Democracy, Foreign Direct Investment and Natural Resources

Existing studies assume that the impact of democracy on FDI is the same for re- source exporting and non-resource exporting countries. This paper examines whether natural resources alter the relationship between FDI and democracy. We estimate a linear dynamic panel-data model using data from 112 developing countries over the period 1982-2007, and we .nd that there is some critical value of the share of miner- als and oil in total exports below which democracy enhances FDI, and above which democracy reduces FDI. We identify 90 countries where an expansion of democracy may enhance FDI and 22 countries where an increase in democratization may reduce FDI.Democracy, Foreign Direct Investment, Natural Resources.

Ledger Provision in Hog Marketing Contracts

Price-dependent loan agreements at low interest rates have sometimes been included in North American hog sector long-term marketing contracts. We show that a general form of this stipulation can be viewed as a hybrid between a forward rate agreement and a bundle of commodity spot options. In some cases, the provision amounts to a commodity swap. These observations provide an approach to valuing the provision. Historical data are used to estimate expected payouts to the producer under the contract feature.

Evaluating the Saskatchewan Short-Term Hog Loan Program

The Saskatchewan short-term hog loan program of 2002 provided a non-market credit line to participating hog producers. The repayment conditions for cash advances committed to by the provincial government depend on later hog prices, and so the program has derivative contract attributes. We model the contracts and use an estimated spot price stochastic process to establish summary statistics for producer benefits from the program.

Institutions and the East Asian miracle : asymmetric information, rent - seeking, and the deliberation council

North (1984) argues that it is not the cost of transport but the cost of transactions that prevents economies from realizing well-being - and that institutions matter because they affect the costs of transactions. The authors analyze the role of the deliberation council - an institution common to most of the high performing Asian economies - in reducing the crippling effect of rent-seeking. A deliberation council is a consultative committee whose members include high-ranking government officials and representatives from the private sector - usually from industry (especially high business) and academia, sometimes from consumer groups and labor. Councils can be organized by industry or sector (as with the Industrial Structure Council of Japan) or by theme or function (as with Thailand's Joint Public Sector-Private Sector Consultative Committee). Generally, the deliberation council has a quasi-legislative authority, and policies cannot be introduced or changed without its recommendation and approval. Unlike a legislative committee, its private sector reprensentatives are not elected but are chosen (by industry or labor, for example, and not necessarily through voting) and its government officials generally become representatives by virtue of appointment to their present position. The authors construct a two-stage incomplete information game model with two identical firms and various links to real-world processes. It is a highly simplified model that focuses on the awarding of government contracts. They use the model to gain insight into the problem of rent-seeking in developing countries and to test their hypothesis. Rent-seeking occurs partly because people are uncertain about the intentions and plans of potential competitors - they engage in rent-seeking for fear that not doing so might give their competitors a huge advantage. To the extent that the council generates an exchange of information, this uncertainty is reduced, so one would expect less rent-seeking. Such exchanges reduce information (transaction) costs and thus improve efficiency. The model confirms that firms are better off it they can communicate their true valuations to competitors than when they cannot. The deliberation council induces participation to reveal true information, and the model shows that the payoffs are better with communication than without.Health Economics&Finance,Economic Theory&Research,Environmental Economics&Policies,ICT Policy and Strategies,Health Monitoring&Evaluation

Speculation and Price Stability Under Uncertainty: A Generalization

Since Friedman maintained that profitable speculation necessarily stabilizes prices, the necessary and sufficient conditions for his conjecture to hold have been derived following ex post analyses. However, within these frameworks, no uncertainty is involved. In this paper we assume the nonspeculative excess demand functions are always linear but with random slopes and intercepts (i. i. d. across time). Employing dynamic programming approaches, the optimal complete speculation sequence for a monopolistic speculator (which maximizes his long-run expected profits) can be characterized. Furthermore, Friedman's conjecture holds under this sequence. As for competitive speculation cases, we consider three variants arising from deviations of the monopolistic case. Of these, two models establish the property that Friedman's conjecture holds for optimal speculation sequences. However, since this conjecture might be falsified for the other model, a necessary condition is derived. Also, an example is given which shows that, if uncertainties are involved, a destabilizing optimal speculation sequence exists even with linear nonspeculative excess demand functions

Profitable Speculation and Linear Excess Demand

Since Friedman maintained that profitable speculation necessarily stabilizes prices, there had been many debates. Farrell concluded these debates by showing that (i) for a two-period model, any continuous negatively sloped non-speculative excess demand function would validate Friedman's conjecture if there is no lag structure, and (ii) for a T-period model with T≥3, negatively sloped linear non-speculative excess demand is necessary and sufficient for Friedman's conjecture to be true if there is no lag structure. Later, Schimmler generalized Farrell's results to lag-responsive nonspeculative excess demand cases. However, there are some problems in Farell's and Schimmler's approaches which invalidate their proofs. In this paper, we will point out these problems and show that after correcting these slips, Farrell's two results are in fact correct. Also, we will redo Schimmler's problem for time-independent non-speculative excess demand functions. The conclusions derived are (i) for two-period models, any continuously differentiable non-speculative excess demand f(P_t,P_(t-1)) with f_1 (P_t,P_(t-1) )<0,f_2 (P_t,P_(t-1) )≤0 [where f_(t-s+1) (P_t,P_(t-1) )=∂f(P_t,P_(t-1) )/〖∂P〗_s , s=t-1, t] will validate Friedman's conjecture; (ii) for T-period models (T≥3), within the class of twice-continuously differentiable functions, linear non-speculative excess demand functions f(P_t,P_(t-1),⋯P_(t-T+1)) satisfying f_1<0,f_2=f_3=⋯= f_(t-T+1)=0 represent necessary and sufficient conditions for Friedman's conjecture to be true

Speculative Holdings under Linear Expectation Processes---A Mean-Variance Approach

In this paper, we considered a discrete time abstract market model where the associated commodity is storable. Also, instead of assuming expected profit maximizing speculators, we assumed they employed mean-variance approaches. Within this framework, given a non-degenerate quadratic inventory cost function and a linear expectation process, the optimal speculative carryover may be decomposed into four components of which two are special features arising from mean-variance considerations. Furthermore, assuming a linear non-speculative excess demand function, Friedman's conjecture (i.e., profitable speculation necessarily stabilizes prices) holds from an ex ante point of view

Selecting the Best Linear Regression Model: A Classical Approach

In this paper, we apply the model selection approach based on Likelihood Ratio (LR) tests developed in Vuong (1985) to the problem of choosing between two normal linear regression models which are not nested in each other. First we compare our model selection procedure to other model selection criteria. Then we explicitly derive the procedure when the competing linear models are non-nested and neither one is correctly specified. Some simplifications are seen to arise when both models are contained in a larger correctly specified linear regression model, or when at least one competing linear model is correctly specified. A comparison of our model selection tests and previous non-nested hypothesis tests concludes the paper

Evaluating the Saskatchewan Short-Term Hog Loan Program

The Saskatchewan short-term hog loan program of 2002 provided a non-market credit line to participating hog producers. The repayment conditions for cash advances committed to by the provincial government depend on later hog prices, and so the program has derivative contract attributes. We model the contracts and use an estimated spot price stochastic process to establish summary statistics for producer benefits from the program