INCOMPLETE OWNERSHIP, RENT DISSIPATION, AND THE RETURN TO RELATED INVESTMENTS

The welfare loss from free access resource use is examined in a general equilibrium model. Actions that intensify competition for the resource, either by lowering the private cost or raising the private benefit of using it, can raise this loss above the rent the resource would earn if owned. Such 'excess dissipation'is illustrated with examples applicable to unowned groundwater. Regulatory policies that fix inputs needed to acquire the resource work by transferring part of the resource's rent to controlled inputs. The resulting welfare effect depends on the elasticity of substitution between, and relative prices of, controlled and uncontrolled inputs.     

Negotiated Discretion: Redressing the Neglect of Negotiation in “Street‐Level Bureaucracy”

This article proposes an interactionist update of “street‐level bureaucracy,” one of the most influential approaches for studying how public policy is translated into street‐level practice. While the street‐level approach assumes that bureaucrats are alone in enacting policy, the present article argues for seeing “street‐level policy” as formed in negotiation between bureaucrats and clients. To demonstrate this, the article uses ethnographic data and a Straussian framework to analyze how nurses and patients negotiated access in a Norwegian emergency service. The article thus sets a new course for street‐level research, helping researchers look beyond the individual to explore inter‐individual negotiation and its influence on street‐level decision‐making.     

RENT‐SEEKING AND CAPITAL ACCUMULATION

A general model incorporating rent‐seeking activities in the standard neoclassical model of capital accumulation is presented. The welfare of the representative agent is negatively affected by the efficiency of rent‐seeking activities. Although intuitive, this result is not obvious because long‐run income can be positively affected by more efficient rent‐seeking activities. The model is used to provide explanations for some recent experiences in developing countries, including the relative poor performance of economies that experience a move to a more decentralized system and the observed path of total factor productivity (TFP) in countries like Ireland and Venezuela. (JEL D23, D74, O40, O41, O47)     

QUALITY DIFFERENCES,THIRD‐DEGREE PRICE DISCRIMINATION,AND WELFARE

We propose a model with two markets to analyze the welfare implications of price discrimination with quality differences. In each market a local firm that operates in that market only competes against a global firm that operates in both markets. Local firms produce higher‐quality goods than the global firm. If the quality levels of the local firms' products are the same, price discrimination is never welfare‐decreasing. If they differ, discrimination is welfare‐increasing if quantity increases. Because of a positive allocation effect of price discrimination, there are parameter values such that welfare increases while total output decreases with price discrimination. (JEL D43, D60)     

A Dual‐track Strategy for Managing Mauritania's Projected Oil Rent

High rent creates contests for its capture that, unless skilfully managed, degrade political institutions and distort the economy, leading to a collapse of growth if unreformed. Mauritania's projected oil stream risks such an outcome because past rent‐driven growth has left a legacy of Dutch disease effects, rent‐seeking and dependent social capital. This article proposes a dual‐track strategy for deploying the oil rent as a politically practical means of managing social tensions and improving the economic outcome. Track one promotes a dynamic market economy in the hitherto neglected rural areas, while track two gradually reforms the rent‐driven urban sector, thus postponing confrontation with established rent‐seekers while the dynamic sector drives competitive diversification of the economy and builds a pro‐reform political constituency.     

Accommodating strangers: British hospitality and the asylum hotel debate

This article examines the accommodation of asylum seekers through Jacques Derrida's ethical writings on hospitality, generosity and parasitism. The differing hospitable spaces of the asylum and the hotel, and of the strange figures of the asylum seeker and the tourist, are discussed with reference to these discourses of “giving” and “taking”, paralleling Derrida's opposition between unconditional hospitality and hospitality‐as‐economy. This “new racism” towards asylum seekers is thus located within the economic sphere, as asylum control is linked to the welfare state and to fears of strangers' parasiting the host nation. However, I argue that it is the nation‐state that parasites asylum seekers both through their defining difference and their contribution to service economies. Ultimately then the asylum hotel does exist, as Stephen Frears' film, Dirty Pretty Things (2002), illustrates.     

THE IMPACT OF A PUBLIC OPTION IN THE U.S. HEALTH INSURANCE MARKET

We develop a game‐theoretical framework to examine the implications of the introduction of a nonprofit “public option” in the U.S. health insurance market. In this model, heterogeneous consumers have to choose between two competing insurance plans. One plan is offered by a profit‐maximizing private insurer; the other by social‐welfare‐maximizing public option. In equilibrium, the distinct objectives of the two insurers induce adverse selection in consumer choice: the public option covers the less healthy consumers, yielding the more profitable segment of market to the private insurer. However, our empirical results suggest that both insurers will capture significant parts of the health insurance market. (JEL I11, L10, L21, L32)     

SECTORAL COMPOSITION OF GOVERNMENT SPENDING AND MACROECONOMIC (IN)STABILITY

This article examines the quantitative interrelations between sectoral composition of public spending and equilibrium (in)determinacy in a two‐sector real business cycle model with positive productive externalities in investment. When government purchases of consumption and investment goods are set as constant fractions of their respective sectoral output, we show that the public‐consumption share plays no role in the model's local dynamics, and that a sufficiently high public‐investment share can stabilize the economy against endogenous belief‐driven cyclical fluctuations. When each type of government spending is postulated as a constant proportion of the economy's total output, we find that there exists a trade‐off between public consumption versus investment expenditures to yield saddle‐path stability and equilibrium uniqueness. (JEL E32, E62, O41)     

FISCAL STABILIZATION WITH PARTIAL EXCHANGE RATE PASS‐THROUGH

This article examines the role of fiscal stabilization policy in a two‐country framework that allows for partial exchange rate pass‐through. Analytical solutions for optimal monetary and fiscal policy rules depend on the degree of pass‐through. Each country unilaterally uses its fiscal instrument to stabilize the costs facing exporters. The welfare effects differ strongly depending on the degree of pass‐through. For high levels, both countries are better off with the fiscal instrument and welfare is closer to the benchmark flex‐price level. For low levels, however, the unilateral equilibrium policy rules lead to high volatility in taxes, and fiscal policy ends up being destabilizing by transmitting exchange rate fluctuations. Because these results stem from strategic considerations by the two countries, the fiscal instrument is not used under policy coordination. In addition, imposing a monetary union increases welfare when pass‐through is low, including the case of local currency pricing. (JEL E52, E63, F41, F42)     

MONETARY POLICY AND ENDOWMENT RISK IN A LIMITED PARTICIPATION MODEL

A limited participation model is constructed to study the risk‐sharing role of monetary policy. A fraction of households exchange money for interest‐bearing government nominal bonds in the asset market and the government injects money through open market operations. In equilibrium, money is nonneutral and monetary policy redistributes consumption across households. Without idiosyncratic endowment risk, monetary policy becomes a perfect risk‐sharing tool, but with idiosyncratic endowment risk, it is not. The Friedman rule is not optimal in general. (JEL E4, E5)     

The evolution of federal employment

The first federal employees (other than Founding Fathers) were clerks. As federal employment grew in the 1820s, its ranks came to be dominated by patronage workers. After the Civil War, bureaucrats slowly displaced patronage workers at the federal level. Now, federal employments are being privatized and the bureaucracy shrunk. I explain this evolution of federal employment with one simple model of politics in a changing environment. Politicians combine into political firms to promise benefits to subsets of voters in return for election. If elected, politicians provide the benefits as efficiently as possible. Thus, politicians choose the form and size of their political firms to maximize expected political profits. Environmental changes affect the choices. The breach of the Appalachians in the 1810s, defeat of the South in the Civil War and the simultaneous rise of big and transcontinental industry, and contemporary worldwide economic inte-gration (globalization) are three environmental changes that changed the efficient organization of federal political firms.     

STRATEGIC DISCLOSURE OF MEANINGFUL INFORMATION TO RIVAL

I study a model of strategic disclosure of a private signal to a rival in the presence of a payoff externality. In the model, two agents forecast the unknown true state of a future period. Specifically, the quality of the signal is also private information. Hence, which quality of signal is revealed for which incentive is the main question of interest. I show that, even when disclosure is costly, the revealing equilibrium, where an agent voluntarily reveals his signal, can exist and it should be a monotone equilibrium. Asymmetry between the penalty for an incorrect forecast and the reward for a correct forecast is a necessary condition for the existence of this revealing equilibrium. If the penalty is larger than the reward, the unique revealing equilibrium is a separating equilibrium, where only the low quality signal is disclosed in order to induce the rival's imitation. On the other hand, if the reward is much larger than the penalty, the unique revealing equilibrium is a pooling equilibrium, where the signal is always revealed in order to induce the rival's deviation. If the reward is not much larger than the penalty, no revealing equilibrium is robust to a costly disclosure. (JEL D81, D82)     

SLEEPING WITH THE ENEMY: THE ECONOMIC COST OF INTERNAL ENVIRONMENTAL CONFLICTS

This paper extends the literature on collective rent‐seeking by introducing the possibility that a competing group may be a subset of another. We develop a model that incorporates the potential for some individuals to be party of both sides of a conflict, which creates interdependence of payoffs. Results indicate that strategic individual behavior, and the resulting rent dissipation, is affected by the relative size of the groups. We conduct an experimental test of the model and find that observed laboratory behavior corresponds well with the game‐theoretic comparative‐static predictions. (JEL C72, C9, Q5, D74)     

The contribution of non-profit organisations to the management of HIV/AIDS: A comparative study

This article elaborates a typology of organisational responses during the first decade of AIDS/HIV in a dozen Western European countries.Welfare mixes: that is, the division of task between all producers of welfare (both private and public), and the processes at work in these policies, are analysed. Three types are identified, presenting unexpected variants in respect to general typologies of Western welfare states. They underline the importance of non-profit actors and also argue that new forms of co-operation between those actors and public ones can lead to renewed management of the main social issues currently facing Western welfare states.     

Negotiating Boundaries of Refugee Resettlement: A Study of Settlement Patterns and Social Support*

This article analyses aspects of the bureaucratie process of negotiating placement and social support by and for resettled refugees in Canada. Theoretical issues addressed include refugee resilience and effects of power structures on migrant networks. The article describes a qualitative study of underlying reasons for government‐assisted refugee secondary migration to Ontario. The study demonstrates that refugees seek social support by moving from initial settlement sites to join extended family and analyses how the resettlement bureaucracy, driven by political as well as humanitarian interests, attempts to control the process, in contradiction to refugees' preferences. The negotiation of placement and definitions of relevant social supports by bureaucrats and refugees are discussed. In conclusion, greater attention to refugee self‐determination is suggested to improve settlement outcomes.     

Pay comparability in state governments

Earnings differentials between state government and private industry employees are estimated for each state using 1990 Census data. Female employees in most state governments receive higher earnings than comparable private sector employees, whereas the opposite result applies to males. However, the size of the state government earnings advantage or penalty is not uniform across states for either sex. The relative earnings of state employees increase with their membership in unions and with the revenues generated by state government’s tax and financing policies.     

EXPERTS AND THEIR RECORDS

A market where short‐lived customers interact with long‐lived experts is considered. Experts privately observe which treatment best serves a customer, but are free to choose more or less profitable treatments. Customers only observe records of experts' past actions. If experts are homogeneous there exists an equilibrium where experts always choose the customer's preferred treatment (play truthfully). Experts are incentivized with the promise of future business: new customers tend to choose experts who performed less profitable treatments in the past. If expert payoffs are private information, experts can never always be truthful. But sufficiently patient experts may be truthful almost always. (JEL C73, D82)     

LEANING AGAINST WINDY BANK LENDING

Using an estimated dynamic stochastic general equilibrium model with banking, this paper first provides evidence that monetary policy reacted to bank loan growth in the United States during the Great Moderation. It then shows that the optimized simple interest‐rate rule features no response to the growth of bank credit. However, the welfare loss associated to the empirical responsiveness is small. The sources of business cycle fluctuations are crucial in determining whether a “leaning‐against‐the‐wind” policy is optimal or not. In fact, the predominant role of supply shocks in the model gives rise to a trade‐off between inflation and financial stabilization. (JEL E32, E44, E52)     

WOMEN PREFER LARGER GOVERNMENTS: GROWTH,STRUCTURAL TRANSFORMATION,AND GOVERNMENT SIZE

The increase in income per capita is accompanied, in virtually all countries, by two changes in economic structure: the increase in the share of government spending in gross domestic product (GDP), and the increase in female labor force participation. We argue that these two changes are causally related. We develop a growth model based on Galor and Weil (1996) where female participation in market activities, fertility, and government size, in addition to consumption and saving, is endogenously determined. Rising incomes lead to a rise in female labor force participation as the opportunity cost of staying at home and caring for the children increases. In our model, higher government spending decreases the cost of performing household chores, including, but not limited to, child rearing and child care, as in Rosen (1996) . We also use a wide cross‐section of data for developed and developing countries and show that higher market participation by women is positively and robustly associated with government size. We then investigate the causal link between participation and government size using a novel unique data set that allows the use of the relative price of productive home appliances as an instrumental variable. We find strong evidence of a causal link between female market participation and government size. This effect is robust to the country sample, time period, and a set of controls in the spirit of Rodrik (1998) . (JEL O4, E62, H11)     

INFORMATION,INSTITUTIONS, AND BANKING SECTOR DEVELOPMENT IN WEST AFRICA

Using a new West African panel data set, we provide evidence on the determinants of individual banks' loans and assets in some of the poorest countries in the world. Higher loan default rates reduce both the loans to assets ratio and the volume of assets. However, the size of these effects is sensitive to bank age and ownership structure. Younger, private, domestically owned banks are most affected, suggesting that such banks face the most severe informational disadvantages. Very old government‐owned banks benefit from high default rates. We also explore how the quality of governance impacts on loans and assets. (JEL G21, O16)