ALBERT

Description: A prominent variant of the compensation hypothesis rests on the premise that increased trade exposure heightens domestic economic volatility, prompting demands for compensation via generous systems of transfers and services. Economic theory suggests that because the expansion of international trade entails integration into larger, deeper, more stable markets, and may entail risk diversification, it may actually promote rather than reduce stability. By the same token, however, economic theory also suggests that smaller economies should experience greater levels of volatility than larger economies, and thus also greater levels of insecurity. The evidence presented here suggests that the level of domestic economic volatility in the developed economies, during the latter half of the twentieth century, may indeed have been driven by the size and depth of markets. And critically, for these countries international trade integration may have eased rather than accentuated domestic economic volatility.

Description: Although the influence of economic factors has long dominated the analysis of corporate political action, the role of organizational factors is increasingly seen as important in explaining the phenomenon. Building upon a recent study (Martin 1995) that emphasizes the prominence of organizational factors in political decision-making, we revisit a previously used literature, reconceptualize the relationship between economic and organizational factors and corporate political action as one of mediation, and employ new data and methods to test this relationship. Our findings demonstrate emphatically the importance of organizational factors in understanding corporate political action.

Description: This paper tackles the question of trade strategy and differential economic performance in Latin America, with a focus on the four countries—Argentina, Brazil, Chile, and Mexico—most important for the successful completion of a full Western Hemispheric integration scheme. The analysis distinguishes between a ‘standard’ market strategy that assigns the task of economic adjustment to market forces, and a ‘competitive’ strategy that more actively employs a range of public policies to facilitate adjustment and correct for instances of market failure. The choices of strategy are explored against the backdrop of international pressures, government business relations, and institutional reform within the state. Two main conclusions are drawn: first, the competitive strategy strongly correlates with more favorable macro- and microeconomic outcomes and, second, mediocre economic performance under a standard market strategy has undermined the spirit of collective action that will be necessary to forge ahead at the hemispheric level.

Description: In 1997, President Clinton became the first President not awarded fast-track trade negotiating authority since this congressional delegation of trade policymaking authority first began in 1934. Fast-track's failure also represents a case of an unsuccessful business political strategy since business supporters of the measure were easily defeated by labor and environmental opponents, despite the many political ‘privileges’ that business possessed. This case study describes why fast-track is important to the future of US and global trade policy and examines the main reasons for its failure. In doing so, it illustrates theories of pivotal politics, the median voter, collective action, issue framing, international trade's welfare costs and benefits, and international relations that often arise in research and courses on the non-market environment of business, international trade, and international political economy.

Description: The globalization of production simultaneously opens up new opportunities for firms and threatens them with intensified foreign competition. Studies of the resulting producer demands for commercial policy have not yet incorporated two recent trends: the increasing significance of the trade in services and the proliferation of international corporate alliances. With two US industries (airlines and telecommunications) as illustrative case studies, it can be seen that, to a surprising extent, even competitive global industries will seek to block foreign competitors from entering local markets via alliances. The level of political conflict in response to these alliances is related to the issue of market access at home and abroad. Market barriers abroad provide global producers with the motive for seeking contingent restrictions. Restrictions at home give domestic firms the opportunity to oppose alliances without worrying that competitors could enter the market through foreign direct investment. The model suggests some important differences in the political reactions to globalization between service and manufacturing firms.

Description: Beginning in the early 70s, ACME, a highly innovative and successful U.S. chemical firm, began commercializing an important and versatile polymer invention. This case study chronicles the many travails faced by ACME in obtaining patent protection for its innovations in major developed economies. ACME's experiences suggest that international differences in patent regimes that stem from ideological, historical, and institutional differences are pervasive, and need to be accounted for in a company's patenting approach. International strategy in the patent area is thus inherently multi-domestic. Further, we also observe that in global industries, obtaining a modicum of exclusivity through strong patent protection in certain key markets may be adequate to preserve a firm's competitive advantage versus multinational rivals. Moreover, a firm's patent strategy seems intrinsically integrated with its continuing innovative and commercial performance.

Description: The activist foreign trade missions of the Clinton Administration are intended to open strategically important, but often difficult-to-enter, emerging markets to US foreign investment with government-to-government negotiations. Some research streams suggest that participation in a trade mission should benefit firms, while others suggest that participation should have no discernible benefit. This paper performs several event studies to analyze the stock return of a portfolio of the publicly traded firms participating in trade missions from 1993 to 1996. It finds that participants did not experience positive or significant abnormal stock returns as a result of mission participation, regardless of how the event date is defined or the data segmented.

Description: This essay tests the hypotheses and claims of models of internationalization that draw on neo-classical trade theory. Using the influential Frieden-Rogowski model, it examines the responses of Iraq and Algeria to the oil price shocks of the 1980s and 1990s. The cases demonstrate that even the most basic assumptions and predictions of this economistic model are flawed. The Frieden-Rogowski model misrepresents the mechanisms through which price shocks are translated into policy, makes inaccurate predictions about how terms of trade affect policy or sectoral performance, fails to explain the duration of lags between price changes and policy changes, and neglects important differences in a variety of major outcomes. I argue that even in the very similar cases of Algeria and Iraq, policy changed not in response to domestic pressures generated from changes in relative prices, but as a result of a severe fiscal crisis that stripped both governments of their ability to protect domestic constituents from world prices.

Description: Despite extensive research on political activity on the part of corporations, clear and consistent findings remain elusive. We identify three reasons for this failure. First, most of the empirical literature on corporate political activity simply studies the wrong phenomena by examining political action committees rather than lobbying more generally. Second, the literature studies an excessively narrow sample of organizations that might engage in lobbying, focusing almost always on extremely large corporations, which inevitably attenuates variance on many of the variables hypothesized to influence engagement in political activity. And third, prior work is rarely attentive to the diversity of corporate activities, narrowly conceptualizing vital aspects of the business context that might influence decisions to engage in political activity. Based on this critique, we develop and test new models of corporate political activity, finding that the diversity of the economic context within which firms work and firm size matter a great deal, if in ways somewhat different from those reported in prior work.

Description: This paper provides a model of integrated market and nonmarket strategies in the context of an industry facing regulation that differentially affects the firms in the industry. The regulation is chosen in a majority rule institution, and to affect the stringency of the regulation, the firms in the industry can take nonmarket action in the form of providing support to legislators based on how they vote. The nonmarket action is considered in the context of client and interest group politics, where the latter involves competition with an environmental interest group. An integrated strategy is composed of the firm's strategy for its market environment and its strategy for its nonmarket environment. Also the integrated strategies of the firms must constitute an equilibrium in their market competition and an equilibrium for their nonmarket competition, including that with the environmental interest group. Collective action in the form of coalition building and rent chain mobilization is also considered.

Description: How do multilateral institutions influence the strategic choices and actions of international managers? This paper addresses the question by exploring the impact of the World Trade Organization's (WTO) decision-making process on multinational enterprises (MNEs). We discuss the three phases of the WTO decision-making lifecycle - the formulation of trade rules, the implementation of those rules, and the enforcement of the rules – and propose a strategic adjustment framework for understanding how companies alter their strategies and structures in response to the WTO's rules and operations. We argue that the increased relevance of multilateral rules and enforcement mechanisms – embodied in the WTO - is an important influence on MNE strategies and structures because of the increasing embeddedness of the WTO in national levels of regulation. We illustrate this through examples taken from the pharmaceutical, textiles and sugar industries sectors that have witnessed substantial multilateral regulation.

Description: Globalization is often said to lead to convergence among firm strategies. Significant differences existed in the organization of the production networks of Japanese and US firms in electronics in East Asia at the beginning of the 1990s. The sources of these differences lie in part in the relative newness of the export-orientation of Japanese companies, in weaknesses in Japanese corporate governance, in the geographical proximity of East Asian plants to Japan, and in the product mix of Japanese firms. An opening of Japanese production networks occurred in the first half of the 1990s in part in response to pressures associated with various forces of globalization, including the diffusion of capabilities, changes in technology, and the internationalization of the Japanese economy. This opening of Japanese networks caused them to converge towards their American counterparts. Partial convergence, however, coexisted with persistent diversity relative to the behavior of US networks. While nationality continued to matter, other factors affecting firms have to be incorporated into the analysis to explain the persistent diversity of firm behaviors.

Description: Using a panel data of S&P 500 Index firms covering 1998–2004, this paper compares the determinants of lobbying expenditures and campaign contributions and estimates the returns to lobbying as assessed by the financial market. Lobbying depends more on managerial incentives and protection needs beyond industry structures than contributions do. Lobbying also has a positive effect on the firm's equity returns relative to the market and, to a lesser degree, relative to its industry.

Description: Although the global economy has flourished in the current global economic governance regime, the foundations of this order are starting to crumble. Both in trade and in finance, the existing institutions are under severe stress. In trade, more and more countries undermine the WTO by implementing preferential trade agreements. In finance, the IMF has been weak for most of this decade, although it experienced a revival in the current crisis. First and foremost, this weakness of the institutions of global economic governance is the result of policies implemented by the transatlantic powers. Both the European Union and the United States are actively pursuing policies that weaken the existing institutions. In trade, there is a large gap between the official rhetoric, which highlights the importance of the multilateral regime, and the trade policy practice, which is weakening the WTO. In finance, the transatlantic powers have until very recently blocked any progress in the IMF with regard to lending policies. In addition, the EU continues to defend its unjustified overrepresentation in the IMF's governance structures. The article suggests that one of the key explanations for this development is the weak support for globalization in most OECD-countries. Confronted with no enthusiasm for globalization in their domestic constituencies, policy makers in Europe and the United States are increasingly opting for policies that will, over time, erode the existing regimes of global economic governance.

Description: This essay explores the relationship between commerce and culture in the context of the recent debate over the social effect of Wal-Mart. In spite of much public debate, little is known about how Wal-Mart affects values. Using data collected from multiple sources, we show there is little evidence that Wal-Mart makes communities more conservative or more progressive.

Description: Seeking to build on related successes in other information technology sectors, the government of India has signaled its intent to transform the country's performance in microelectronics. Facing a young and expanding population, India needs to create manufacturing jobs in promising industries, and it needs to build out from its limited high-technology base. Semiconductors are foundational in this regard. Today, there is much discussion within India about the link between semiconductors and innovation in bio-electronics, alternative energy production and storage, and various micro- and nano-devices. The government's contemporary attempt to promote the building of infrastructure for manufacturing and applied research in semiconductors highlights reasons for hope. So too does the remarkable talent now available in the Indian diaspora. But significant impediments, especially in postsecondary and graduate-level education, must still be overcome if the necessary human capital is to be developed, equipped, and deployed effectively.

Description: The U.S. is no longer providing leadership in trade policy. In recent years, we have seen a sharp turn toward a rapid proliferation of bilateral preferential trade agreements, accords that are likely to undermine the World Trade Organization (WTO). By pursuing a strategy of ‘competitive liberalization’ both on a sectoral basis under the Bill Clinton administration, and then a policy of seeking bilateral arrangements under the George W. Bush administration, this article argues that American administrations have undermined the coalition for free trade in the United States. Consequently, protectionist industries including textiles, steel, and agriculture have made further liberalization more difficult and thus the prospects for promoting continued trade liberalization have grown dimmer.

Description: How and to what effect do firms coordinate their actions to deal with the negative external effects of productive activity? Under which conditions do associations engage in self-regulation and how do they tackle the specific regulatory challenges at stake? When developing hypotheses, we first vary attributes of the information environment in which private actors interact; and, secondly, actors' preferences as a function of the problem type at hand. With respect to the environmental conditions, our findings show that a regulatory threat matters when developing associative action, whilst the evidence is less clear as regards NGO campaigns. In terms of the problem type, we find that redistributive issues and prisoner's dilemma situations are much more conflict prone than coordination/win-win type of problems. Industry actors recur to various governance devices such as flexible contract design and compensation mechanisms to solve redistributive problems. Prisoner's dilemma (PD) problems may only partially be addressed by governance devices to the extent that free-riding is controlled and sanctioned within an association. We conclude that private actors engaging in self-regulation will not successfully manage all types of conflicts. They lack powerful sanctioning tools to deal with PD situations, but prove to be able to flexibly handle redistributive problems.

Description: For many, transnational capital is one of the most important driving forces of economic globalization; yet, we know little about what determines cross-border portfolio investments. In addition to recent economic literature's focus on information asymmetries as one key determinant of cross-border investment, this study brings in a political aspect to the field of international trade in assets. The –race to the bottom’ thesis connects domestic economic policies to investment decisions and argues that capital is more likely to move towards economies characterized by economic liberalism; political institutions are also relevant for portfolio investments, because democratic institutions often provide more credible protection against predatory practices. In this study, I model bilateral portfolio investments as a function of economic policies, political institutions, and levels of transparency of sending and receiving countries as well as important international connections. Empirical findings indicate the importance of transparency to attract portfolio investments. Moreover, transnational portfolio investments are only sensitive to some fiscal policy indictors and only within the OECD countries. Therefore, for non-OECD countries, there is still ‘room to move’ in maneuvering different aspects of fiscal policies. Finally, I find that investors care about the nature of political institutions as democratic institutions tend to be associated with higher levels of portfolio investment inflows. This is good news for developing countries that have undergone or are in the process of democratization. In addition to democratizing for peace, increased foreign capital further incentivizes a progression towards democratization.

Description: This article traces the ascent of the International Accounting Standards Committee (IASC) from an obscure group with little influence in the early 1970s to a pre-eminent position as global accounting standard-setter in 2001. I argue that the rise of the IASC can be explained by several factors, including the IASC's ability to build legitimacy through technical expertise, to embed itself in a network of international organizations, and to benefit from rivalries among developed and developing countries and among European and American regulators. But the most important reason for the IASC's success is that its core values aligned strongly with the interests of the most powerful regulator-the US Securities and Exchange Commission.

Description: In recent years programs of private regulation have spread from North America and Europe to developing countries around the world. Though central to debates over public versus private international governance, little is known about the actual operations of these programs, especially in developing countries where weak state regulation has failed for decades to control environmental degradation. This paper assesses the effectiveness in Argentina of two prominent global private environmental regulatory programs'the chemical industry's Responsible Care® program and the Forest Stewardship Council. Argentina presents an intriguing country case because, despite conditions and policies that should support such programs, their implementation there has been stunted when compared against other regional cases. A focus on the demand and supply factors that shape these programs in Argentina reveals that market demand is a necessary but insufficient condition for regime effectiveness. Supply-side factors such as industry characteristics, public policies, and the institutional culture of firms significantly influence program implementation. Some transnational corporations helped export these program to Argentina; however, many others have shown opposition or disinterest, stifling program development. Also, feckless and unstable state agencies have created an institutional environment unfavorable even for private initiatives aimed at bypassing government interference.

Description: In this paper we analyze the distribution of pay and changing trends of inequality in Argentina and Brazil, illuminating the specific winners and losers, by region and by economic activity (sector). In both countries we find that inequality rose in the neoliberal period, but that it declined following the severe crises of neoliberal policy, in 1993 in Brazil and in late 2001 in Argentina. This period of post-neoliberalism is characterized in both countries by a decline in the economic weight of the financial sector and a recovery of the position of the civil service. In both countries, the rise in inequality leading to the crisis produced an increase in the relative position of the major metropolitan centers; this positional advantage also declined modestly in the post-crisis recovery period.

Description: This paper explores the East-West dichotomy of outsourcing in the European Union in the context of its 2004 eastward enlargement. The purpose of the study is to shed light on the connection between outsourcing and the causal logic of regional integration. The conventional view is that the transfer of business operations from Western Europe to low-cost locations to the east represents a process of outsourcing West-European jobs which deprives the EU core of growth opportunities to the exclusive benefit of the new members from Eastern Europe. This analysis posits the systemic functions of EU outsourcing as a mechanism of economic homogenization in the regional market along its three principal dimensions: investment, commodity trade, and labor mobility. At the macro-level, outsourcing complements capital movements and trade, and acts as a substitute for labor mobility. Keeping labor mobility “down” is the main value added of EU outsourcing. Empirically, its relevance to the regional market is established in an input-output framework of relationships with indicators of economic convergence (homogenization effects) and labor mobility (substitution effects) in the EU. Positive correlations with indices of business synchronization and weak negative correlations with measures of labor supply and wages suggest that outsourcing fits well both with strategies fostering market integration and those counterbalancing the politically sensitive labor mobility in the EU. There is no significant evidence to suggest that, at the aggregate level, outsourcing has independent substitution effects with regard to unemployment rates and wages in Western Europe. The geographic expansion of EU integration, therefore, is not a proxy for losses of social welfare in the West. The paper concludes that as the cost efficiency and resource allocation functions of outsourcing facilitate the homogenizing dynamics of regional integration, it is likely to become increasingly subsumed under EU-level regulation and monitoring in a trade-off between the regional interest and domestic sectoral concerns.

Description: This study examines the relationships between deregulation, business strategy (low cost, differentiation, and scope), size, and firm performance in the U.S. airline industry based on archival data for the Major, National, and Large Regional air carriers in the U.S. from 1972 to 1995. Cross-sectional time series regression analysis shows that deregulation had a significant impact on the strategic choices made by airlines. Results also support a significant relationship between business strategy and firm performance. Further, the study found that firm size moderates the environment-business strategy relationship and the business strategy-firm performance relationship, thereby supporting the salience of firm size as a contingency variable in strategy studies.

Description: Compensation hypothesis, which has established a link between trade openness of countries and levels of government spending, has been widely accepted in the literature on trade policy and international globalization. However, the nature of the distribution effects produced by trade is likely to determine the existence of more or less redistribution demands from the median voter, and therefore government growth. In this paper I hypothesize that the effects of trade openness on redistribution demands are not homogeneous between countries, and I argue that they depend both on the type-of-factor endowment of the economy and the size of the sectors more likely to be affected by trade. I test this hypothesis with ISSP data for 23 countries, both with a country level and an individual level analysis. The results show that redistribution demands issued from trade openness of the median voter of a country are largely conditional on GDP per capita and size of potential loser sectors such as manufacturing: while trade has a negative effect on pro-redistribution preferences in “poor” and/or in “low manufacturing” countries; it positively affects pro-redistribution preferences in “rich” and/or in “high manufacturing” countries. Additionally, I empirically observe that the size of the loser sector plays a more important mediating role than the type-of-factor endowment of the economy.

Description: In 1998, the domestic steel industry in the United States devised and executed a complex and sophisticated effort to achieve an effective non-market response to a sudden, persistent, and damaging surge of imported steel. This campaign lasted until 2002, when President George W. Bush invoked Section 201 of the U.S. trade laws to impose tariffs on imports of most steel products. This case of the steel industry's trade policy campaign provides an opportunity to examine selected models of protection-seeking industries and lobbying to ask why and how the steel coalition achieved this extraordinary governmental response. These questions are explored though a descriptive case of the steel industry's protection-seeking campaign followed by a comparative examination of previous models of protection-seeking firms, and lobbying to achieve protectionist policies. A comparison with selected models of the determinants of protection-seeking and factors affecting lobbying strategies show that most, almost all, were present in the steel case. In fact, a meta-strategic approach that transcends the customary understanding of lobbying is suggested in a complex policy environment. Such an environment can be characterized by: the need to influence multiple governmental entities – legislative, regulatory, executive; the desire for multiple outcomes with varying levels of specificity – laws or resolutions, administrative rulings, policy choices; interactions between different levels and branches of government; employment of coordinated interrelated lobbying techniques; and simultaneity of these factors.

Description: Although scholars have begun to explore the determinants of public attitudes toward trade policy, we still do not know whether these attitudes have policy consequences. This paper presents the first systematic analysis of this question. I find that higher public support for free trade leads to lower tariffs, but only in democracies. I also find that democracy leads to lower tariffs only where public support for free trade is relatively high. Hence, although both public opinion and regime type are important, neither matters independently of the other. This finding suggests a need for further research on the conditional effects of both.

Description: Is it possible to generate more efficient outcomes with respect to public procurement in general and defense acquisition in particular? Or are cost overruns inevitable when it comes to major engineering projects, like the development of modern weaponry? In this article, we draw on a unique data set of nearly 50 French armaments contracts in order to examine how one government has reformed its defense acquisition process over the past twenty years. Beginning in the early 1990s, France embarked on a series of policy reforms that enabled the state to contain skyrocketing weapons costs. We emphasize three, inter-related aspects of the defense acquisition environment in France that favored cost containment: first, hard budget constraints; second, the great technical capacity that the French government brought to bear on the weapons acquisition process, coupled with its iterative relationship with a small number of suppliers; and third, the use of contracting techniques that empowered project managers.

Description: The introduction to the special issue develops a systematic and theoretically grounded framework for assessing business power in global governance. It is shown that power is said to have shifted from the world of states to the world of business. However, in order to evaluate such a claim first a differentiation of power in its instrumental, structural, and discursive facets is necessary. It is furthermore explained that the strength of such a three-dimensional assessment is that it combines different levels of analysis and considers actor-specific and structural dimensions and their material and ideational sources. Following a short introduction to the more empirical articles is provided summarizing their commonalities and differences.

Description: Research on conflict in resource-rich countries suggests that resource extraction companies contribute to tension but not development. In recent times, public-private partnerships (PPPs) have flourished, in which set up regulation is not against business but in joint cooperation with corporate actors. Yet PPPs are criticized for serving business self-interest and increasing business power rather than the common good. The paper takes the Kimberley Process and the diamond industry as an example to examine the multi-faceted nature of business power when this PPP was negotiated. The core of the argument is that realist-informed perspectives about business power in PPPs and constructivist accounts emphasizing socialization and social learning processes only tell one part of the story. While demonstrating that the diamond industry acted as a both a socializing and socialized agent, the analysis of the different facets of power shows that structural and discursive power were crucial elements in making socialization happen in the first place.

Description: Do neoliberal economic policies help or hinder human development? Many have argued that such policies promote economic stability and growth, which may have indirect positive effects on human welfare. Others claim that neoliberal policies retard human development. We argue that neoliberal economic policies may improve the human welfare in ways that are independent of their effects on economic performance. Specifically, this paper hypothesizes that open international trade policies, low-inflation macroeconomic environments, and market-oriented property rights regimes promote human development across the world. We test this argument by examining the impact of several measures of neoliberal policies on infant mortality rates across the world between 1960 and 1999. Results suggest that openness to imports, long-term membership in the GATT and WTO, low rates of inflation, and effective contract enforcement are each associated with lower rates of infant mortality across the world, even when controlling for countries' economic performance.

Description: Drawing upon a comprehensive database of contemporary protectionism, this paper offers an initial assessment of the extent to which our understanding of protectionism may have to evolve. While some long-standing features of protectionism appear to have endured (such as the distribution of discriminatory measures across economic sectors), specific corporate needs arising from the global financial crisis and particular national attributes are more likely to have influenced the choice of beggar-thy-neighbor policy instruments than binding trade rules and other international accords.

Description: In this paper we deconstruct the popular book by Thomas Friedman which argues that the world is integrated through the advent of a new form of globalization based on the Internet. We use the logic of international business strategy to demonstrate that Friedman's examples of worldwide integration are special cases which ignore the empirical realities of multinational enterprises (MNEs). We provide empirical evidence to demonstrate that the world's largest MNEs do not operate globally, but sell and produce the vast majority of their output within their home region of the triad. We develop a new analytical framework to explain the limited nature of Friedman's thinking, and we contrast this with the more robust frameworks available in international business. The latter frameworks, which take into account country level and regional level barriers to integration, are better at explaining the activities of MNEs. We conclude that, from the viewpoint of international business strategy, the prescriptive thinking from Friedman is misleading if it is believed that a global strategy is feasible. Instead, MNEs need to develop strategies to accommodate the realities of intra-regional integration and to overcome the liabilities of inter-regional expansion across the triad.

Description: The modernization of the banking sector, and particularly the big four state owned commercial banks, has a top priority on the Chinese reform agenda. Three of the four state banks found foreign strategic investors as minority shareholders and domestic banks now face more competition from global players since the country's WTO commitments came fully into effect at the end of 2006. A comprehensive approach to reform aims at pushing China's state banks into the league of global leading financial institutions within a few years time. But is this aim feasible despite prevalent state dominance? To shed light on the role and impact of the state in promoting sound risk management practices this paper focuses on the political economy of law implementation. Two main conclusions are drawn: (1) the direction of action is significantly different from reform outcomes due to weak incentives to enforce respective policies and as a consequence non-performing loan accumulation continues; and (2) on a more general level banking regulation in China illustrates that a normative approach based on international best practice is insufficient to address the issue of financial stability in many emerging and developing countries because it neglects the role of the institutional embeddedness of banking reform.

Description: American political campaigns have become a multi-billion dollar industry. Rather than assume that only political factors affect the campaigns that voters see, scholars must assess the importance of the business incentives associated with political consulting. Economic competition does not match political competition; firms compete for clients within the two major parties, against their political allies. I argue that the supply of firms in each party, the revenue models in the industry, the diversification of client types, and the cooperative structure in each party all may affect political campaigns. The way the industry operates and the different patterns of behavior within each party create incentives and practices that may alter campaigns in response to economic factors having little to do with optimal political strategy. Using two original surveys and a network analysis, I analyze how the industry is changing and how consultants in each party cooperate and compete.

Description: Jiangsu and Zhejiang are of two of China's most prosperous and dynamic provinces. This paper first presents a factual account of two empirical phenomena: 1) FDI has played a more substantial role in the economic development of Jiangsu than in Zhejiang, and 2) ownership biases against domestic private firms in Jiangsu were more substantial than in Zhejiang. The paper hypothesizes that there is a connection between these two empirical phenomena. Specifically, ownership biases against domestic private firms increase preferences for FDI because FDI provides a measure of relative property rights security. Thus a biased domestic private firm has an incentive to move its assets and/or future growth opportunities to the foreign sector. The paper uses two private-sector surveys—one conducted in 1993 and the other in 2002—to provide an empirical test of this hypothesis. Our analysis shows, controlling for a variety of firm-level attributes and industry and regional characteristics, those private firms which perceive ownership biases to be more severe are more likely to form joint ventures with foreign firms.

Description: The rentier-state literature pays little attention to the initial political conditions that shape the way an oil-rich country develops its resources. One of the key causal mechanisms linking oil wealth and regime type is the relationship between foreign investors and host governments. Especially in the developing countries that depend on international financing and expertise, the role of foreign capital in fashioning the balance of power in the political system and thereby the distribution of oil wealth becomes ever more important. As the experiences of Azerbaijan and Russia in the 1990s demonstrate, among oil-rich states in the developing world, those with authoritarian regimes tend to fare better in terms of attracting FDI in the oil sector than states with democratizing (or hybrid regimes). The durability of some authoritarian regimes in the developing world is partly a function of this external legitimation from foreign investors.

Description: We are currently witnessing the evolution of global accounting standards, as developed by the International Accounting Standards Board (IASB). This is a remarkable development, not only because accounting standards are relevant for all business operations. Whereas accounting standard-setting has previously been a task of national authorities, the process will now be managed internationally by a London-based organisation whose parent foundation is a private company incorporated in the US state of Delaware and mainly financed by the Big Four accounting firms. Furthermore, the US appear to be willing to accept foreign standards that are quite different from their own Generally Accepted Accounting Standards (GAAP). This does not only contradict a widespread perception that equals globalization with Americanization, but also offers a remarkable contrast to US unilateralism in other policy fields. Finally, we are also amidst a major change in the substance of accounting standards, as indicated by a shift from historic cost to fair value accounting within the work of the IASB. This special issue of Business and Politics is devoted to a systematic explanation of these developments, drawing on concepts from International Relations, International Political Economy and Systems Theory.

Description: The Federal Communications Commission rule making for low power FM radio was widely reported as an instance where Congress sharply rebuked a regulatory agency for enacting rules too favorable to entrants. Theories of bureaucratic control generally agree that when such events occur, policy differences of Congress and the agency must be large. Because rival policy positions are quantifiable in this case, the preferences of Congress and the Commission can be directly evaluated. While the distance between the policy position of the Commission and Congress appear large, they signified a negligible increment in competition when compared to a benchmark efficient policy. A financial event study supports this interpretation, as radio broadcaster's equity values were not materially affected by either events in Congress or the Commission. Thus, even marginal differences may prompt a costly intervention by Congress to ostensibly discipline an agency.

Description: Democratic consolidation was the top priority of re-democratized Argentina and Brazil. Regional integration was also part of this goal from two perspectives: from the outside, through a treaty that diminished the scope for political manoeuvring by the military and increased international support for the incumbent administrations, and; from within, through encouragement of a proactive role for business in integration that would give it democratic legitimacy, while, at the same time, exercising democratic practices. Argentine and Brazilian political classes expected to combine these two aspects but soon had to face business reluctance. Government-business relations in the construction of Mercosur reflected government attempts to balance the trade-off between the approaches from without and from within. Although business was largely excluded from the strategic formulation of integration, in a democratic context, governments have to accommodate societal interests. This occurred through a significant overlap between powerful business interests and the executive's plans. The achievement of integration helped consolidate democracy and the choices made by political elites drove forward the democratic process.

Description: This paper applies an economic approach to empirically investigate differences in inward foreign direct investment (FDI) patterns between East Asia and Latin America and discusses the implication of regional trade arrangements. International production/distribution networks in East Asia effectively utilize the new economic logic of fragmentation, agglomeration, and optimal internalization and seem to greatly contribute to economic development. The paper examines statistical data for international trade as well as the activities of Japanese and U.S. multinational enterprises (MNEs) and argues that international production/distribution networks, particularly in machinery industries, are extensively developed in East Asia while remaining immature in Latin America. The impact of regional trade arrangements is substantially different depending on whether international production/distribution networks have already been developed or not. Our findings suggest that the impact of FTAA on FDI in Latin America by East Asian MNEs could be either positive or negative, depending on the content of FTAA and accompanying policies. If differentials between intra-regional tariffs and MFN-based tariffs are kept large, import-substituting FDI from East Asia may stagnate or even decrease. With a proper policy package to nurture international production/distribution networks, on the other hand, FDI from East Asia could be accelerated and contributed to deeper integration of Latin America.

Description: Why do many States in transitional economies lack the regulative capacities to evenly distribute property rights among emerging private firms resulting in having public good devoured by particularistic interests? I argue that uneven distribution of property rights is deeply embedded within broader power relations permeating political regimes. This study attempts to develop the concept of politically-embedded cronyism where State incumbents generate and protract uneven distribution of property rights in favor of a few private actors as tactics of regime survival that go beyond the mere interest of self-enrichment as the capture thesis would argue. Politically-embedded cronyism is likely to emerge the more State incumbents retain their relative autonomy from their cronies through higher concentration of power in the executive, less role of societal groups in general and business in particular in the reproduction of the power of top incumbents and higher public asset retention in the post-liberalization period in addition to possessing channels of political incorporation to fledging business.

Description: While there is a strong theoretical foundation for the relationship between business sectors' political spending and the policy benefits that they receive, the empirical support for it is mixed. We use the logic of this exchange to examine a policy area that directly and significantly affects all businesses, and is thus a most likely case, taxation. Using principally firm-level tax rates of a large random sample of U.S. corporations for the 1998–2005 time period, we determine whether lobbying has measurable effects on firm-level tax rates. Contrary perhaps to popular belief, or at least anecdotal illustration, we find after controlling for firm size and industry-level tax rates, among other controls, that there is no discernible effect of political spending on firm-level taxation: firms that spend more in an effort to affect policy generally or tax policy specifically are no more likely to benefit from lower tax rates. We also examine the possibility that firms in the same industry coordinate efforts to affect tax rates. While we find limited evidence that firms occasionally coordinate within industries – or at least lobby simultaneously – to affect tax rates, perhaps more importantly, we determine that free-riding by smaller firms at the expense of the largest firms is rampant.

Description: Scholars of business associations have recently learned a great deal about how associations contribute to development, but much less about the origins of such developmental associations. This essay introduces and assesses a new political explanation for the origins of ‘developmental associations.’ Conventional wisdom holds that developmental associations must be able to rise above political and collusive pressures and establish autonomy from states. Yet, I argue that these associations' developmental capacities emerge as a result of active state support by key actors, and in response to challenges and threats posed by competitive business organizations. Developmental associations emerge and acquire their capacities as they confront internal threats from other associations, as well as utilize the opportunities presented by the national state and international channels. In this view, functional or organizational capacity is not enough, rather, developmental business associations, must exhibit political capacity'that is the ability to manage the political environment, and respond to the structure of opportunities and threats. This explanation views developmental business associations as political organizations seeking power as well as offers a historically sensitive analysis of transformation of business politics in reforming India.

Description: This paper explores the implications of going beyond transaction cost theory's implicit focus on domestic investors to include multinational actors. As developed herein, the discriminating alignment between the level of hazards (contractual and/or political) and the mode of governance carries over. In the open-economy context, such an alignment reflects the hazards that arise from the nature of the transaction and those that arise from the nature of the political and regulatory environment.

Description: From the 1970s to the 1990s, British Telecom (BT), the main telecommunications operator in Britain, underwent a dramatic revolution. The former public administration, often considered inefficient and hardly innovative, became a private company, and now aims to become one of the most dynamic giant telecom players, delivering everything from simple voice calls to advanced eCommerce services all over the world. These changes in the market arena were accompanied by some wide changes in the nonmarket arena, i.e. the institutional and regulatory environment of the British telecom market. This case study analyzes the changes in these two arenas to understand how market and nonmarket strategies may be combined by British Telecom to generate a competitive advantage in a deregulated environment.

Description: The main aim is to question why we don't see more firms petitioning for import relief. It is well accepted that petitioning itself can restrain imports, lead to higher prices and hence higher profits (in the short run). What prevents more firms from filing for protection? It may be that petitioning reflects cost inefficiency on the part of the petitioning firm, and concerns about revealing this information might act as a deterrent for firms to come forward with their complaints. However, in a declining industry where a large number of firms are contemplating exit, petitioning could be a signal that the firm expects to remain in the market for the near future. The signaling hypothesis is tested by comparing the stock market response of an antidumping petition for petitioning firms and non-petitioning firms producing the same product.

Description: This paper investigates the importance of variations in judicial institutions after a ‘shock’ has unraveled a regulatory status quo. State court decisions involving utility regulation are examined. Appointed state courts are generally agreed to be more independent than elected state courts. Before 1970, the primary participants in the process of utility regulation (and thus its largest beneficiaries) were the regulated firms and their commercial customers; afterwards, utility regulation increasingly accommodated consumer groups as well. Certain scholars have proposed that independent courts help keep administrative agencies from deviating from the original wishes of their political principals, and thus might be expected to slow down such changes in regulatory approach (which occurred with few alterations to the governing statutes). Other scholars have proposed instead that independent courts can decide as discretion dictates, and may thus lead such changes. The results of this analysis provide support for the latter view: controlling for other factors (such as partisan affiliation), more independent appointed courts sided more often with consumer groups while less independent elected courts sided more often with regulated firms and their large commercial customers.

Description: The concluding article to the special issue critically reflects on arguments and analysis presented in the preceding articles. It argues that globalisation, new forms of private authority and the increased power of transnational business have not generally weakened the state, but rather advanced a business-oriented transformation of statehood. To understand this transformation the article first provides a very short overview of the state-globalisation debate. Subsequently, it deals more explicitly with the state theoretical debate. In particular, it brings together neo-Marxist and post-Weberian conceptualisations in order to address both the social nature of the state and the particular forms and processes by which it is interactively embedded in the economy and society. After an outline of the transformation of statehood and the strategic options for non-state actors, the article concludes with some critical remarks on the future of democratic politics.

Description: Environmental policies of providers of international finance – namely the World Bank, export credit agencies, and Equator Principles banks – provide interesting cases within which to study the power of business not as only an input to the political process or as a constraint on politics, but also as a conduit for both state and non-state actors.This paper shows how targeting financial actors has allowed NGOs to transform their rather weak discursive power base into instrumental power over business actors in other sectors. NGOs have channeled their power through states, consumers, and financial institutions; this has allowed them to augment discursive power over their targets with additional indirect, yet more immediate, forms of structural and instrumental power. As a consequence of both direct and indirect NGO pressure, financial institutions have adopted environmental policies. This article posits a theoretical explanation of the underspecified power relationships in NGO strategies that allow NGOs to exploit weak links in commodity chains for their campaigns.This paper argues that financial institutions wield considerable structural power through their ability to control access to finance. It is particularly this power base which has made them prime targets for NGOs campaigning for the greening of infrastructure development projects. As a consequence of NGO pressure, financial institutions have adopted environmental policies which in turn have provided the World Bank and Equator banks with additional sources of discursive power.

Description: Negotiations for China's accession to the WTO provoked a debate between pessimists who believed that opening the economy would lead to a flood of imports and a de-nationalization of manufacturing industry, and those who believed that it would spur rationalization of state-owned enterprises, lock in domestic reforms, attract foreign investment, and open the way for trade expansion. The industry most frequently mentioned as endangered was motor vehicles, where an awkward combination of Stalinist central planning with localized autarky had resulted in a proliferation of inefficient producers. With the partial exception of two investments by Volkswagen, initial joint ventures in assembly operations failed miserably. China's commitments on joining the WTO banned (or at least complicated) many of the most important industrial policy tools it had used to promote the auto industry since the opening to joint ventures in the early 1980s'including performance requirements, high tariffs, and numerical quotas. After accession in 2001, tariffs fell steadily while output and foreign investment soared. The Chinese government moved towards a lighter-handed but more effective form of industrial policy that reduced top-down planning while expanding market incentives and scope for managerial freedom. Rather than destroying industrial policy for the auto industry, WTO accession constrained and disciplined it. When foreign auto firms and their governments pushed for more aggressive protection of trademarks and other intellectual property rights under the WTO, the Chinese government initially stalled. Continuing pressure then tilted the balance of state policy toward promotion of independent design, whether by state-owned enterprises testing the boundaries of their joint ventures with foreign multinationals, or by audacious smaller firms purchasing foreign designs and technology to complement inexpensive local parts and assembly, thereby creating the conditions for the emergence of a more competitive industry.

Description: To ascertain whether youth bulges are related to violent conflict and whether violent conflict falls off when youth bulges are followed by busts, we analyzed data from 1998–2005 covering 127 nations. Controlling for variables representing such factors as socio-development, macroeconomics, technology advancement, government capacity, and geo-politics, we find that youth bulges are related to violent conflict, but when youth bulges are followed by busts violent conflict grows rather than diminishes contrary to the prediction we make. From this analysis, we draw implications for further research and analysis with regard to doing business in violence-prone nations.

Description: By analyzing the interaction between a business firm and multiple government institutions (including a regulatory agency, an executive and a bicameral legislature), we develop predictions about how firms target their political strategies at different branches of government when seeking more favorable public policies. The core of our argument is that firms will target their resources at the institution that is ‘pivotal’ in the policy-making process. We develop a simple framework, drawing on the political science literature, which identifies pivotal institutions in different types of political environments. We find empirical support for our thesis in an analysis of how U.S. accounting firms shifted their political campaign contributions between the House and Senate in response to the threat of new regulations governing auditor independence during the 1990s.

Description: Recent work suggests that the most fruitful approach to accounting for variations in interest system diversity of any type lies in understanding variations in interest system density (Lowery, Gray and Fellowes 2005). We build on this insight by examining the sources of variation in the substantive diversity of health interests in the American states, focusing on how the densities of several sub-guilds of health interest organizations vary in their responses to changes in the sizes of the constituencies that give rise to them and variations in the policy and political energy supporting their mobilization. We discuss the concept of interest system diversity in the first section of the paper, highlighting its multiple meanings and the limits of prior research. This is followed by a close empirical examination of 14 sub-guilds of state health interest organizations. We conclude by discussing the inherent difficulties of understanding interest system diversity.

Description: The article takes a political economy perspective on the current harmonization of accounting standards. It argues that the process not only signals a major shift in the mode of governance (towards private authority), but also in the substance of what is being governed. In political-economic terms, the most significant change which the International Accounting Standards Board (IASB) brings to accounting is an increased reliance on market values in the form of so-called Fair Value Accounting (FVA). The FVA paradigm represents a financial perspective on business operations. This perspective is matched by the process and structure of the institutions that govern international accounting standard setting, particularly the IASB and the European Financial Reporting Advisory Group which advises the Commission of the European Union on the adoption of IASB standards. A network analysis of the different committees and working groups of these two institutions demonstrates that financial sector actors wield substantially more influence than other categories of business actors within the governance of international accounting standard setting.

Description: This paper examines the interplay between leading international and American accounting authorities over the span of a critical four-year period, 2001–2005. Historically, US regulators and private-sector accounting institutions have taken a cautious approach to International Financial Reporting Standards (IFRSs), citing the superior rigor and overall quality of their own Generally Accepted Accounting Principles (GAAP). During the past four years, however, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) have each become markedly receptive to the International Accounting Standards Board's (IASB) efforts to harmonize accounting standards worldwide based on IFRSs. Why? This paper offers an explanation that highlights the role of the high-profile American corporate scandals (2001–2002) in precipitating a shift in US accounting authorities' views of the optimal form of accounting rules, an issue that has stood in the way of trans-Atlantic accounting standard convergence. Prior to the accounting scandals, the highly-detailed rules that are characteristic of US GAAP were widely seen to be the most effective form of accounting rule. Since 2002, a normative shift has taken place such that the SEC now endorses objectives-oriented rules that are conceptually aligned with the principles-based standards promulgated by the IASB. The analysis is framed by insights from contemporary International Relations theory which emphasize the influence of scope conditions on patterns of governance.

Description: Analyses of central bank independence (CBI) have generated two sets of apparently contradictory results - CBI appears to be both inversely related to inflation and positively related to the rise in unemployment and slowdown in economic growth during disinflations. I suggest that these results may issue from autonomous central banks being associated with sharper, more aggressive disinflations. To test the proposition I use two measures of policy stance, one of which contains more information concerning policymaker's expectations than has heretofore been the case. The results suggest a need to qualify yet further the optimality of CBI.

Description: This paper provides a comprehensive review of the empirical literature in transaction cost economics (TCE) across multiple social science disciplines and business fields. We show how TCE has branched out from its economic roots to examine empirical phenomena in several other areas. We find TCE is increasingly being applied not only to business-related fields such as accounting, finance, marketing, and organizational theory, but also to areas outside of business including political science, law, public policy, and agriculture and health. With few exceptions, however, the use of TCE reasoning to inform empirical research in these areas is piecemeal. We find that there is considerable support of many of the central tenets of TCE, but we also observe a number of lingering theoretical and empirical issues that need to be addressed. We conclude by discussing the implications of these issues and outlining directions for future theoretical and empirical work.

Description: In recent years, International Political Economy literature on “politics beyond state” has emphasized the role of non-governmental organizations (NGOs) in broader policy processes, both national and international. In addition to their impact on states, NGOs influence the policies of non-state actors such as firms via public and private politics. Dissatisfied with the progress firms have made in response to public regulation, NGOs have sponsored private authority regimes in several issue areas and pushed firms to participate in them. Across the world, the contest between NGOs and firms has provoked substantial behavioral and programmatic change'including widespread participation in these private authority regimes'among firms seeking to escape NGO pressures. Using firm-level data, this paper examines why direct targeting has not led firms in the U.S. forest products sector to participate in an NGO-sponsored private authority regime, the Forest Stewardship Council. This global regime has been adopted widely in Europe, but U.S.-based forestry firms have tended to favor a domestic industry-sponsored regime, the Sustainable Forestry Initiative. Our analysis suggests that the desire of firms to maintain control over their institutional environment in light of hostile relations with NGOs has led US-based firms to favor the Sustainable Forestry Initiative.

Description: Until the 1990's, Switzerland could be classified as either a corporatist, cooperative or coordinated market economy where non-market mechanisms of coordination among economic and political actors were very important. In this respect, Business Interest Associations (BIAs) played a key role. The aim of this paper is to look at the historical evolution of the five main peak Swiss BIAs through network analysis for five assorted dates during the 20th century (1910, 1937, 1957, 1980 and 2000) while relying on a database that includes more than 12,000 people. First, we examine the logic of membership in these associations, which allows us to analyze their position and function within the network of the Swiss economic elite. Until the 1980's, BIAs took part in the emergence and consolidation of a closely meshed national network, which declined during the two last decades of the 20th century. Second, we investigate the logic of influence of these associations by looking at the links they maintained with the political and administrative worlds through their links to the political parties and Parliament, and to the administration via the extra-parliamentary commissions (corporatist bodies). In both cases, the recent dynamic of globalization called into question the traditional role of BIAs.

Description: For the first time in modern history, free trade coexists with free finance. Free trade and free finance (defined as the deregulation and internationalization of banking and finance) are not mutually reinforcing, but cause a mismatch between the demand and supply of financial instruments. Investors want more marketable instruments whereas entrepreneurs want more transaction-specific instruments. This mismatch potentially hurts small firms and local interests most. What can they do about it? It depends on state institutions. The more centralized the state, the fewer opportunities available to potential losers to curb free finance. Free finance is most successful in centralized countries, where resistance to free finance is least strongly felt. This hypothesis is systematically tested on a sample of OECD countries.

Description: With increasing regularity managers must address nonmarket as well as market problems. A common U.S. manifestation of this often-unwelcome reality is the abrupt emergence of a “Washington problem,” such as a piece of hostile legislation gathering momentum in the Congress. Although most business leaders today realize that doing nothing is rarely a viable response many activist nonmarket strategies are likewise problematic. For example even in the rare instances in which companies have the resources to devote to last-minute cover-the-Capitol blitzes such strategies are rarely effective and invariably wasteful. On any given issue a significant minority of legislators will oppose the lobbying manager's recommendations no matter what and a sizeable minority will favor them no matter what. Effective nonmarket strategies in contrast consist of knowing enough about governmental processes to ascertain who are the likely pivotal voters. This article presents a theory that provides a parsimonious way to think about pivotal voters in separation-of-power situations. Ultimately the theory provides guidance for the formation of more efficient and effective nonmarket strategies.

Description: This investigation of accounting standard setting as a case of business power in global governance links together three facets of power. First we examine the discursive power of international accounting standards in the ongoing process of financialization, which we break into two dynamics centered on profit and control. We argue that the selection of accounting paradigms does not concern measurement accuracy but is rather a choice of perspectives between finance and production when presenting economic reality as numbers. Drawing on evidence from the contestation between Rhenish capitalism and the financial perspective, we then explain why, despite the overwhelming structural power of finance, instrumental power exercised in political lobbying over accounting standards can still have considerable success.

Description: In the study of corporate political activity in the United States, scholars have consistently relied on samples comprised entirely or principally of large firms. While scholars have raised the issue of bias in these samples, there have been no systematic examinations of the consequences for causal inference. We address this issue directly by comparing the results of comprehensive models that examine corporate lobbying using both large-firm and randomly-generated samples. We find that while there are some notable differences, they are certainly not so large as to lead us to question fundamentally the results of decades of scholarship. In short, the results generated using a random sample lead to causal inferences largely consistent with those in the theoretical and empirical literature. In particular, firms' resources and interactions with government condition both their decisions to lobby and the level of their activity.

Description: Both policymakers and scholars have expressed concern that trade has increased inequality in advanced industrialized countries (AICs). We argue that the impact of trade on inequality depends on the availability of public goods, such as educational opportunities, that allow displaced workers to upgrade their skills and adjust to trade. The provision of public goods, in turn, depends on political institutions: institutions that unify budgetary powers promote public-good spending while institutions that separate budgetary powers discourage it. Trade should thus increase inequality more (reduce inequality less) in countries with a high separation of budgetary powers. We test and find support for these hypotheses with a cross-sectional time-series analysis of fourteen AICs. Our results imply that trade can improve aggregate welfare without worsening economic inequities, but only if governments adopt complementary policies that facilitate human capital formation and labor-market adjustment.

Description: With increasing fragmentation of worldwide production chains and the corresponding contracting relations between companies, the “firm as an inspector” has become a frequent phenomenon. Buyer firms deploy supervising activities over their suppliers' products and production processes in order to ensure their compliance with regulatory standards, thereby taking on tasks commonly performed by public authorities. Why would a firm engage in such activities? In this article we will analyze the conditions under which firms play the role of an inspector vis-à-vis their sub-contractor firms to guarantee compliance with quality and environmental regulations. We develop a theoretical argument based on transaction cost economics and institutionalism to offer hypothetical answers to this question and provide an empirical assessment of our hypotheses.

Description: This paper broadens the scope and depth of business alliance research by way of interdisciplinary enrichment. The paper draws on the political science literature on nation-state alliances to generate insights into the establishment, operations and performance of inter-firm alliances. Shared theory bases of game theory and transaction cost economics, as well as theories, variables and research findings indigenous to political science are posited as a platform from which propositions regarding inter-firm alliances are derived.

Description: This paper discusses the pros and cons of a Transatlantic Free Trade Area (TAFTA) in comparison with an informal trade-facilitating marketplace between Europe and the US. It finds considerably more cons, especially since TAFTA would be expected to produce larger, more detrimental discriminatory effects on dynamic non-member economies, mainly in Asia but also in food-exporting regions as well. Efficiency-enhancing effects are argued to be achievable under a marketplace concept which does not separate insiders from outsiders. It is also shown that in foreign direct investment (FDI) and FDI-related service trade, TAFTA seems redundant as in recent years bilateral capital and trade flows have proven to be buoyant without preferential treatment.

Description: Over the last 60 years, the multilateral management of trade through the GATT and subsequently through the WTO has been led by the United States and Europe. Since the turn of the new millennium, however, developing countries have increasingly used their leverage to insist that talks on agriculture receive priority attention, deny the inclusion of investment and competition policy on the negotiating agenda, and block agreement on negotiating modalities for agriculture and non-agricultural market access (NAMA). Cooperation between the United States and the European Union is still essential, but no longer sufficient, for successful multilateral negotiations. Specifically, the “BRICKs” (Brazil, Russia, India, China, and Korea) are likely to be pivotal in directing the course and contributing to the success or failure of the WTO.

Description: Most of the existing studies of the welfare state have dealt with OECD countries. Moreover, these studies have focused on government partisanship (left versus right), or institutional features under democracy, as primary causal variables. By providing four primary causal mechanisms (the power of popularly based parties, labor strength, democracy, and political instability) that are different from those of OECD countries, I answer the question of whether and why the efficiency or compensation hypothesis holds for developing countries. I show that either the efficiency or compensation thesis can hold for developing countries depending on the type of globalization with which popularly based governments interact.

Description: In this study we advance the current research on corporate political strategy by examining how firms decide on their level of engagement in political action. This study proposes a contingency approach that identifies conditions in which firms prefer individual action to collective action in their pursuit of political strategy and introduces a framework that addresses this preference. Our results show that even in concentrated industries, a firm's preference of individual action over collective action varies when government contracts or research and development intensity are important considerations.

Description: Reform of the multilateral trade regime is not simply a second order problem within a wider economic crisis. The completion of the Doha Round may be a second order question but the global trade regime faces a series of broader systemic challenges beyond the completion of the current negotiations. This paper identifies five challenges: (i) a marked reduction in popular support for open markets in major OECD countries; (ii) the stalling of a transition from one global economic equilibrium to another; (iii) a lack of clarity and agreement on the agenda and objectives for the WTO as we move deeper into the 21st century; (iv) the demand for fairness and justice in the governance of the WTO'the ‘legitimacy’ question and (v) the rise of regional preferentialism as a challenge to multilateralism. Failure to address these challenges will represent not only a fundamental question for the future of the WTO as the guarantor of the norms and rules of the global trade regime specifically, but also the ability to establish greater coherence in global economic governance overall when its need is arguably greater than at any time since the depression years of the 20th century inter-war period.

Description: Why do some countries institutionalize a social program compensating the unemployed while others do not? My main argument is that the choice to have an unemployment insurance program is a function of 1) the distribution of unemployment risks within a country and 2) political processes through which demands for insurance are realized. The distribution of industrial-specific risks and workers' employment status are the driving force in shaping workers' demands. In developing countries, these demands are more likely to be realized under democratic regimes. An event history model for 102 developing countries from 1946 to 2000 is used to test the arguments.

Description: This paper examines the motivation and impact of corporate diversification in Chinese listed firms. We find that in local government owned-firms there is a non-linear relationship between the level of firm diversification and state ownership. As state ownership increases from zero, the level of diversification decreases. After state ownership reaches a certain level, the level of diversification increases as state ownership increases. There is no evidence that ownership is related to corporate diversification in non-state-owned firms or central government-owned firms. We also document that diversification is negatively related to firm performance in local government-owned firms. However, there is no evidence that diversification is negatively related to the firm performance in non-state-owned firms or central government-owned firms. Our findings suggest that agency problems are responsible for local government owned-firms taking value-reducing diversification strategies.

Description: Rulings made by the World Trade Organization (WTO) dispute settlement body have, since the organization's creation in 1995, significantly advanced global economic liberalization. The response of business has been varied and far from uniformly supportive of the WTO agenda. The reason stems from the fact that adjusting to liberalization measures is easier in some industries than in others. The response is premised on the strategic alternatives available within an industry. Through examining antidumping (AD) elements of the European Union (EU) trade policy regime in the context of two European industries - chemicals and textiles - we find that both are under severe competitive pressure, due to WTO-induced market liberalization. However, the responses taken by companies within the respective industries are very different. We suggest that while WTO activity catalyzes industry evolution, the form of that adjustment is highly industry specific. In the case of textiles, the disaggregation of the industry value chain allows for a variety of product and locational adjustment strategies. In contrast, the chemicals industry is nationally based, reliant on intellectual property for competitive advantage and structurally limited in its ability to adopt a wide range of adjustment strategies. Therefore, in the absence of alternative strategy options, EU chemical companies lobby for rule harmonization in the WTO.

Description: This article starts by highlighting the significance of two forms of authority'private and technical authority'that are becoming increasingly important relative to public authority, which traditionally has been considered the only relevant form of authority in international affairs. It then suggests that public, private and technical authority are related to one another not by the erasure of one by another, but rather through a process of politicized functional differentiation. Functional differentiation involves the transformation of multi-functional units into a set of more autonomous units that are related to one another in specific limited ways. The article explores differentiation between and within each of the three types of authority in the globalization of accounting, and the role of power as well. It challenges the view that globalization necessarily involves a centralized exercise of power or an elimination of differences.

Description: This paper analyzes the causes for regulatory compliance, using traditional deterrence variables and potential moral and social variables. We use self-reported data from 459 Tanzanian artisanal fishers in Lake Victoria. The results indicate that the decision to be either a non-violator or a violator, as well as the violation rate – if the latter – are influenced by changes in deterrence variables like the probability of detection and punishment and also by legitimacy and social variables. We also identify a small group of fishers who react neither to normative aspects nor to traditional deterrence variables but persistently violate the regulation.

Description: This paper presents the results of a dichotomous choice contingent valuation (CV) study of reduced flood risks in Bangladesh. Sensitivity of willingness to pay (WTP) to varying risk exposure levels is tested in a ‘natural experiment’, targeting floodplain residents facing regular annual flooding and a disaster flood once every five to ten years. Accounting for price, income and education levels, both subjective risk aversion and objective baseline risk exposure affect stated WTP for a common level of flood protection. We find a number of problems with the CV application in this specific developing country context. Half of the respondents are unable to pay in financial terms, but are willing to contribute in kind. The combined use of a monetary and non-monetary measure of WTP would have lowered the number of zero bids considerably. A test-retest carried out six months after the original survey shows that the stated WTP values are reliable.

Description: We examine the implications of migration and insecure property rights to land use and deforestation in tropical frontier forests. Three forms of property rights risks are introduced to basic land-use forms. Illegal logging risk is associated with forest plantations, a land expropriation risk affects land in agriculture and plantation forestry, and illegal logging risks threaten native forest land. Public and private landowners can reduce these risks by employing costly enforcement effort. We show how that migration, expropriation, and illegal logging risks lead to deforestation by promoting agricultural expansion, and illegal logging. Higher public enforcement reduces illegal logging, but higher private enforcement may or may not reduce deforestation depending on migration pressures. Higher timber prices have an ambiguous effect on deforestation, but an increasing value of non-timber benefits decreases or leaves deforestation unchanged depending on the incentive structures of illegal loggers.

Description: We estimate annualized values of access to home tap water in three cities in El Salvador, and marginal ‘barrios’ in four Guatemalan cities, using a hedonic price method for studying changes in capitalized home values from obtaining a water connection. A tap water connection is found to add from 10 per cent to 52 per cent to sales values of homes in our sample. The estimated mean values of gaining tap water access represent 1–5 per cent of real household income, differing by city and with generally higher values in El Salvador. On average this gain eliminates between 1 per cent and 3 per cent of the initial difference in real incomes between the groups of connected and unconnected households. We also find large differences in the value of a tap connection depending on the main source of non-tap water, with lowest values when the source is a private well in El Salvador.

Description: This paper, based on a computable general equilibrium model of the Indian economy, shows that a domestic carbon tax policy that recycles carbon tax revenues to households imposes heavy costs in terms of lower economic growth and higher poverty. However, the decline in economic growth and rise in poverty can be minimized if the emissions restriction target is modest, and carbon tax revenues are transferred exclusively to the poor. India's participation in an internationally tradable emission permits regime with grandfathered emissions allocation is preferable to any domestic carbon tax option, provided the world market price of emission permits remains low. Even better would be if India participated in a global system of tradable emission permits with equal per capita emission entitlements. India would then be able to use the revenues garnered from the sale of surplus permits to speed up its economic growth and poverty reduction and yet keep its per capita emissions below the 1990 per capita global emissions level.

Description: Climate change is increasing the intensity of extreme weather events. Mexico is particularly prone to suffer at least two different types of these events: droughts and hurricanes. This paper focuses on the effects of an extended drought on the Mexican economy. Through a computable general equilibrium model, we simulate the impact of a drought that affects primarily agriculture, livestock, forestry, and hydropower generation. We look at the effects on the overall economy. We then simulate the effects of several adaptation strategies in (chiefly) the agricultural, forestry, and power sectors, and we arrive at some tentative yet significant conclusions. We find that the effects of such an event vary substantially by sector with moderate to severe overall impacts. Furthermore, we find that adaptation policies can only effect modest changes to the economic losses to be suffered.

Description: Common property resources are often used by households of developing countries as insurance in case of economic stress. The aim of this paper is to consider the potential poverty-trap implications of this use. If the capacity of the resource is low, or if the population in need of insurance is too large, the households are trapped in CPR extraction activity and cannot get more than their subsistence requirement. In this context, cooperation between households and the introduction of a cooperative insurance mechanism may sustain an equilibrium outside the poverty trap and relax pressure on the resource. Moreover, private insurance schemes could also be a potential solution to this poverty trap.

Description: We study the economic performance of Benthic Resource Management Areas (BRMAs) in central-southern Chile. The analysis considers 26 managed areas with Agreements of Use declaring Chilean abalone (Concholepas concholepas) to be the main exploited benthic resource from 2001 to 2003. Our analysis explores the role played by several characteristics thought to be potential BRMA performance determinants. These variables were defined and grouped into four types: economic, environmental–biological, institutional–organizational, and organizational leader. Our results indicate that the price of Chilean abalone, the size of the habitable area, the target resource density, the density of other resources, and leader experience are determinant factors for the economic performance of the BRMAs under study.

Description: Migration literature has considered environmental constraints as one of the prime movers of populations, especially from dry regions, where water rather than land is the primary limiting factor. This study examines the impact of degradation of private as well as common pool land resources on migration decisions, based on primary data from over one thousand households in three dry land districts in Gujarat. The study finds that economic assets and natural capital have differential impacts on short-term and long-term migration decisions. Thus, any employment creation in rural dry land regions is likely to help the poorest. Further degradation of common-pool land resources influences short-term but not long-term migration. Therefore, better management of common-pool resources would strengthen the livelihood base of traditional herder communities and limit migration among middle-income households. Overall, in dry areas such as Gujarat, access to irrigation, rather than land ownership per se, is likely to deter migration.

Description: We investigate the role that economic instruments can play in promoting economic sustainability and the preservation of biodiversity in agroforestry management in coffee production. Most of the world's coffee producers live in poverty and manage agro-ecosystems in regions that are culturally and biologically among the most diverse on the globe. Despite the relatively recent finding that bees may augment pollination and boost coffee crop yields, the short-term revenues from intense monoculture drive land-use decisions that destroy the forest strips serving as habitats for pollinating insects. Our study investigates whether farmers specialize in environmentally detrimental (sun-grown) or sustainable (shade-grown) farming, or both practices coexist. We calibrate an empirical model to characterize the equilibria and investigate the ecological and economic impacts of three alternative policy instruments: conservation fees, price premiums, and minimum wages.

Description: Based on multiple rounds of household survey data collected in the year after the 1998 massive flooding in Bangladesh, we investigate the role of private transfers as a social coping response to natural disasters. We also explore the role of private transfers (gifts) as an informal insurance mechanism to smooth consumption in the face of an adverse covariate shock caused by the flooding. The level of transfers made is shown to be altruistically calibrated to the severity of flood exposure. As an indicator of the economic importance of such gifts, the amount of transfers received is shown to significantly contribute to reducing household consumption variability. We discuss the policy implications of our findings in a developing country context.

Description: A lack of information on environmental protection values, especially non-market values, has contributed to wetland degradation in the Mekong River Delta. To fill this information gap, this study uses choice modelling to estimate the biodiversity protection values of Tram Chim National Park, a typical wetland ecosystem of the Delta. The estimated net social benefit of a proposed protection program ranges from USD0.52 million to USD1.84 million. This suggests that the program's implementation would improve social welfare. Some choice modelling issues, including the use of focus groups, aspects of questionnaire designs, and different survey modes, are discussed in the context of a developing country application.

Description: We analyze the external effects that arise in the decisions of firms on polluting emissions and in the decisions of parents on the number of births in an optimal control model with three stock variables representing population, economic capital, and pollution. We distinguish two different types of households, which represent opposite ends of a spectrum of potential familial structures: ‘dynastic households’, in which the family sticks together forever and ‘micro-households’, in which children leave their parent's household immediately after birth. We show that the decision of parents on the number of births involves an externality that is qualitatively different for both types of familial structure. Hence, population policy should be different, according to the type of household. A first best result may be obtained in the case of dynastic households if an appropriate tax on the household size is applied, or, in the case of micro-households, if an appropriate tax on children is applied.

Description: Presented in this paper are the results of two contingent valuation analyses, one undertaken in Ecuador and the other in Guatemala, of potential payments for environmental services (PES) directed toward rural households. We find that minimum compensation demanded by these households is far from uniform, depending in particular on individual strategies for raising incomes and dealing with risks. Our findings strengthen the case for allowing conservation payments to vary among recipients, which would be a departure from the current norm for PES initiatives in Latin America.

Description: This paper assesses the implications of large-scale investments in biofuels for growth and income distribution. We find that biofuels investment enhances growth and poverty reduction despite some displacement of food crops by biofuels. Overall, the biofuel investment trajectory analyzed increases Mozambique's annual economic growth by 0.6 percentage points and reduces the incidence of poverty by about 6 percentage points over a 12-year phase-in period. Benefits depend on production technology. An outgrower approach to producing biofuels is more pro-poor, due to the greater use of unskilled labor and accrual of land rents to smallholders, compared with the more capital-intensive plantation approach. Moreover, the benefits of outgrower schemes are enhanced if they result in technology spillovers to other crops. These results should not be taken as a green light for unrestrained biofuels development. Rather, they indicate that a carefully designed and managed biofuels policy holds the potential for substantial gains.

Description: This paper is not concerned with advances in game theory. Rather, the paper is concerned with the relevance, if any, of game theory to a major resource management issue, namely the management of internationally shared fishery resources. It is argued that the economics of the management of such resources cannot, in fact, be understood, other than through the lens of game theory. The paper discusses several elementary game theory concepts that are of utmost policy relevance, but which are, as of yet, poorly understood by most policy makers. The paper does, in addition, discuss a key policy problem in the management of shared fishery resources that demands a game-theoretic analysis. The required analysis, however, has yet to be developed.

Description: A differential game model is developed to compare incentives for wastewater pollution abatement of upstream and downstream countries under cooperative and noncooperative strategies. The Tijuana River is the empirical setting of water flow from south (Mexico) to north (US) where pollution stock accumulates. Asymmetry between the upstream and downstream countries for costs, damages, and emissions influences incentives to abate pollution. Cost minimization is achieved as the US can finance pollution abatement in Mexico. Game sharing rules (Shapley value, Chander–Tulkens rule, Helsinki rule, egalitarian rule) are analyzed. Financial transfers from two North American Free Trade Agreement (NAFTA) institutions are examined. In most cases of cooperation, transfer payments are positive from downstream to upstream for reductions in flow and stock of pollution. Transfer size varies according to the rule and sensitivity analysis of changes in abatement costs and damages. The two institutions follow a variation of the Helsinki rule.

Description: This paper explores a few cooperative aspects of investments in uncertain, real options. By hypothesis some production commitments, factors, or quotas are transferable. Cases in point include energy supply, emission of pollutants, and harvest of renewable resources. Of particular interest are technologies or projects that provide anti-correlated returns. Any such project stabilizes the aggregate proceeds. Therefore, given widespread risk aversion, a project of this sort merits a bonus. The setting is formalized as a two-stage, stochastic, production game. Absent economies of scale, such games are quite tractable in analysis, computation, and realization. A core imputation comes in terms of shadow prices that equilibrate competitive, endogenous markets. Such prices emerge as optimal dual solutions to coordinated production programs, featuring pooled commitments, or resources. Alternatively, the prices could result from repeated exchange.

Description: Traditional pastoralist land management institutions in sub-Saharan Africa have been stressed by an increasing human population and related forces, including private enclosure of grazing land; government-sponsored privatization; and the increasing prevalence of violent conflicts and livestock theft. We model the incompleteness and flexibility of traditional grazing rights using fuzzy set theory. We compare individual and social welfare under the traditional system to individual and social welfare under a private property system and a common property system. Whether the traditional system is preferred to private property depends on whether the value of mobility, as defined by the traditional system, is more valuable than the right of exclusion inherent in private property. We find that under some conditions the imprecision which characterizes traditional rights can result in higher social returns than a common property regime characterized by complete symmetric rights across all members of the user group and complete exclusion of non-members.

Description: In many regions of the world, property rights to natural resources are held under various forms of communal ownership, which often exhibit flexibility for users to access different resources depending on relative need. This paper explores the links between climate variability, transactions costs associated with resource access, and patterns of herd mobility in northern Kenya. Results indicate that greater spatial variability of vegetation leads to greater herd mobility, and that higher transaction costs reduce mobility for herds engaged in long-distance movements. Moreover, long-distance mobility is higher in drought years only in those communities with greater spatial and seasonal variability of vegetation.