IN DEFENSE OF THE FINANCE CONSTRAINT

Simple models of monetary trade commonly impose a finance constraint on expenditure. It is often suggested that this finance constraint is artificial - a result of money's being the only asset, of the absence of credit, and of the special time structure of such models. This paper shows that the finance constraint on aggregate expenditure remains in force when other assets and credit are introduced and when the time structure is generalized to allow overlapping income periods of differing lengths. Most of the objections to the finance constraint are shown to involve fallacies of composition.
There are economists to whom a constraint of the form pc < M (in units $/t < $) must appear unthinkable. R. E. Lucas, Jr. (1980)     

DETERMINANTS OF POLICE EXPENDITURES IN CHICAGO, 1904–1958

Recent longitudinal analyses of policing resources, both cross- and within-jurisdictional studies, raise serious questions about the explanatory power of the public choice and conflict perspectives of crime control. The present study, which examines the determinants of police expenditures within Chicago from 1904 to 1958, indicates that idiosyncratic historical processes may temper the influence of environmental factors on the capacity of municipalities to provide crime control.     

THE ROLE OF MARITAL STATUS IN HEALTH SERVICES EXPENDITURES FOR PSYCHIATRIC OUTPATTIENTS

This study tested the hypothesis that married psychiatric outpatients would have lower total health services expenditures than divorced or separated patients. Chart review of the 471 individuals attending an academic medical center outpatient psychiatric clinic during 1994 identified 131 married, 40 separated, and 93 divorced patients. Separated men had significantly higher average total charges ($16,890) than married ($5,279) or divorced ($5,539) men by one-way ANOVA (p < .05). The nonparametric Mann-Whitney test also showed that separated men had higher charges than married or divorced men. There were no differences between marital status groups for women.     

THE CULTURE OF CORRUPTION,TAX EVASION,AND ECONOMIC GROWTH

This study uses a dynamic general equilibrium model to quantify the effects of corruption and tax evasion on fiscal policy and economic growth. The model is calibrated to match estimates of tax evasion in developing countries. The calibrated model is able to generate reasonable predictions for net tax rates, the corruption associated with public investment projects, and the negative correlation between corruption and tax revenue. The presence of corruption and evasion is shown to have significant, but not large, negative effects on economic growth. The relatively moderate effects help explain the absence of a robust negative correlation between growth and corruption in cross‐country data. The model also implies that cracking down on tax evasion before addressing corruption can be a bad idea and that higher wages for public officials can improve welfare. (JEL H3, O4)     

RISING R&D INTENSITY AND ECONOMIC GROWTH

Over the past decades, private R&D spending in the United States and other developed countries has been growing faster than gross domestic product. At the same time, the growth rates of per-capita and aggregate output have been rather stable, possibly declining slightly. This article proposes a growth model that can account for the observed phenomenon by explicitly describing competition among technological leaders and followers in individual markets in a way that is consistent with existing studies on firms' motivation to invest in R&D. The model shows the possibility that the unsustainable trend of rising R&D intensity persists for a very long time. (JEL O3, O4, L1)     

THE DISTRIBUTION OF POLITICAL POWER, THE COSTS OF RENT-SEEKING, AND ECONOMIC GROWTH

Poor economic growth in many countries can be explained by the misallocation of entrepreneurial resources to activities that do not foster growth. This paper deals with the relation between the distribution of political power, the allocation of entrepreneurial resources and growth. We model growth as deriving from Schumpeterian entrepreneurs who try to increase profits through innovation. We endogenize the choice of time devoted to this activity vis-a-vis other ways of increasing income, such as obtaining government subsidies. More unequal access to the political redistribution mechanism makes rent-seeking activities less profitable, and results in higher growth.     

ECONOMIC ACTIVITY IN THE SHADOW OF CONFLICT

Appropriation possibilities significantly alter economic fundamentals in a production and exchange economy. This is the primary lesson of our model, which combines Ricardian trade and the potential for predator/prey behavior. The model shows how conflict can be subdued by mutual gains from trade, but at a resource cost that modifies the exchange itself. On the other hand, it identifies conditions wherein appropriation incentives are so strong that specialized production and trade are precluded altogether. The model also reveals a new way to think about and measure the gains from trade. ( JEL C72, D51, D74, F10)     

FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: THE GROWTH ACCOUNTING PERSPECTIVE

A positive relationship between FDI and economic growth under two economic conditions has been estimated: a sufficient level of human capital and well-developed financial markets, respectively. However, these two conditions can be fundamentally different catalysts for FDI to promote economic growth in the perspective of growth accounting. Using data from 69 countries over 1970–1989, we find that FDI promotes productivity growth only when the host country reaches a threshold level of human capital; and FDI promotes capital growth only when a certain level of financial development is achieved. ( JEL F21)     

INSTITUTIONS, TRANSACTION COSTS AND ECONOMIC GROWTH

This essay develops a theoretical framework which explores the historical obstacles to economic growth. These obstacles are examined in the context of the political/economic institutional framework of economies in history and consequent transaction costs that determine economic performance and growth. The essay concludes with specific suggestions for the study of economic growth.