or at what point did it become solvent? Did winning the war, in effect, pay for the war? While these questions have not been addressed before, knowing the answer is important for understanding why a particular method was chosen for funding the national debt, how the new Constitution adopted by Congress in 1789 affected public finance, and how this new untried government - that was deeply in debt and had been in default on this debt for half a decade after independence - could garner an excellent credit rating by the early 1790s. Evidence is gathered on the government's liabilities and assets to estimate its net worth and so answer these questions.(This abstract was borrowed from another version of this item.)
This paper provides a model of the interaction between risk-management practices and market liquidity. On one hand, tighter risk management reduces the maximum position an institution can take, thus the amount of liquidity it can offer to the market. On the other hand, risk managers can take into account that lower liquidity amplifies the effective risk of a position by lengthening the time it takes to sell it. The main result of the paper is that a feedback effect can arise: tighter risk management reduces liquidity, which in turn leads to tighter risk management, etc. This can help explain sudden drops in liquidity and, since liquidity is priced, in prices in connection with increased volatility or decreased risk-bearing capacity.
We investigate the impact of vertical mergers on upstream firms' ability to collude when selling to downstream firms in a repeated game. We show that vertical mergers give rise to an outlets effect: the deviation profits of cheating unintegrated firms are reduced as these firms can no longer profitably sell to the downstream affiliates of their integrated rivals. Vertical mergers also result in an opposing punishment effect: integrated firms typically make more profit in the punishment phase than unintegrated upstream firms. The net result of these effects in an unintegrated industry is to facilitate upstream collusion. We provide conditions under which further vertical integration also facilitates collusion.
Politics has always attracted the attention of the media, citizens organizations, and the general public. Recent years have also witnessed a global process of “spectacularization” of politics, which, among other things, has resulted in a dramatic increase in the amount of information available about many facets of political life. Politicians, for example, are public figures, and much of what they do is now the object of close public scrutiny. Nevertheless, the extent to which various aspects of what goes on within the political sector are observable from the outside, which we refer to as the transparency of politics, still varies a great deal across countries. For example, while in some countries all individual votes in the legislature are part of the public record (e.g., the United States and Sweden), this is not the case in others (e.g., Italy and Spain). Also, while many democracies have adopted disclosure laws that require political parties and politicians to report all the contributions they receive (e.g., Canada and the United Kingdom), such laws are not in place in several other countries (e.g., Austria and Finland). It is therefore interesting to ask whether the transparency of politics may be systematically related to political outcomes, and whether more transparency would lead to better outcomes. In particular, in this article, we analyze the relationship between the transparency of politics and the quality of politicians, and focus on the recruitment of politicians by political parties. Parties represent a fundamental institution of representative democracy, and are the political-sector analogues of firms in the market sector. By and large, politicians are affiliated with a party, and typically start their political careers by working for party organizations (see, e.g., Heinrich Best and Maurizio Cotta 2000). Hence, the recruiting decisions of parties determine the quality of the pool of politicians.
Previous papers by Eric B. Rasmusen, J. Mark Ramseyer, and John S. Wiley, Jr. (1991) and Ilya R. Segal and Michael D. Whinston (2000) argue that exclusive contracts can inefficiently deter entry in the presence of scale economies and multiple buyers. We first show that these results no longer hold when buyers are final consumers who can breach these contracts and pay expectation damages. We then show, however, that exclusive contracts can inefficiently deter entry if buyers are downstream competitors, even in the absence of scale economies and even if breach is possible.
An explanation for motivation crowding-out phenomena is developed in a social preferences framework. Besides selfish and fair or altruistic types, a third type of agent is introduced. These “conformists” have social preferences if they believe that sufficiently many of the others do as well. When there is asymmetric information about the distribution of preferences (the “social norm”), the incentive scheme offered or autonomy granted can reveal a principal's beliefs about that norm. High-powered incentives may crowd out motivation as pessimism about the norm is conveyed. But by choosing fixed wages or granting autonomy, trust in a favorable norm may be signaled.