Showing papers by "London School of Economics and Political Science published in 2000"

The Political Economy of Government Responsiveness: Theory and Evidence from India

Abstract: The determinants of government responsiveness to its citizens is a key issue in political economy. Here we develop a model based on the solution of political agency problems. Having a more informed and politically active electorate strengthens incentives for governments to be responsive. This suggests that there is a role both for democratic institutions and the mass media in ensuring that the preferences of citizens are reflected in policy. The ideas behind the model are tested on panel data from India. We show that public food distribution and calamity relief expenditure are greater, controlling for shocks, where governments face greater electoral accountability and where newspaper circulation is highest.

Nursery Cities: Urban Diversity, Process Innovation and the Life-Cycle of Products

Abstract: A simple model of process innovation is proposed, where firms learn about their ideal production process by making prototypes. We build around this a dynamic general equilibrium model, and derive conditions under which diversified and specialised cities coexist. New products are developed in diversified cities, trying processes borrowed from different activities. On finding their ideal process, firms switch to mass-production and relocate to specialised cities with lower costs. When in equilibrium, this configuration welfare-dominates those with only diversified or only specialised cities. We find strong evidence of this relocation pattern in establishment relocations across French employment areas 1993u1996.

Consequences of the psychological contract for the employment relationship: a large scale survey

Abstract: The renewed interest in the concept of the psychological contract has come to the fore in attempts to describe, understand and predict the consequences of changes occurring in the employment relationship. Recognizing that the employment relationship includes two parties to the exchange process, we set out to examine the content and state of the psychological contract from both the employee and employer perspective. The two perspectives permit an examination of the mutuality of obligations, which has not received much empirical attention to date. The research methodology consists of two surveys conducted in a large local authority directly responsible and accountable for a range of public services including education, environmental health and social care to the local population. The key findings suggest that the majority of employees have experienced contract breach. This view is also supported by managers, as representatives of the employer, who further indicate that the organization, given its external pressures, is not fulfilling its obligations to employees to the extent that it could. Overall, the results indicate that employees are redressing the balance in the relationship through reducing their commitment and their willingness to engage in organizational citizenship behaviour when they perceive their employer as not having fulfilled its part in the exchange process.

The cosmopolitan perspective: sociology of the second age of modernity*

Abstract: ‘Second age of modernity’ is a magical password that is meant to open the doors to new conceptual landscapes. The whole world of nation sovereignty is fading away – including the ‘container theory of society’ on which most of the sociology of the first age of modernity is based upon. In this article I propose a distinction between ‘simple globalization’ and ‘reflexive cosmopolitization’. In the paradigm of the first age of modernity, simple globalization is interpreted within the territorial compass of state and politics, society and culture. This involves an additive, not substitutive, conception of globalization as indicated for example by ‘interconnectedness’. In the paradigm of the second age of modernity globalization changes not only the relations between and beyond national states and societies, but also the inner quality of the social and political itself which is indicated by more or less reflexive cosmopolitization as an institutionalized learning process – and its enemies.

Measurement of inequality

Abstract: The analysis of inequality is placed in the context of recent developments in economics and statistics.

Shaping the Web: Why the Politics of Search Engines Matters

Abstract: This article argues that search engines raise not merely technical issues but also political ones. Our study of search engines suggests that they systematically exclude (in some cases by design and in some, accidentally) certain sites and certain types of sites in favor of others, systematically giving prominence to some at the expense of others. We argue that such biases, which would lead to a narrowing of the Web's functioning in society, run counter to the basic architecture of the Web as well as to the values and ideals that have fueled widespread support for its growth and development. We consider ways of addressing the politics of search engines, raising doubts whether, in particular, the market mechanism could serve as an acceptable corrective.

The World Technology Frontier

Abstract: We define a country's technology as a triple of efficiencies: one for unskilled labor, one for skilled labor, and one for capital. We find a negative cross-country correlation between the efficiency of unskilled labor and the efficiencies of skilled labor and capital. We interpret this finding as evidence of the existence of a World Technology Frontier. On this frontier, increases in the efficiency of unskilled labor are obtained at the cost of declines in the efficiency of skilled labor and capital. We estimate a model in which firms in each country optimally choose from a menu of technologies, i.e. they choose their technology subject to a Technology Frontier. The optimal choice of technology depends on the country's endowment of skilled and unskilled labor, so that the model is one of appropriate technology. The estimation allows for country-specific technology frontiers, due to barriers to technology adoption. We find that poor countries tend disproportionately to be inside the World Technology Frontier.

Diversity and specialisation in cities. Why, where and when does it matter?

Abstract: Summary. Why are some cities specialised and others diversie ed? What are the advantages and disadvantages of urban specialisation and diversity? To what extent do the structure of cities and the activities of e rms and people in them change over time? How does the sectoral composition of cities ine uence their evolution? To answer these and related questions, we e rst distil some key stylised facts from the empirical literature on cities and the composition of their activities. We then turn to a review of different theories looking at such issues, and study the extent to which these theories contribute to the understanding of the empirical regularities.

Accountability in the Regulatory State

Abstract: Accountability has long been both a key theme and a key problem in constitutional scholarship. The centrality of the accountability debates in contemporary political and legal discourse is a product of the difficulty of balancing the autonomy given to those exercising public power with appropriate control. The traditional mechanisms of accountability to Parliament and to the courts are problematic because in a complex administrative state, characterized by widespread delegation of discretion to actors located far from the centre of government, the conception of centralized responsibility upon which traditional accountability mechanisms are based is often fictional. The problems of accountability have been made manifest by the transformations wrought on public administration by the new public management (NPM) revolution which have further fragmented the public sector. In this article it is argued that if public lawyers are to be reconciled to these changes then it will be through recognizing the potential for additional or extended mechanisms of accountability in supplementing or displacing traditional accountability functions. The article identifies and develops two such extended accountability models: interdependence and redundancy

Functional-Coefficient Regression Models for Nonlinear Time Series

Abstract: The local linear regression technique is applied to estimation of functional-coefficient regression models for time series data. The models include threshold autoregressive models and functional-coefficient autoregressive models as special cases but with the added advantages such as depicting finer structure of the underlying dynamics and better postsample forecasting performance. Also proposed are a new bootstrap test for the goodness of fit of models and a bandwidth selector based on newly defined cross-validatory estimation for the expected forecasting errors. The proposed methodology is data-analytic and of sufficient flexibility to analyze complex and multivariate nonlinear structures without suffering from the “curse of dimensionality.” The asymptotic properties of the proposed estimators are investigated under the α-mixing condition. Both simulated and real data examples are used for illustration.

Does Financial Reform Raise or Reduce Saving

Abstract: The effect of financial liberalization on private saving is theoretically ambiguous, not only because the link between interest rate levels and saving is itself ambiguous, but also because financial liberalization is a multidimensional and phased process, sometimes involving reversals. Using principal components, we construct 25-year time-series indices of financial liberalization for each of eight developing countries: Chile, Ghana, Indonesia, Korea, Malaysia, Mexico, Turkey, and Zimbabwe. These are employed in an econometric analysis of private saving in these countries. Our results cannot offer support for the hypothesis that financial liberalization will increase saving. On the contrary, the indications are that liberalization overall—and in particular those elements that relax liquidity constraints—may be associated with a fall in saving.

The location of european industry

Abstract: The objectives of this study are to describe the changes in industrial location that have occured in Europe in recent decades; to establish whether these are associated with countries' economic structures becoming more or less similar, and industries becoming more or less spatially concentrated; to compare industrial location patterns in Europe and the US; and to identify the underlying forces that determine industrial location and assess the extent to which these have changed in recent years.

Incentives, Information, and Organizational Form

Abstract: We model an organization as a hierarchy of managers erected on top of a technology (here consisting of a collection of plants). In our framework, the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him. We argue that different organizational forms give rise to different information about managers' performance and therefore differ according to how effective incentives can be in encouraging a good performance. In particular, we show that, under certain assumptions, the M-form (multi-divisional form) is likely to provide better incentives than the U-form (unitary form) because it promotes yardstick competition (i.e. relative performance evaluation) more effectively. We conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for Chinese data.

Health, community and development: towards a social psychology of participation

Abstract: The concept of ‘community participation’ plays a central role in policies and interventions seeking to reduce health inequalities. This paper seeks to contribute to debates about the role of participation in health by suggesting how social psychological concepts can add to the theorisation of participation. It criticises traditional concepts of development and introduces some of the challenged that are present for development and community theorists in conditions of rapid globalisation. The paper proceeds to demarcate the space which a social psychology of participation occupies within the terrain of existing research into the health-society interface. The concepts of empowerment and social capital are identified as important starting points to address the relative lack of social psychological attention to community-level determinants of health. It is suggested that social identities, social representations and power are crucial elements for constructing a social psychology of participation. The paper concludes by highlighting the vital link that should exist between the development of theory and practical interventions. Paulo Freire's notion of conscientisation is a guiding notion throughout the paper. Copyright © 2000 John Wiley & Sons, Ltd.

Land Reform, Poverty Reduction, and Growth: Evidence from India

Abstract: In recent times there has been a renewed interest in relationships between redistribution, growth and welfare. Land reforms have been central to strategies to improve the asset base of the poor in developing countries thought their effectiveness has been hindered by political constraints on implementation. In this paper we use panel data on the sixteen main Indian states from 1958 to 1992 to consider whether the large volume of land reforms as have been legislated have had an appreciable impact on growth and poverty. The evidence presented suggests that land reforms do appear to be associated with poverty reduction.

Technical opinion: Information system security management in the new millennium

Abstract: R apid advances in electronic networks and computerbased information systems have given us enormous capabilities to process, store, and transmit digital data in most business sectors. This has transformed the way we conduct trade, deliver government services, and provide health care. Changes in communication and information technologies and particularly their confluence has raised a number of concerns connected with the protection of organizational information assets. Achieving consensus regarding safeguards for an information system, among different stakeholders in an organization, has become more difficult than solving many technical problems that might arise. This “Technical Opinion” focuses on understanding the nature of information security in the next millennium. Based on this understanding it suggests a set of principles that would help in managing information security in the future.

Biotechnology and the European public

Abstract: The latest European sample survey of public perceptions of biotechnology reveals widespread opposition to genetically modified (GM) food in much of Europe, but public attitudes to medical and environmental applications remain positive.

Crime and Economic Incentives

Abstract: In economic models of crime, changing economic incentives alter the participation of individuals in criminal activities. We critically appraise the work in this area. After a brief overview of the workhorse economics of crime model for organizing our discussion on crime and economic incentives, we first document the significant rise of the economics of crime as a research field and then go on to review the evidence on the relationship between crime and economic incentives. We divide this discussion into incentives operating through legal wages in the formal labor market and the economic returns to illegal activities. Evidence that economic incentives matter for crime emerges from both.

Value-at-Risk and Extreme Returns

Abstract: We propose a semi-parametric method for unconditional Value-at-Risk (VaR) evaluation. The largest risks are modelled parametri- cally, while smaller risks are captured by the non-parametric empirical dis- tribution function. A comparison of methods on a portfolio of stock and option returns reveals that at the 5 % level the RiskMetrics analysis is best, but for predictions of low probability worst outcomes, it strongly underpre- dicts the VaR while the semi-parametric method is the most accurate. Valeurs-a-Risque et les rendements extremes RESUME. - Nous presentons une methode semi-parametrique pour evaluer la valeur-a-risque (VaR). Les risques les plus grands sont modeli- ses parametriquement, alors que les petits risques sont approches par la distribution empirique. Une comparaison des methodes sur les rendements d'un portefeuille d'actions et options montre qu'au niveau de confiance de 5 %, la methode proposee par J. P. MORGAN (RiskMetrics) est la meilleure, mais que pour les predictions pour les plus grandes pertes a des bas niveaux de probabilite, la methode semi-parametrique est superieure, la methode RiskMetrics sous-evalue la VaR.

Time series analysis of non‐Gaussian observations based on state space models from both classical and Bayesian perspectives

Abstract: The analysis of non-Gaussian time series by using state space models is considered from both classical and Bayesian perspectives. The treatment in both cases is based on simulation using importance sampling and antithetic variables; Markov chain Monte Carlo methods are not employed. Non-Gaussian disturbances for the state equation as well as for the observation equation are considered. Methods for estimating conditional and posterior means of functions of the state vector given the observations, and the mean-square errors of their estimates, are developed. These methods are extended to cover the estimation of conditional and posterior densities and distribution functions. The choice of importance sampling densities and antithetic variables is discussed. The techniques work well in practice and are computationally efficient. Their use is illustrated by applying them to a univariate discrete time series, a series with outliers and a volatility series.

Modern treaty law and practice

Abstract: This new edition of a textbook first published in 2000 provides a comprehensive account of the law of treaties from the viewpoint of an experienced practitioner. As such, it is the first, and only, book of its kind. Aust provides a wealth of examples of the problems experienced with treaties on a daily basis, not just when they are the subject of a court case. He explores numerous precedents from treaties and other related documents, such as memorandums of understanding (MOUs), in detail. Using clear, accessible language, the author covers the full extent of treaty law, drawing examples from both treaties and MOUs. Modern Treaty Law and Practice is essential reading for teachers and students of law, political science, international relations and diplomacy, who have an interest in treaties.

Geography and development

Abstract: The most striking fact about the economic geography of the world is the uneven spatial distribution of economic activity, including the coexistence of economic development and underdevelopment. High-income regions are almost entirely concentrated in a few temperate zones, half of the world's GDP is produced by 15 percent of the world's population, and 54 percent of the world's GDP is produced by countries occupying just 10 percent of the world's land area. The poorest half of the world's population produces only 14 percent of the world's GDP, and 17 of the poorest 20 nations are in tropical Africa. The unevenness is also manifest within countries and within metropolitan concentrations of activity. Why are these spatial differences in land rents and wages not bid away by firms and individuals in search of low-cost or high-income locations? Why does economic activity cluster in centers of activity? And what are the consequences of remoteness from existing centers? The authors argue that understanding these issues is central for understanding many aspects of economic development and underdevelopment at the international, national, and subcontinental levels. They review the theoretical and empirical work that illuminates how the spatial relationship between economic units changes and conclude that geography matters for development, but that economic growth is not governed by a geographic determinism. New economic centers can develop, and the costs of remoteness can be reduced. Many explicit policy instruments have been used to influence location decisions. But none has been systematically successful, and many have been very costly-in part because they were based on inappropriate expectations. Moreover, many ostensibly nonspatial policies that benefit specific sectors and households have spatial consequences since the targeted sectors and households are not distributed uniformly across space. These nonspatial policies can sometimes dominate explicitly spatial policies. Further work is needed to better understand these dynamics in developing countries.

Strategic Ignorance as a Self-Disciplining Device

Abstract: We analyse the decision of an agent with time-inconsistent preferences to consume a good that exerts an externality on future welfare. The extent of the externality is initially unknown, but may be learned via a costless sampling procedure. We show that when the agent cannot commit to future consumption and learning decisions, incomplete learning may occur on a Markov perfect equilibrium path of the resulting intra-personal game. In such a case, each agent's incarnation stops learning for some values of the posterior distribution of beliefs and acts under self-restricted information. This conduct is interpreted as strategic ignorance. All equilibria featuring this property strictly Pareto dominate the complete learning equilibrium for any posterior distribution of beliefs.

The Determinants of Foreign Direct Investment in Transition Economies

Abstract: Using a panel dataset containing information on FDI flows from market to transition economies, we establish the determinants of FDI inflows to Central and Eastern Europe: country risk, unit labour costs, host market size and gravity factors. In turn, we find country risk to be influenced by private sector development, industrial development, the government balance, reserves and corruption. By introducing structural shift dummy variables for key announcements of progress in EU accession we show that announcements have impacted directly upon FDI receipts but have not influenced country credit ratings. The Agenda 2000 announcement by the European Commission induced a bifurcation between the 'first wave' transition countries and the remainder of our sample. The underlying dynamics of the process illustrate that increases in FDI improve country credit ratings with a lag, hence increasing future FDI receipts. Consequently we suggest that the accession progress has the potential to induce virtuous cycles for the frontrunners but may have serious consequences for the accession laggards.

Looking in the Wrong Place for Healthcare Improvements: A System Dynamics Study of an Accident and Emergency Department

Abstract: Accident and Emergency (AE and the outputs of policy analysis runs of the model which vary a number of the key parameters. Two significant findings have policy implications. One is that while some delays to patients are unavoidable, reductions can be achieved by selective augmentation of resources within, and relating to, the A&E unit. The second is that reductions in bed numbers do not increase waiting times for emergency admissions, their effect instead being to increase sharply the number of cancellations of admissions for elective surgery. This suggests that basing A&E policy solely on any single criterion will merely succeed in transferring the effects of a resource deficit to a different patient group.

Power in partnership? an analysis of an NGO’s relationships with its partners

Abstract: This article analyses partnership relationships between NGOs and donors. Using a framework adapted from Dahl (1957) to explore issues of power in the relationships of a US-based development NGO, it questions whether the current emphasis on organizational partnership is useful or whether in practice and in theory greater recognition should be given to the importance of individual relationships. It examines whether asymmetrical relationships can be termed partnerships and highlights the potential for such a discourse to reinforce existing power inequalities. Reproduced by permission of London School of Economics

Looking Into the Black Box: A Survey of the Matching Function

Abstract: We survey the microfoundations, empirical evidence and estimation issues underlying the aggregate matching function. Several microeconomic matching mechanisms have been suggested in the literature with some successes but none is generally accepted as superior to all others. Instead, an aggregate matching function with hires as a function of vacancies and unemployment has been successfully estimated for several countries. The Cobb-Douglas restrictions with constant returns to scale perform well. Recent work has utilized disaggregated data to go beyond aggregate estimates, with many refinements and suggestions for future research.

Using Agency Theory to Design Successful Outsourcing Relationships

Abstract: Outsourcing affects thousands of companies and employees every year. Recent studies indicate that 85 per cent of all companies outsource at least one function generating billions of dollars in outsourcing contracts (ElmutiElute, KathwalaKithara & Monippallil, 1995). Transportation is one of outsourcing's biggest players. Many outsourcing attempts have proved unsuccessful and recent articles blame these failures on failed outsourcing relationships. This paper addresses these failed relationships and suggests two possible solutions to the problem. The first solution is to diagnose the relationship from both sides of the contract. The second suggestion is to engage agency theory to help design the types of contracts and relationships necessary to provide and support an environment of trust.