CIBER Abstracts for Working Papers
The main concern in this comparative
analysis is the impact of privatization on equity in each country –
i.e., the distribution of assets and income.
In the case of Brazil, with a long tradition of asset and income
concentration, concern with privatization’s equity impact was not taken
into account. In the case of
Russia, which emerged from 70 years of communism, concern about asset and
income distribution played a more significant role in the design of its
privatization program. It is
the major purpose of this article to analyze the actual distributional
results of privatization in each country.
In this paper we use a novel approach to
decompose differences in the self-employment probabilities of various
socio-economic groups into differences in their entry rates into self-employment
and exit rates from self-employment. This decomposition is based on the estimated
Markov transition probabilities into and out of three employment states:
non-employment, wage/salary employment, and self-employment. The analysis
utilizes data from the March supplement of the Current Population Survey.
We concentrate on differences in self-employment rates due to gender, race,
and educational attainment. We demonstrate that the effect of differential entry
rates (relative to the effect of differential exit rates) varies both across groups
and over the life-cycle. The empirical findings are consistent with some models of
self-employment but not with others. In
particular, gender differences in the incidence of self-employment are due to
higher female exit rates and are more consistent with conscious career choice
rather than with barriers to entry into self-employment.
Race differences in self-employment are due to a black-white gap both in
entry and exit rates. However, the entry rate gap becomes progressively smaller
over the life-cycle, possibly because African-Americans are able to relax liquidity
constraints through life-time savings. Finally,
differences in the self-employment rates of college and high school educated
individuals appear at mid-life and are due exclusively to differences in entry
rates. This is consistent with the
human capital accumulation hypothesis which postulates that the opportunities for
self-employment of educated individuals are enhanced by their experience in the
We investigate the effectiveness of passenger shipping cartels in regulating
migration across the Atlantic during the early twentieth century.
We test whether trans-Atlantic shipping cartels reduced immigration to North
America through higher fares (as claimed by the US Justice Department and predicted
by the “consensus” theory of cartels) or led to a stabilization of the
trans-Atlantic passenger market (as claimed by the cartels themselves and predicted
by models of “destructive competition”). We assemble a detailed data-base of passenger flows and cartel
operations from primary sources and find support only for the first of the above
hypotheses: Cartel operation reduced
migratory flows by approximately 20% to 25% while it actually somewhat increased
(rather than decreased) flow variability. We show that there is no strong inter-temporal substitution in
migration to North America (at least in the short-run) and, therefore, that the
effects of cartel operation were not “undone” by later migration.
Given that immigration patterns shifted after WWI, our results suggest that
the operation of the cartels changed North American demographics in an appreciable
Using a new short-panel data-set, we (i) construct the
employment life-cycle of the South Korean labor-force,
(ii) estimate the transition probabilities of workers between employment
states as a function of their age and other characteristics, and
(iii) evaluate the degree to which the Korean labor market is in transition
by investigating to what extent the future life-cycle employment profile of the
country would differ from the current profile if the current transition
probabilities were to hold for a generation. We
find evidence of a trend towards later retirement for educated people.
We also find evidence of a progressive shift of self-employment towards
individuals who are better educated and older, regardless of gender or regional
background. These trends in the
employment profiles are making the South Korean labor market more similar to that
of developed countries. In contrast,
we find no evidence of convergence in the female/male labor force participation and
self-employment rates, or any evidence that labor force participation or
self-employment rates depend on whether the person was raised in a large city or
small city/rural area. Our approach
provides a novel way with which to utilize very short panels to make projections
about the future employment profiles in a labor market.
This paper analyses the evolution of the South American Common Market,
Mercosur. It shows how the
lack of coordination of macroeconomic policies, especially of the two
major participants (Argentina and Brazil), had caused trade strains and
conflicting interests in attracting foreign investments.
Divergent macro-economic policies have had negative effects on
bilateral trade due to the risk averseness (resulting from bilateral
exchange rate volatilities) of exporters and importers, and due to the
protectionist forces they have brought forth.
The paper also shows how the lack of policy coordination caused
increased confrontations with respect to Foreign Direct Investment in the
The current financing system of the European Union is, as a matter of
fact, based on grants of the member states. The EU has neither the
power to tax nor the right to run a public debt. In our paper, we
analyze if the EU should receive the right to go into public debt. We
make use of the normatively oriented theory of public indebtedness and of
positive political economy analysis. We propose the assignment of a
right to public borrowing to the EU within tight quantitative and
qualitative consitutional restrictions. With respect to the fiscal
goal, we suggest public borrowings in order to bridge lacks of liquidity;
with respect to the allocation goal, the financing of exclusively long-term
investment projects would be meaningful. For stabilization goals,
public indebtedness would be helpful only for extreme cases of emergency,
which have to be defined precisely in advance. According to the
political economy analysis, a misuse of public debt may be possible.
But the implementation of strict constitutional constraints could limit such
This paper provides a theoretical analysis
of the impact of social norms and enforcement regime on the dynamics of taxpayer
compliance. An aggregate-level model,
inspired by epidemic models in mathematical biology, is developed to evaluate the
flows between classes of compliant and noncompliant taxpayers.
Convergence in theoretical results is sought and found via a second model
that emphasizes micro-level agent behavior. Several
interesting observations arise from our analysis.
In particular, the impact of changing enforcement levels on compliance
depends upon whether the initial population is relatively compliant or
non-compliant. Compliant populations
are insensitive to changes in enforcement policies until the policies become
sufficiently lax. Then a sudden shift
to high levels of noncompliance is observed. In
contrast, relatively noncompliant populations respond to increased enforcement
severity by gradually increasing compliance. Then,
when enforcement becomes sufficiently harsh, a sudden shift in aggregate behavior
is observed, to very high levels of compliance.
Once the discontinuous shift in behavior (from compliance to noncompliance
or vice versa) occurs, our models predict that a return to the enforcement policy
existing immediately before the change in behavior will be insufficient to cause
the population to return to its previous state.
Finally, over a range of compliance levels, two equilibria are observed that
are dependent on the initial compliance behavior of the population. This is consistent with the observation that compliance varies
considerable across time and geographically under similar enforcement regimes.
provide an analytical narrative of the political and economic causes and
consequences of institutional changes in the Argentine banking system.
We devote most of our attention to the privatization of the provincial
banks. Our story differs from the
prevailing wisdom in its stress on the key roles played by convertibility and an
independent Central Bank rather than the Fondo Fiduciario.
This study tests the proposition that foreign market uncertainty leads firms to
internationalize incrementally. The
results show that the nature of this relationship differs between operational
uncertainty and cultural uncertainty. Industry
and host-country factors were found to moderate the relationship between
operational uncertainty and incremental expansion. No such effect was found for the relationship involving cultural
uncertainty. These findings
reinforce the need to re-examine and refine the incremental model.
This article brings up to date the development of the Swiss value added tax, with
discussion of the status of the plans to convert the legal basis from an
ordinance to a law, a summary of the tax, and data for numbers of firms, taxable
and non-taxed sales, in total and by class of firm, and reference to current
problems with the tax.
There is substantial decentralization of VAT administration in mainland Tanzania.
Hiring of personnel is done in central office of VAT.
There are 950 registered firms in the Arusha area.
Returns and payments are made in the regional offices; check is made for
delinquents in the central office, but nonfilers are contacted in the regional
offices. Coordination of the work in
the central office and the regional office is impeded by the lack of a direct
computer link. There are serious
problems with the educational backgrounds of the staff in the Arusha office and
there are major procedural problems.
while a part of Tanzania, has considerable autonomy with a separate VAT Act, now
essentially identical with the Tanzania Act.
Zanzibar has a separate Revenue Board.
As on the mainland, there are serious misunderstandings about the VAT.
is a widespread belief on the mainland that many transactions escape the Zanzibar
tax and then enter the mainland duty free. Zanzibar
officials insist that this is no longer true since the rates of the tax are the
same in the two jurisdictions, but mainland firms are not convinced.
This paper examines why and how corporate
governance practices are implemented across countries. We look at the worldwide
development and adoption of codes of good governance, a set of
"best practice" recommendations regarding the behavior and structure of
the board of directors. We find that codes of good governance serve to compensate
for deficiencies in the legal system covering shareholders' rights. The results
also show that size of capital markets, degree of government intervention, and
percentage of foreign investors in the stock market are predictors of the
existence of codes of corporate governance, while country openness has no
The integration of the former communist countries of central and eastern Europe
into the European Union will create a dilemma for the
EU’s regional policy. The
EU’s expenditure on regional policy (which we term its “active” regional
policy) was guided by political reactions on deepening and enlarging the EU and
not by a rational regional policy strategy.
In contrast, the strong EU instrument of subsidies surveillance, developed
for competition policy (which we will call its “reactive” regional policy)
has been relatively successful in avoiding a national race of regional policy
subsidies among the member states. We
show that a shift from active regional policy to reactive, competition-oriented
regional policies would be a way to handle the challenge of enlargement for the
established member states, but at the same time this shift will be difficult for
the applicant countries.
This article begins with a
description of the main characteristics of Brazil's Real
stabilization program and its initial success in eliminating inflation.
If then examines the use of the exchange rate to keep inflation in check
and the problems which overvaluation created. It also focuses on the
structural desiquilibria it faced and the various artifices that were
used to deal with them but which ultimately let to a set of
contradictions that brought about its collapse.
This article focuses on the regional dimension of the traditional
dilemma of "equity vs. efficiency as exemplified by the case of
Brazil. The main question addressed is whether a more market-oriented
and open economy leads to an increased or decreased concentration of
income, and whether there is a natural regional "trickle down"
effect when unfettered market forces increase regional concentration of
economic growth. In the first part of the article these questions are
examined from an historical perspective, while the second part
concentrates on the regional impact of the open market policies of the
Consider an industry where firms can choose their product's price and
quality. We examine the profitability of tow different cartel
organizational forms: Semi-collusion, where firms collude on price only
and full collusion, where firms collude on both price and quality. Under
semi-collusion, firms are assumed to choose product quality after an
agreement on price is reached. An increase in a firm's product quality
leads to higher demand for its product, the second results in a
diversion of sales from the other firms. We show that in the presence of
demand uncertainty that cannot be contracted upon in the cartel
agreement firms may be better off limiting their collusive agreement to
price only. In particular, we also show that for any given level of
demand uncertainty, their exists a threshold level of demand diversion
such that if the demand diversion component is lower, collusion on price
only would yield higher profits than collusion on firms may be better
off limiting their collusive agreement to price only. In particular, we
also show that for any given level of demand uncertainty, their exists a
threshold level of demand diversion such that if the demand diversion
component is lower, collusion on price only would yield higher profits
than collusion on both rice and quality. The degree of demand diversion
is crucial for this result. If the demand diversion component is higher
than a threshold, then an increase in demand uncertainty makes full
collusion more profitable relative to semicollusion, and, therefore, no
level of uncertainty will make semicollusion the optimal organizational
This article examines the reasons behind the over-optimism of a large
segment of the economics profession concerning the performance of East
Asian economies, which was shattered by the financial crises of 1997-98.
It also shows how the crisis placed into bold relief many institutional
characteristics of these economies which negate many past attempts to
characterize them as open and market driven.
This article surveys the evolution of technology policy in Brazil from
its inception to the present day, examining the changes that it has
undergone along the way. Having sketched in the appropriate background,
it goes on to discuss the broad technological impact of rapid
liberalization in the 1990s.
This paper provides a selective survey of the literature that has used
the transaction costs approach to explain the existence and forms taken
by the multinational enterprise (MNE) and its alternatives, spot markets
and contracts (e.g. procurement contracts, licensing, and franchising).
Transaction costs theory, which is now the dominant theory of
international business institutions, partly antedates--and was in large
part developed independently of--Williamson's own theories.
After briefly sketching the differences between the
Hymer-Kindleberger and the transaction costs view of the MNE, the paper
develops a theory of when and why the organization of international
interdependencies will be more efficiently effected in firms (MNEs) than
in markets. Firms are shown to succeed when markets fail because
they rely on behavior, as opposed to output constraints. I then
show how the various forms taken by the expansion of firms abroad can be
explained by transaction costs theory. Vertical forward
integration into raw materials, components, and distribution can be seen
as a response to the relative inefficiency of markets for raw materials,
components and parts, and distribution services. Horizontal
integration into manufacturing and services can be explained by the
relative inefficiency of markets for knowledge and reputation.
Lastly I show that free-standing firm, an unusual form of pre-1914 MNE,
can be explained, like some current forms of MNE's by the
internalization of markets for financial capital. In all cases the
MNE is shown to be an institution which reduces the costs of organizing
interactions between agents located in different countries.
If the above is true, then government policies that limit the
expansion of MNE's should have negative efficiency consequences, and
should lead to the development of second-best substitutes. Part
III shows that countertrade is a second best solution chosen when
government intervention reduces the efficiency of MNE's.
In Part IV I show how transaction costs theory can throw light
on two main strategic decision MNE face when entering foreign markets:
whether to enter with wholly-owned affiliates or with joint venture, and
whether to set up a new affiliate, or acquire an existing firm.
The conclusion outlines what is distinctive with the preceding analysis.
Although the theoretical connection between the value of a firm and the
performance of its future cash flows is one of the most important
concepts in finance, there has been only one major test of the theory by
Kaplan and Ruback. There has been only one test because forecasted
free flows (FCF's) are generally unavailable for academic research.
An objective of this paper is to provide an indirect test of the
FCF approach used to estimate the theoretical value of a firm (VF).
We hypothesize that management implements strategies to create
shareholder value, therefore the rate of the growth in the long-run
value of a firm (GVF) is significantly related to performance
of the cash flow components that underlie a firm's FCF--net operative
flows, net investment flows and net working capital. In this study
the net working capital flows were decomposed into five cash flow
components. It is hypothesized that all of the cash flow
components contribute to the growth in the value of a firm. Also,
a Book/Market value (B/M) measure and a size variable are included in
the analysis. Data from a large sample of American and Japanese
companies were used in a regression model to test the significance of
the hypothesized relationships. The results show that net
investment and the combined working capital components make nearly equal
contributions to the creation of value for American companies. The
size component was the most important variable in estimating growth in
the value of American companies. Net operating flows and the B/M
measure were not consistently associated with the growth in the value of
the American companies. The cash flow components make only minor
contributions to the value creation process of Japanese companies.
The most important contributions to the creation of wealth in
Japanese companies are B/M ratios and firm size. During extended
periods when small stocks were outperforming large stocks, there was not
a positive and statistically significant relationship between growth in
the value of either Japanese or American firms and their average net
operating cash flows.
This paper overviews the formation of the US shipping cartels
(conferences) and their state of development before the onset of World
War I. These cartels ranged from simple price agreements to very
complex and tight revenue pooling agreements. The focus of the
paper is in identifying the factors that influence the choice of the
cartel organizational form. We find that the degree of collusion
is higher in routes in which entry of competing firms is less likely, in
routes with fewer firms of relative unequal size, and in routes in which
member firms have large global capacity. We also find that multi-market
contact facilitates collusion, i.e., a cartel in more likely to be
"tight" if its members are also interacting in many other
routes. These results indicate that complex cartels (as opposed to
simple rate agreements) are formed when organizational costs are lower
and enforcement easier and more credible.
This paper measures total factor productivity in Korean Manufacturing
Industries using the refinements introduced by recent scholars.
Our findings show that several capital-intensive industries, which were
"pushed" by the Korean Government, did as well as the
labor-intensive industries. This suggests that the Korean policy
of selective intervention was helpful.
Taxation in Namibia is divided almost equally among (1) individual and
company income taxes, (2) domestic indirect taxes, of which the sales
tax is the most important, and (3) custom and excise. The individual
income tax is progressive, with a maximum rate of 35%--the same as the
company tax rate. Substantial incentives for investment are provided in
income tax and some in sales tax. The sales tax is basically a retail
sales tax, with broad coverage, an 8% rate on goods, 11% on services.
The tax has the usual advantages of retail type sales taxes and the
disadvantages of cascading. There is consideration of shift to a value
added tax, as South Africa has done. Tax administration suffers from
extreme shortage of trained personnel and an antiquated computer system,
but there are major plans for improvement. Tax administration is
organized on a functional basis.
The objective of this paper is to estimate the excess burden associated
with the personal income tax in Brazil. The study is based on a
one-period utility maximization labor supply model for urban prime age
male employees. We develop a sensitivity analysis based on two different
specifications of preferences. Using an estimation procedure that
considers the nonlinearity of the budget constraint, constraints on the
choice of work hours, and possible measurement error, we find that the
choice of functional form influences the results dramatically.
Non-nested tests indicate that a Linear Expenditure System is more
appropriate than the popular Linear Labor Supply specification used in
most labor supply studies. The results suggest that, for the selected
populations subgroup, the deadweight loss of the personal income tax in
Brazil is small.
Although the theoretical connection between the value of a firm and the
performance of its future cash flows is one of the most important
concepts in finance, there has been only one major test of the theory by
Kaplan and Ruback. The reason there has been only one test is that
forecasted free cash flows (FCFs) are generally unavailable for academic
research. Therefore, an objective of this paper is to provide an
indirect test of the FCF approach of estimating the theoretical value of
a firm (VF). We hypothesize that because management implements
strategies to create shareholder value, the rate of growth in the
long-run value of a firm (GVF) is significantly related to the cash flow
components that underlie a firm's FCF. Also a B/M measure and a size
variable are included in the analysis. Data from a large sample of
American and Japanese companies are used in a regression model to test
the significance of the hypothesized relationships. The results show
that the data from the American companies were supportive of the
hypothesized relationships, but the Japanese data were only modestly
supportive. Also, the study found that net operating cash flows may not
be as closely related to long-run creation of firm value as previously
This paper investigates the proposition that the greater the cultural
distance between the home base of the foreign direct investor and the
country where it establishes its affiliate, the lower the chances of
survival of that affiliate. We test it on a sample of North European and
Japanese affiliates manufacturing in the United States, whose parents
come from countries which differ in their cultural distance to the
United States, with Northern European countries (Denmark, Finland, the
Netherlands and Norway) culturally closer to the US than Japan. Keeping
constant all other factors which, besides cultural distance, should
affect the survival of these affiliates, we find that, contrary to our
expectations, affiliates of Japanese parents do not run a higher risk of
exiting the United States (through either a sale to another firm, or
through a liquidation/bankruptcy) than those of their Northern European
This paper seeks to isolate the partial impact of cross-national
ownership on the longevity of joint ventures by comparing two types of
joint ventures placed in the same environment, namely the United States.
The first type of joint ventures is that between Japanese partners.
These joint ventures should not suffer from cross-national cultural
conflicts. We contrast the longevity of these joint ventures with that
of Japanese-American joint ventures, joint ventures that should
experience cross-national cultural conflicts. Carefully controlling for
all the other factors that may affect longevity, we then try to pry out
whether, everything else constant, joint ventures with mixed parents are
shorter-lived than joint ventures between parents from the same country,
as would be the case if cross-cultural conflicts had a significant
partial effect. We find that the longevity of Japanese-American joint
ventures is lower than that of Japanese-Japanese joint ventures. A
number of authors have found that the longevity of a joint venture is
highly correlated with subjective and financial measures of its
performance, so the shorter life of US-Japanese joint ventures gives
some support to the hypothesis that cross-national cultural conflict
does not hamper joint venture performance. We find, however, that the
differential partial impact of cross-national parentage only appears for
dissolutions that result from the sale of the venture to one of the
partners. Japanese-American joint ventures have the same longevity as
Japanese-Japanese joint ventures for dissolutions due to liquidations
and sales of the venture to a third party. Contrary to expectations,
possible cross-cultural conflicts in Japanese-American joint ventures do
not result in higher rats of liquidation or sale to third parties.
Instead, cross-cultural conflicts in Japanese-American joint ventures
are more likely to be solved by transferring full ownership to one of
We investigate how Japanese firm's direct and indirect experience with
US acquisitions influences its subsequent choice of entering the US with
acquisitions rather than with greenfield investments. We test this
hypothesis on 283 second and subsequent Japanese entries into US
manufacturing industries. Controlling for all the other factors that may
affect the choice between acquisitions and greenfields, we find that
both direct and indirect experience increase the probability subsequent
entries will be acquisitions.
Is there a preferred method foreign investors should use to start the
process of building a business in an unfamiliar market? International
business theorists have argued that joint ventures with local firms
should be the preferred method of initial entry into foreign markets.
They have given three main reasons for that choice: (1) joint venturing
with local partners allows the novice investor the opportunity to learn
to support future expansion; (2) joint ventures can provide quick access
to resources necessary to expand in a foreign market; (3) lastly, joint
ventures are also an efficient vehicle to exploit one's partner, and to
capture the resources it contributes to the venture. While all three
rationales seem theoretically persuasive, their implication that firms
which choose a joint venture with a local firm for their first entry
should perform better over time and that there is therefore a dominant
organizational form for initial market entry, has never been tested. Our
study, which tracks the expansion paths of Japanese investors in the
United States, finds no evidence that Japanese firms which first entered
the United States in joint venture with local firms grow faster than in
that country than their Japanese counterparts which used wholly-owned
subsidiaries for initial U.S. market entry.
While many generalizations, explanations, and prescriptions have been
based on the oft noted short lives of international joint ventures, the
real meaning of this phenomenon is unclear. First, all foreign
affiliates are subject to normal business risk, and to the risk that
they will be divested by parents for strategic or financial reasons. We
want to know whether these risks are higher for joint venture than for
wholly-owned subsidiaries. Second, joint ventures may be shorter lived
not because of their joint venture status, but because affiliates which
are joint ventured have other characteristics that make them more likely
to exit. To know whether joint ventures are shorter lived, one must
control for the other factors that affect the longevity of affiliates,
whether wholly-owned or joint ventured. Third, many joint ventures
contracts contain clauses that allow partners to sell their stakes to
one another at specific intervals. Because they make exit easier, we
would therefore expect joint ventures to have shorter lives, but these
shorter lives should only be due to selloffs, not to liquidations. It is
therefore important to see whether the possible higher termination rate
of joint ventures stakes is due to a higher rate of selloffs or to a
higher rate of liquidations. This paper seeks to answer these questions
by analyzing factors that affect the longevity of 355 Japanese stakes in
US manufacturing affiliates. We find that, controlling for all the
factors that affect exit rates, Japanese parents are more likely to
terminate their stakes in U.S. joint ventures than in wholly-owned
subsidiaries. This higher termination rate of joint venture stakes is
explained by a higher probability of selling them, but not of
liquidating them. Most of the other factors have been found significant
in explaining gross divestment of foreign affiliates do in fact only
affect exits through sales, but not exits through liquidations. Hence it
is true that joint ventures have shorter lives, but dangerous to
interpret this finding as necessarily meaning that they are more likely
Free standing firms were an important type of pre-1914 multinational
enterprise (MNE). While they were overshadowed after World War I by the
more traditional type of MNEs, they continued to be formed in both the
U.K. and the United States, and some are still being floated today.
Free-standing firms shared a number of characteristics. They were
domiciled in the dominant equity markets of the time (in London, but
also in Brussels, Paris, Boston, etc.) and raised equity there by
selling shares directly to the public to finance investments that were
located overseas. In their country of registration they had a head
office, but not industrial activity, all their actual operations
(plants, mines, plantations) being in foreign countries, mostly in the
least developed part of Europe (Spain, Italy, Russia), in the regions of
recent settlement (Australia, Canada, the United States, Argentina), and
in developing countries. While they were engaged in a wide variety of
businesses, from services to manufacturing, the majority of
free-standing firms were in two sectors, ranches and
plantations--natural rubber, tea, sugarcane, cinchona--and mining and
petroleum. Free-standing firms had two other important characteristics:
they were financed in large part by selling equity directly to the
public. Most free-standing firms were also single project firms,
operating a single plantation, a single mine. Yet these seemingly
independent free-standing firms were often linked in clusters. For
example, the thirty-six separate companies engaged in the exploitation
of Chilean nitrates in 1913 can be traced back to five groups of British
capitalists. A full explanation of free-standing firms would therefore
seem to require a simultaneous understanding of two related phenomena:
the phenomenon of the free-standing firm proper, a single project firm
with no domestic operations, and that of their clustering around a firm
that takes minority stakes. In this paper I argue that both of these
phenomena are hard to explain in terms of the eclectic theory of the
multinational enterprise (Dunning 1981). I show that they can be
explained by extending transaction costs theory into two directions:
into a theory of minority equity stakes and into a theory of
transactions costs in capital markets. The paper develops these two
theories and shows that the evidence on free-standing firms is generally
consistent with their implications.