Showing papers in "Journal of Economic Literature in 1993"

Economic deregulation: days of reckoning for microeconomists

Abstract: ECONOMIC DEREGULATION of American industry is one of the most important experiments in economic policy of our time1 In 1977, 17 percent of US GNP was produced by fully regulated industries2 By 1988, following ten years of partial and complete economic deregulation of large parts of the transportation, communications, energy, and financial industries that total had been cut significantly-to 66 percent of GNP3 The political forces behind the decision to change the market conditions under which roughly $600 billion of U S output is produced were strong and varied, but according to political scientists Martha Derthick and Paul Quirk (1985, p 36), deregulation "would never have occurred" if economists-especially microeconomists-had not generally supported it through their research4 In retrospect, it is fair to ask: were microeconomists able to develop a theoretical and empirical framework to explain regulation and its effects and to form predictions of deregulation's effects? Were they able to predict the actual effects of deregulation? This paper surveys the evidence to address these questions and of-

Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?

Abstract: The authors are grateful to Avner Ben-Ner, Jacques Defourny, Saul Estrin, Felix FitzRoy, Barbara Lee, Bentley MacLeod, Egon Neuberger, Jeffrey Pliskin, Stephen C. Smith, and three anonymous referees for comments on various drafts of this paper. Jones acknowledges with gratitude thefinancial assistance of the National Science Foundation (Grant # 9010591). Of course, all remaining errors and any omissions are entirely the responsibility of the authors.

Bargaining with Private Information

Abstract: BARGAINING is usually interpreted as the process of arriving at mutual agreement on the provisions of a contract. In the economic realm, the prototype is exchange between a seller and a buyer of an item for money: the contract specifies the price paid for the item. In a wage negotiation, for instance, the union is the seller, the firm is the buyer, and if other terms of the contract are fixed, then the price is the base wage. In the legal realm, the prototype is disposition of a claim by a plaintiff against a defendant: the contract specifies the amount of the settlement, whereas failure to agree means proceeding to trial. Many damage suits, for instance, are settled by agreement on a payment from the defendant in exchange for the plaintiff's withdrawal of the claim; i.e., the defendant buys the claim from the plaintiff. The aggregate gain from trade in the case of exchange is the difference between the buyer's and the seller's valuation of the item; in the case of a damage suit, it is the sum of the parties' costs of a trial. These two prototypes of bilateral bargaining provide ample motivation for the topics discussed in this paper. In both economic and legal contexts, agreement may be delayed as the parties continue negotiations, or agreement might never be reached. Delay is usually costly, due to the opportunity costs of the parties' delayed receipt of their gains from trade and to expenses incurred during the process. Opportunity costs might be represented by lost production or forgone interest income; and expenses, by fees paid to brokers, attorneys, or other agents. Such costs loom large in prominent cases: corporate acquisitions, strikes by labor unions, and major civil suits. 1

European Monetary Unification

Abstract: Work on this paper was begun during visits to the International Finance Division of the Board of Governors of the Federal Reserve System and the Research Department of the International Monetary Fund and completed during visits to the Bank of France and the Institute for Advanced Study in Berlin. I gratefully acknowledge the support and hospitality of all these institutions while absolving them of responsibility for the views expressed here. Research assistance was provided by Ansgar Rumler andfinancial support by the Center for German and European Studies of the University of California. For comments on portions of this work I thank Tamin Bayoumi, Lorenzo Bini-Smaghi, Paul De Grauwe, Jeffry Frieden, Alexander Italianer, Peter Kenen, Paul Masson, Thomas Mayer, Ronald McKinnon, Jacques Melitz, Richard Portes, Gianni Toniolo, Jiirgen von Hagen, and Charles Wyplosz.

The Dynamics of Industrial Capitalism: Perspectives on Alfred Chandler's Scale and Scope

Abstract: Financial support from the Sloan Foundation to the Consortium on Competitiveness and Cooperation at the University of California at Berkeley is gratefully acknowledged Helpful comments were received from Richard Nelson, Peter Grindley, David Mowery, FM Scherer, Oliver Williamson, and Klaus Zimmer, as well as from the reviewers and editors of the Journal

The Market-Power Foundations of Macroeconomic Policy

Abstract: THE PREDOMINANT THEORY of markets, namely the Walrasian or Arrow Debreu model of general competitive equilibrium, implies that unemployment never appears and that economic policy never has universally good effects. First, it postulates that the supply and demand by price-taking agents equilibrates in the market for any commodity, including labor. Hence, no unemployment occurs. Second, Walrasian equilibria are efficient, as anticipated by Adam Smith's "invisible hand," and as precisely stated by the first fundamental theorem of welfare economics. ("Efficient" is synonymous with "Pareto optimal.") Thus, either economic policy has no effects or it hurts some group of citizens. The first fundamental theorem does require some substantive conditions, such as complete markets and the absence of physical externalities.' It is nevertheless a powerful result, because it indicates that, except for distributional concerns, the public interest is well served without the need for cooperation, coordination, or public intervention, as long as all economic agents are price takers. Situations that seem to call for some form of coordination, as the presence of multiple equilibria or of complementarities in production, are in fact covered by the theorem. The possibility of multiple equilibria is totally natural not only in the Walrasian system but, more generally, in any model defined by a system of nonlinear equations. For instance, Walrasian as well as oligopolistic models may well have three equilibria, one of which has high wages and low employment, whereas another one has low wages and high employment.

Clear and convincing evidence: Measurement of discrimination in america

Abstract: Auditing is a technique used to test for discrimination. The concept is straightforward: Two individuals are matched on all relevant characteristics except the one presumed to lead to discrimination. Each person then applies for the same job, housing, mortgage loan, or credit card. The differential treatment they receive provides a measure of discrimination. The authors argue that the value of auditing has grown in the current legal and political environment because it can detect subtle forms of discrimination.