The paper begins with a brief overview of the theory of incentives, with special attention to issues that are important in the public sector, in general and human capital in particular. It then reviews some case studies and empirical studies of incentives in the public sector, examining how these studies relate to the theory. Some implications for reform and design of organizations are drawn.

Incentives and Organizations in the Public Sector: An Interpretative Review

Paul L. Joskow MIT ABSTRACT This chapter provides a comprehensive overview of the theoretical and empirical literature on the regulation of natural monopolies. It covers alternative definitions of natural monopoly, regulatory goals, alternative regulatory institutions, price regulation with full information, regulation with imperfect and asymmetric information, and topics on the measurement of the effects of price and entry regulation in practice. The chapter also discusses the literature on network access and pricing to support the introduction of competition into previously regulated monopoly industries.

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Regulation of natural monopolies

The paper studies the dynamics of company profits for 172 of the largest manufacturing firms in Turkey. A time-series analysis is used to estimate the long-run projected profits and firm-specific speed of adjustment parameters that measures the rate at which short-run rents are eroded. While we observe persistent profitability differences across firms, there is also a moderately quick erosion of rents except for the most highly profitable firms. Firm characteristics rather than industry effects account for the differences in permanent profits.

https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2061295

Persistence of Firm-Level Profitability in Turkey

This paper examines the role of competition policy in emerging markets from a developmental and international perspective. Its main conclusion include: contrary to conventional wisdom, evidence suggests that the intensity of competition in leading emerging markets is certainly no less than that observed in advanced countries; analysis and evidence indicates that maximum competition is not necessarily optimal, in terms of dynamic efficiency; developing countries need a competition policy today, because of (a)privatization and deregulation, and (b) the huge international merger movement; there is little evidence to indicate that the current international merger wave will enhance global economic efficiency; the current competition policies in the UK and the EU are unsuitable for developing countries - countries at different levels of development and governance capacities require different types of competition policies. The paper presents a proposal for a development-oriented international competition authority to control anti-competitive conduct and growth by mergers of large multi-national companies.

Competition and Competition Policy in Emerging Markets: International and Developmental Dimensions

Transaction-cost politics views economic policy-making as a political process constrained by asymmetric information and limited commitment possibilities. This paper examines some implications of this perspective for less-developed countries (LDCs) considering policy reform. It emphasizes that success requires reform of the rules and institutions which govern the strategic interaction of the participants in the political game, and that reforms must cope with the special interests and asymmetric information which already exist. In this light, it examines some broad issues of the design of constitutions and institutions (definition and enforcement of property rights, control of inflation, and of government expenditures, federalism, and redistribution), as well as some specific issue of the design of organizations and incentives (problems posed by the interaction of multiple tasks and multiple interests, and their interaction with the limitations on auditing and administration that exists in many LDCs).

https://papers.ssrn.com/sol3/Delivery.cfm/ecpo_118.pdf?abstractid=416140&mirid=1

Some Lessons from Transaction-Cost Politics for Less-Developed Countries

Developing countries suffer from weak institutions: inefficient tax systems, lack of auditing expertise, poor education, corruption, inefficient financial systems, lack of credibility of governments, capture of politicians and bureaucrats. This paper asks whether and how each of these problems calls for a different view of competition, to what extent competition helps solve these problems, and to what extent it is implementable. Even though the pressure of competition is generally favorable, some care must be exerted in implementing it in the context of weak institutions. The need to support institutional improvements and to condition aid on such changes is great.

Jean-Jacques Laffont

Papers

Competition, Information, and Development