Competitive Market Economy Research Articles

Value of Information in Competitive Economies with Incomplete Markets

A substantial literature addresses the negative effect on welfare of the release of information in a competitive market economy. We show that the value of information in this setting is typically positive if asset markets are sufficiently incomplete. More specifically, for any competitive equilibrium of a generic economy, we can find a finer information structure such that an allocation that is resource feasible and measurable with respect to thisinformation ex-post Pareto dominates the given equilibrium allocation.Journal of Economic Literature Classification Numbers: D52, D60, D80.Keywords: Competitive Equilibrium, Incomplete Markets, Value of Information.

The Living Wage, Economic Efficiency, and Socio-Economic Wellbeing in a Competitive Market Economy

Conventional economic wisdom views a Living Wage as costly in term of economic efficiency and competitiveness. I argue, based on x-efficiency theory, that higher wages need not cause any economic harm and can, on the contrary, generate higher levels of material wellbeing. Higher wages can be expected to induce x-efficiency and technological change cost offsets. In this context, an effective living wage, one that is above some subsistence minimum, can have a net efficiency effect on the economy. Therefore, a living wage greater than the wage rate generated by the free market cannot be predicted to generate economic harm. With the institutional parameters in place to realize a living wage, the economic pie can be expected to grow to accommodate the living wage.

Effects of Social Exclusion on Depressive Symptoms: Elderly Chinese Living Alone in Shanghai, China

Research has identified social exclusion as one of the social determinants of health. There are risks of social exclusion in later life in recent years. However, despite the fact that China has the largest aging population in the world and reports a rapid growth in the proportion of older people living alone, research on the role of social exclusion on depression is limited. This study examined the effects of social exclusion on depressive symptoms in older Chinese who are living alone in China, based on the data from one Shanghai neighbourhood. The data used were obtained between August and October 2008 through face-to-face interviews, using a structured survey questionnaire, from a simple random sample of 228 Chinese 60 and older living alone in a Shanghai community. Depressive symptoms were measured by a 15-item Chinese version Geriatric Depression Scale. Social exclusion was represented by income adequacy, social relations, civic participation, and housing condition. Over 30% of participants reported symptoms of a mild or above mild level of depression. When controlled for the demographics and health variables in hierarchical multiple regression, social exclusion variables, represented by a lower level income adequacy, a less favourable housing condition, and feeling more lonely correlated significantly with more depressive symptoms. Contrary to previous studies on depression in the older adults in China, this study has obtained findings indicating that social exclusion variables are more important than other socio-demographic factors in the context of contemporary China. While two significant social exclusion variables (i.e. income and housing) are related to structural changes in the economic context in China, the intra-personal role of feeling lonely that ties strongly living alone and role of older adults in an increasingly competitive market economy should not be underestimated. To address depression and mental health of older Chinese who live alone, social policies and programs to reduce various forms of social exclusion should be developed. In additional to providing assistance in financial support and housing improvement, services to strengthen the social networks and social relations of these older people are essential.

SOFT BUDGET CONSTRAINT RECONSIDERED

ABSTRACTThis paper demonstrates that Kornai's original concept of the soft budget constraint (SBC) as a theoretical innovation in micro‐theory disguises income redistributions that are essentially macroeconomic relationships. The SBC also postulates a competitive market economy as the benchmark of hard budget constraint (HBC) and efficiency. A recent formal theory explains the SBC as a component of profit‐maximizing strategic behaviour. From this perspective, the SBC can be integrated into the new microeconomics, but it loses its specific institutional connotation and its macroeconomic dimension. The SBC is thus included in ubiquitous market‐type relationships, particularly complete (optimal) contractual arrangements.

Productive and Cognitive Innovation Strategy: African Framework Design

Since the mid 1900’s, economist have come to recognize the role of innovative activity in firms productivity growth, particularly in the competitive market economies. However, the most conducive market environment for innovative activity has also become a subject of interest. Thus, a major constraint on industrial dynamism in African countries is said to be the dearth of indigenous entrepreneurs. This paper therefore argued for the provision of comprehensive innovation policy, in which the government supports the innovators by providing appropriate financial measures; removing regulatory, institutional (competitive) obstacles to innovation; and strengthening the knowledge base through investment in education, research and industrial sites in Africa.

Natural religion and “moral capitalism”

PurposeAt the 2009 Devos economic forum on the global financial crisis, David Cameron, then leader of the British Conservative Party and now Britain's Prime Minister, called for embracing a “moral capitalism.” The purpose of this paper is to consider the insights into a moral framework for the modern economic order that might be drawn from natural religions perceived by Adam Smith and Thorstein Veblen.Design/methodology/approachA review of the two perceptions of natural religions provide the basis for assessing their compatibilities with the type of competitive market economy that Smith observed in the eighteenth century, and with a modern market economy of large corporate enterprises and global financial markets. Particular attention is given to reforms that curb the practices that led to the global financial crisis.FindingsSmith's “pure and rational” natural religion has been interpreted as being compatible with the type of competitive market economy that he analyzed in Wealth of Nations. Veblen's natural religion of “Christian morals” had a natural rights analogue in the ethics of a competitive market economy in which market relationships were heavily influenced by production resting heavily on personal skills of craftsmen and trade relying on the honesty of small merchants.Research limitations/implicationsThe primary focus is on reforms in those aspects of the financial sector of the modern market system that have been associated with the current global financial crisis. What the two natural religions might suggest in the nature of broader socio‐economic reforms, e.g. corporate governance issues, would require a much larger study.Social implicationsWhile debates over a “moral capitalism” will be influenced doctrinal stances of institutional religions, sectarian differences may be bridged by considering natural religions that are rational and rest on the principle of fair play and mutual service.Originality/valueBecause of the attention that has been given to Smith's and Veblen's critical commentaries on institutional religions, the paper shows that their perceptions of natural religions and how those religions might relate to the economic order are easily overlooked.

Primary school education system in Croatia improvements through a strategic management model (case study)

In the process of EU accession the Republic of Croatia is endeavouring to meet the new requirements for improving the education system. This presents an opportunity for changes in the education system, by embracing and conducting a process of strategic thinking aimed at enhancing all of the segments in the Croatian education system. The ultimate goal is to help create a more efficient and more competitive economy. Usage of ICT in education is a major strategic feature of quality education, development, and employment possibilities in a competitive market economy. All education systems face the challenges and requirements of the information society, and use of ICT to make knowledge, information, and education more accessible, as well as to provide life-long learning and education. The paper aims to investigate the education system efficiency through the usage of ICT, and is based on empirical research.

Impact of the HRM practices and organisation culture on managerial effectiveness in public sector organisations in India

This study is in the light of the liberal global Indian economy that has led to a competitive environment. In a changing scenario of the global business environment with a highly competitive market economy, the HRM practices and organisation culture will provide an edge to an organisation. This study is an attempt to understand the effect of the HRM practices and organisation culture on managerial effectiveness in public sector organisations in India. This study revealed that the HRM practices and organisational culture are a strong predictors of the managerial effectiveness of the public sector organisations surveyed.

The day after neoliberal triumphalism

PurposeThe purpose of this paper is to analyse the causes of failure of the neoliberal model of capitalism and rise of state capitalism. The arguments that efficient market economy can thrive under autocracy are refuted.Design/methodology/approachBoth western neoliberal capitalism and state capitalism in China and Russia are juxtaposed and critically analyzed.FindingsNeoliberalism is a conceptual model of enthusiastic true believers who never succeed in developing a workable economic system but rather a travesty of its own ideal. The USA instead of an efficient, competitive market economy became a playground for lobbyists and a corporate autocracy fraught with deep imbalances. Yet due to the rule of law and inherent freedoms the post‐neoliberal USA will be capable of “self repair” which is not possible in state capitalism.Research limitations/implicationsThe connections between politics and economics are inherently complex and difficult to be presented as predicable dependences. An interdisciplinary approach is necessary and revealing but it has obvious analytical limitations because of inadequate tools.Practical implicationsThe proclamation of the end of the democratic capitalism is unfounded. The neoliberal ideologues are hardly to blame for the failures of the western market economy because they have merely created a pretext for corporate America to reduce the regulatory power of the government. The solution is in returning to the model of interventionist government mindful of the nation's long‐term wellbeing.Originality/valueThe author creates unique functional characteristics of western market capitalism and state capitalism and points out clear advantages of democratic western market capitalism often forgotten in the heat of the post‐crises debates.

Competition and Development: Towards an Institutional Foundation for Competition Enforcement

We bring together three strands of contributions to the study of institutions in the development process in order to lay down the foundations for an economic approach to the formulation of competition policies and competition law. Competition policies need to be complemented by trade, industrial, and procurement policies that provide the context for the operation of any policy regime in developing countries, laying down the foundations of a competitive market economy. First, models of the political economy of development that incorporate interest groups and their influence in the political process show that when a small group of vested interests dominate economic policy there is little room for competition policy. Second, based on the decision theory and the theory of torts of Glaeser and Shleifer we define the different regimes of competition law according to the capability to avoid subversion, elicit the optimal precaution of damages, and minimize information costs. This shows that competition regimes should be graduated by the level of institutional development. Third, we characterize the level of institutional development with a composite index of governance and government capture. Bringing together these three strands of research, we stress the need that the competition policy regime should fit each institutional level of development. We thus propose a research agenda to help policy makers and advisers better ground competition regimes and laws. This type of approach of policy, paying particular attention to the institutional background, could be applied to most areas of policy and law.

Stages of Organizational Transformation in Transition Economies: A Dynamic Capabilities Approach

abstractHow do organizations previously dominated by the state develop dynamic capabilities that would support their growth in a competitive market economy? We develop a theoretical framework of organizational transformation that explains the processes by which organizations learn and develop dynamic capabilities in transition economies. Specifically, the framework theorizes about the importance of, and inter‐relationships between, leadership, organizational learning, dynamic capabilities, and performance over three stages of transformation. Propositions derived from this framework explain the pre‐conditions enabling organizational learning, the linkages between types of learning and functions of dynamic capabilities, and the feedback from dynamic capabilities to organizational learning that allows firms in transition economies to regain their footing and build long‐term competitive advantage. We focus on transition contexts, where these processes have been magnified and thus offer new insights into strategizing in radically altered environments.

Social assistance policy and its impact on social development in China: the case of the Minimum Living Standard Scheme (MLSS)

China has been undergoing large-scale socio-economic transformation in the past three decades. With the shift from a planned to a market economy, China's social security system has been fundamentally transformed. In order to help inefficient state-owned enterprises to survive in a competitive market economy, since the mid-1980s the Chinese government has made great efforts to transform the traditional danwei- (work unit-) based social security system into a multi-tier social security system based on social insurance programmes. However, the embryonic social insurance system has proven inadequate and inefficient to cope with the mounting unemployment and urban poverty caused by the reform of the state-owned enterprises (SOEs), and has left more urban people outside the social protection system, thus imposing a negative impact on social stability. In the late 1990s, to pacify the vulnerable social groups consisting of laid-off workers, the unemployed, retirees and poor farmers, the Chinese government started to reform its public assistance policy and established a social assistance system with the minimum living standard scheme (MLSS) as its core. Focusing on the policy pertinent to the MLSS in China in general and in Guangdong in particular, this article examines social assistance policy and its impact on social development. It argues that although the MLSS indicates a statist approach to social development, the residual nature of the MLSS and the localization of financial responsibility have hampered the role of social assistance policy in promoting people's wellbeing and social development in China.

Implementing the Marshall Plan in Greece: Balancing Reconstruction and Geopolitical Security

Implementation of the Marshall Plan in Greece involved a multitude of variables, unlike those associated with its implementation in any other European Recovery Program (ERP) recipient state, making Greece unique among the 16 member states of the ERP. A preeminent factor, but not one exclusively responsible for this, was the Greek Civil War which polarized political factions, hindered the development of major long term projects, and subjected the state to the maintenance of a disproportionate military budget which acted as a deterrent to development. It was under these circumstances that Marshall Planners were called to act, attempting to stabilize socioeconomic factors in Greece on the hardening geopolitical battleground of the Cold War, while at the same time setting the necessary foundations of a formidable ally with a competitive market economy.

La codificazione del diritto dei consumatori. Aspetti di diritto comparato

- The constitutional dimension of consumer rights obtained definitive consecration with the approval of the Nice Charter in December 2000, made autonomous from the Constitution, in the form of the European Charter of Fundamental Rights and used not only as a political document, but also as a legal document, and with the approval of the European Constitution in October 2004, the latter subject to the ratification of all Member Countries. Among the aims of the Union, the European Charter of Fundamental Rights sets human dignity as the basic value (art.I-2) and states that the sustainable development of Europe is based on "balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress"(art.I-3). The Charter recognizes and guarantees the right of individuals to physical and mental integrity (art.II-63), reaffirmed in the form of health protection (art.II-95), respect for family life (art.II-67) and protection of personal data (art.II-68) and specifically provides "a high level of protection" for consumers (art.II-98). Consequentially, a distinction should be made between consumer claims which adhere to fundamental rights, recognized in the constitutions of the member countries, and emphasised in the European Charter, and the so-called "economic rights", which are placed on the same level of those rights referring to the "professional". The elevation of individual rights - as a "consumer" - to European constitutional level has a dual value: it binds the Community institutions and the Member States, but it also binds national courts. In this way, the Drittwirkung of the recognized and guaranteed principles may take place directly - and not only as a consequence - in the relations between individuals.

Accounting for wage and employment changes in the US from 1968–2000: A dynamic model of labor market equilibrium

In this article, we present a unified treatment of and explanation for the evolution of wages and employment in the US over the last 30 years. Specifically, we account for the pattern of changes in wage inequality, for the increased relative wage and employment of women, for the emergence of the college wage premium and for the shift in employment from the goods to the service-producing sector. The underlying theory we adopt is neoclassical, a two-sector competitive labor market economy in which the supply of and demand for labor of heterogeneous skill determines spot market skill rental prices. The empirical approach is structural. The model embeds many of the features that have been posited in the literature to have contributed to the changing US wage and employment structure including skill-biased technical change, capital-skill complementarity, changes in relative product-market prices, changes in the productivity of labor in home production and demographics such as changing cohort size and fertility.

Barriers to Entry and Growth of Private Companies in Poland, the Czech Republic, Hungary, Albania and Lithuania (Part II)

Free 'Entry' and free 'Exit' are fundamental mechanisms of the competitive market economy operation. Free entry ensures that potential entrepreneurs will take advantage of profitable opportunities and enter profitable segments of the market, increasing competitive pressure on the incumbent firms, lowering output prices and improving the overall allocation of resources. Both free entry and free exit guarantee that more efficient firms and those producing in accordance with the market demand, survive and prosper while inefficient units and those whose production is not geared to the market will contract and eventually embark on exit. Barriers to entry and exit influence the development of competitive conditions in established market economies, however, for economies in transition the freedom of entry and exit has an even more significant dimension. The reason for that are particular 'initial conditions' which the economies inherited from their communist past: massive distortions of the economic structure, highly monopolistic and oligopolistic markets, and a large average firm size. With a collapse of the old regime, transformation of the old economic structure had to take place through the entry of new, market-oriented firms particularly in the undeveloped sectors of the economy and the exit of inefficient and uncompetitive enterprises especially from the over-grown industrial sector. This report presents some outputs of the research project 'The Impact of Barriers to Entry on the Speed of Transition: A Comparative Study of Countries in Different Stages of Transition' (PHARE ACE project No. P95-2047-R), coordinated by Leszek Balcerowicz and done by an international team which included: Ewa Balcerowicz (Poland), Andrzej Bratkowski, (Poland); Irena Grosfeld (France); Iraj Hashi (U.K); Jan Mladek (the Czech Republic); Gediminas Rainys (Lithuania); Jacek Rostowski (Hungary); Miklos Szanyi (Hungary); and Lindita Xhillari (Albania). The main aim of the project was to investigate nature and impact of barriers to entry in five countries at different stages of transition with various development backgrounds and traditions. The study has been based on the experience of new firms in Poland, Hungary, the Czech Republic, Lithuania and Albania - the first three having reached an advanced stage of transition and the latter two having embarked on the transition process later, thus lagging behind the front-runners. The study has focussed on the legal, fiscal and institutional factors which impede new entries and slow down the expansion of new firms in each country. The report consists of two parts. In Part I, Chapter 2 we discuss the interaction between the government's regulatory activity and the entry of new firms into the formal or informal sectors of the economy. Here we highlight the necessity of this important function of the government as well as its undesirable implications such as rent seeking and corruption. In Chapter 3 we consider a framework for the analysis of barriers to entry and growth of new firms, highlighting the main constraints to entry and growth considered by this report. Chapter 4 is devoted to the review of an actual pattern of new firms' entry in the early transition period in the five countries under consideration. Part II reports on the results of our enterprise survey; it is a detailed study of 400 firms in five transition economies. Here we first discuss (Chapter 5) the composition of the sample on which the study is based and then (Chapters 6,7,8,9 and 10) summarize main findings of the study in terms of the relative importance of different barriers facing new firms in each country. Chapter 11 discusses the main policy recommendations of this study.

Age at first reproduction and economic change in the context of differing kinship ecologies.

Kinship systems which tend to be based on ecologies of subsistence also assign differential power, privilege, and control to human connections that present pathways for manipulation of resource access and transfer. They can be used in this way to channel resource concentrations in women and hence their reproductive value. Thus, strategic female life course trade-offs and their timing are likely to be responsive to changing preferences for qualities in women as economic conditions change. Female life histories are studied in two ethnic groups with differing kinship systems in NE India where the competitive market economy is now being felt by most households. Patrilineal Bengali (599 women) practice patrilocal residence with village exogamy and matrilineal Khasi (656 women) follow matrilocal residence with village endogamy, both also normatively preferring three-generation extended households. These households have helpful senior women and significantly greater income. Age at first reproduction (AFR), achieved adult growth (height) and educational level (greater than 6 years or less) are examined in reproductive women, ages 16-50. In both groups, women residing normatively are older at AFR and taller than women residing nonnormatively. More education is also associated with senior women. Thus, normative residence may place a woman in the best reproductive location, and those with higher reproductive and productive potential are often chosen as households face competitive market conditions. In both groups residing in favorable reproductive locations is associated with a faster pace of fertility among women, as well as lower offspring mortality among Khasi, to compensate for a later start.

Resistance, Revision and Retrenchment in the Transition to a Competitive Market Economy in China

China has generally benefited from globalization, particularly in the economic area, and Chinese citizens know it. China, for its part, has been one of the most open developing countries. The general trend since economic reforms began in 1978 has been toward greater openness, and a more competitive market economy. However, China never followed the Washington Consensus, particularly with respect to relationship between domestic economy and international economy. Moreover, Chinese government officials and citizens are now much more acutely aware of the many practices adopted by rich countries to pursue their own national economic interests and to protect their own domestic companies. As result, there are now signs of a retrenchment in China and a growing protectionism. Part I provides an overview of China's economic policies and development strategies, highlighting the differences between Beijing's development strategy and the Washington Consensus; the recent policy shift away from the focus on aggregate growth to a greater concern with sustainable development, social justice and the creation of a harmonious society; and the rise of nationalism and the increase in protectionist sentiments.Part II takes a closer look at various areas where there has been resistance to economic globalization, or signs of retrenchment, including WTO compliance, enforcement of IP rights, M&A regulations, anti-monopoly law, securities litigation, anti-dumping cases, property law, bankruptcy, labor law and the legal profession. Part III explains the recent push back on economic globalization, and why nevertheless the general trend is still toward greater openness and a more competitive economy.

Some Opportunities and Reconsiderations of the Strategy Regarding the Finance Source of Durable Development in the Context of Romania's Fit in the European Union

In condition of accession Romanian to European Union, local companies have at their disposal many and varied financing mechanisms. For achieving the goals of sustainable development, it is necessary mobilization and efficiently usage of the financial resources, especially those native ones. In the actual stage, increase and variety of financing sources at the company level, are strong related to the reinforcement of the functional and competitive market economy, which impose the rising of physical internal production, taking in account the improvement of competition and meeting of fundamental interrelations, like production and consumption.

Consensus Consumer and Intertemporal Asset Pricing with Heterogeneous Beliefs

The aim of the paper is to analyze the impact of heterogeneous beliefs in an otherwise standard competitive complete market economy. The construction of a consensus probability belief, as well as a consensus consumer, are shown to be valid modulo an aggregation bias, which takes the form of a discount factor. In classical cases, the consensus probability belief is a risk-tolerance weighted average of the individual beliefs, and the discount factor is proportional to the beliefs dispersion. This discount factor makes the heterogeneous beliefs setting fundamentally different from the homogeneous beliefs setting, and it is consistent with the interpretation of belief heterogeneity as a source of risk. We then use our construction to rewrite in a simple way the equilibrium characteristics (market price of risk, risk premium, risk-free rate) in a heterogeneous beliefs framework and to analyze the impact of belief heterogeneity. Finally, we show that it is possible to construct specific parametrizations of the heterogeneous beliefs model that lead to globally higher risk premia, lower risk-free rates, and risk premia that are lower for assets with higher belief dispersion.