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Abstract:
Is investment constrained more by insecure property rights or by limited external finance; For five transition economies in Eastern Europe and the former Soviet Union we find that weak property rights limit the reinvestment of profits in startup manufacturing firms. Access to credit does not appear to explain differences in investment. At least in the early stages of post-communist reform, retained earnings appear to have been enough to finance the investments that managers wanted to make.

Abstract:
Which of the democratic checks and balances - opposition parties, the judiciary, a free press - is the most critical? Peru has the full set of democratic institutions. In the 1990s, the secret-police chief Montesinos systematically undermined them all with bribes. We quantify the checks using the bribe prices. Montesinos paid television-channel owners about 100 times what he paid judges and politicians. One single television channel's bribe was four times larger than the total of the opposition politicians' bribes. By revealed preference, the strongest check on the government's power was the news media.

Democracy, institutions, corruption, bribery, checks and balances, media, Peru

Abstract:
Which of the democratic checks and balances - opposition parties, the judiciary, a free press - is the most critical? Peru has the full set of democratic institutions. In the 1990s, the secret-police chief Vladimiro Montesinos systematically undermined them all with bribes. We quantify the checks using the bribe prices. Montesinos paid television-channel owners about 100 times what he paid judges and politicians. One single television channel's bribe was four times larger than the total of the opposition politicians' bribes. By revealed preference, the strongest check on the government's power was the news media.

Democracy, institutions, corruption, bribery, checks and balances, media, Peru

Abstract:
Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.

Abstract:
Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.

Abstract:
Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning courts also encourage entrepreneurs to try out new suppliers. Courts are particularly important when specific investments are needed for a relationship to develop. While relationships can sustain existing interactions, workable courts help new interactions to start and develop.

Abstract:
Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning courts also encourage entrepreneurs to try out new suppliers. Courts are particularly important when specific investments are needed for a relationship to develop. While relationships can sustain existing interactions, workable courts help new interactions to start and develop.

Abstract:
Post-communist countries offer new evidence on the relative importance of courts and relationships in enforcing contracts. Belief in the effectiveness of courts has a significant positive effect on the level of trust shown in new relationships between firms and their customers. Well-functioning courts also encourage entrepreneurs to try out new suppliers. Courts are particularly important when specific investments are needed for a relationship to develop. While relationships can sustain existing interactions, workable courts help new interactions to start and develop.

Abstract:
Using a survey of private firms in Vietnam, we examine how ongoing relationships serve information-provision and contract-enforcement purposes, substituting for absent market infrastructure. We find that ongoing relationships work when firms face high costs in finding alternative trading partners; the firms have access to information about their trading partners from other firms or from family members; and community sanctions are invoked if the trading partner reneges on the deal. Ongoing relationships have costs, however, in that inefficient matches can persist. These networks develop quite easily in response to the need for some contracting assurance; they need not be based on family ties.

Abstract:
A survey of private firms in Vietnam is used in this paper to examine ongoing interfirm relationships; this survey gives detailed data on a firm's relationships with specific trading partners. We take as our measure of a firm's trust in its trading partner the amount of trade credit it grants. Bilateral relationships between trading partners are embedded in two kinds of networks: one based on pre-existing ties of family or friendship, the other on communication among manufacturers of similar types of goods.

While we find that reputation is a workable basis for contracting in Vietnam, we also find some shortcomings of the informal mechanisms. Small firms rely more heavily than large firms on family connections and on gossip from the customer's other trading partners. Firms dependent on trading partners run by family members grow slowly. These observations suggest that to be successful, rather than just to survive, a firm must somehow escape its reliance on the family-based clientelistic links. Interfirm networks remain significant even for large firms, however, in that they use other manufacturers of similar goods as sources of information about new suppliers, suggesting that a network of firms in the same industry, being an open network, does not limit a firm's success in the way that a family network does. Our results are compared to the existing trade credit literature.

Abstract:
People's concern for their own reputation can support contracting between a pair of trading partners when one or both are locked in, and among multiple trading partners in close-knit communities where information flows freely. In communities where people can hide behind their anonymity, private order, if it is to operate at all, must be organized. Private-order organizations in notably diverse settings, from medieval Europe to present-day Mexico, work in similar ways. An organization such as a market intermediary or a trade association disseminates information about contractual breaches and coordinates the community's response to breaches. The usual sanction is to boycott the offender.

In countries making a transition from planned to market economies, private order acts in place of the inadequate legal system. We use data from a survey of firms in five transition economies in Eastern Europe and the former Soviet Union to show that in these transition economies social networks and informal gossip substitute for the formal legal system, while business networks and trade associations work in conjunction with the formal legal system.

Abstract:
The use of modern microeconomics in policy is illustrated by the markets for spectrum, electricity, greenhouse-gas reductions, defense procurement, and Treasury bills. Further examples are antitrust divestiture rules, market-based redistribution, fishery conservation, and privatization. The limits of the use of theory are also discussed, by reference to China's economy-wide reforms. Lessons on the policy use of theory are drawn.

Abstract:
Analyzing a variety of cross-national and sub-national data, we argue that high adult mortality reduces economic growth by shortening time horizons. Higher adult mortality is associated with increased levels of risky behavior, higher fertility, and lower investment in physical and human capital. Furthermore, the feedback effect from economic prosperity to better health care implies that mortality could be the source of a poverty trap. In our regressions, adult mortality explains almost all of Africa's growth tragedy. Our analysis also underscores grim forecasts of the long-run economic costs of the ongoing AIDS epidemic.

Fertility, growth, human capital, investment, mortality

Abstract:
Analyzing a variety of cross-national and sub-national data, we argue that high adult mortality reduces economic growth by shortening time horizons. Higher adult mortality is associated with increased levels of risky behavior, higher fertility, and lower investment in physical and human capital. Furthermore, the feedback effect from economic prosperity to better health care implies that mortality could be the source of a poverty trap. In our regressions, adult mortality explains almost all of Africa's growth tragedy. Our analysis also underscores grim forecasts of the long-run economic costs of the ongoing AIDS epidemic.

Abstract:
Analyzing a variety of cross-national and sub-national data, we argue that high adult mortality reduces economic growth by shortening time horizons. Higher adult mortality is associated with increased levels of risky behavior, higher fertility, and lower investment in physical and human capital. Furthermore, the feedback effect from economic prosperity to better health care implies that mortality could be the source of a poverty trap. In our regressions, adult mortality explains almost all of Africa's growth tragedy. Our analysis also underscores grim forecasts of the long-run economic costs of the ongoing AIDS epidemic.

Fertility, growth, human capital, investment, mortality

Abstract:
Is investment constrained more by insecure property rights or by limited external finance? For five transition economies in Eastern Europe and the former Soviet Union we find that weak property rights limit the reinvestment of profits in startup manufacturing firms. Access to credit does not appear to explain differences in investment. At least in the early stages of post-communist reform, retained earnings appear to have been enough to finance the investments that managers wanted to make.

Abstract:
This Paper (a) provides a framework for quantifying any economy's flexibility, and (b) reviews the evidence on New Zealand firms' birth, growth and death. The data indicate that, by and large, the labor market and the financial market are doing their job.

Flexibility, turnover

Abstract:
This paper (a) provides a framework for quantifying any economy's flexibility, and (b) reviews the evidence on New Zealand firms' birth, growth and death. The data indicate that, by and large, the labour market and the financial market are doing their job.

Creative destruction, New Zealand

Abstract:
Which of the democratic checks and balances - opposition parties, the judiciary, a free press - is the most forceful? Peru has the full set of democratic institutions. In the 1990s, the secret-police chief Montesinos systematically undermined them all with bribes. We quantify the checks using the bribe prices.

Montesinos paid a television-channel owner about 100 times what he paid a judge or a politician. One single television channel's bribe was five times larger than the total of the opposition politicians' bribes. By revealed preference, the strongest check on the government's power was the news media.

Abstract:
A seller choosing between auctioning online and live faces a tradeoff: lower transaction costs online against more rents left with the bidders. We model this tradeoff, and apply the theory to auctions of art. The crucial parameter for whether the seller does better online than live is not the expected price but the valuation uncertainty.

Abstract:
The mix of formal and informal mechanisms for contract enforcement is examined using survey data from Russia, Ukraine, Romania, Poland, and Slovakia. Using the size of trade credit to quantify the success of contracting, we ask: Do the courts have a perceptible effect on contracting; When can a firm rely on its customer to repay trade credit voluntarily; Which is more effective, the courts or relational contracting; Do trade associations play a role in contract enforcement; Does relational contracting entail inefficiencies; Is the reliance on relation contracting merely a transitory phenomenon, reflecting the inadequacy of these countries; legal systems?

Abstract:
In this paper we consider recent proposals to auction U.S. import quotas. using the funds so obtained to encourage relocation out of the protected industries. We argue that the information available to the government, or lack thereof, is a critical factor in understanding these policies. In a world or full information, it makes little sense to use auction quotas rather than tariffs. Similarly, it is unclear why an elaborate program of temporary protection is needed, rather than immediately opening trade and compensating people with an income transfer. When the government has Limited information, however, these policies become quite sensible and may even be optimal.

Abstract:
Vietnam's firms contract without the shadow of the law and only partly in the shadow of the future. Although contracting rests in part on the threat of loss of future business, firms often are willing to renegotiate following a breach, so the retaliation is not as forceful as in the standard repeated-game story and not as effective a sanction. To ensure agreements are kept, firms rely on other devices to supplement repeated-game incentives. Firms scrutinize their trading partners. Community sanctions are occasionally invoked. Transactions with greater risk of reneging are supported by more elaborate governance structures.

Abstract:
New firms have been formed at a striking rate in the transition countries, improving welfare by creating jobs, supplying consumer goods, constraining the market power of the state-owned firms, and building political momentum for reform. We summarize evidence on the relative role of entrepreneurs and the state in economic reform. Early in the transition, the government's main contribution to entrepreneurship was to avoid impeding the entrepreneurs' self help. Later, the entrepreneurs came to need positive assistance from the state: institutions to support contracting and finance.

Abstract:
We use survey data to examine new firms in Poland, Slovakia, Romania, Russia and Ukraine. By measures of job growth, security of property, and market development, our countries fall into two groups: an advanced group including Poland, Romania and Slovakia, with Slovakia falling somewhat behind the other two; and a backward group of Russia and Ukraine. Macroeconomic stability is not sufficient for private-sector growth. A lack of bank finance does not seem to prevent private-sector growth. More inhibiting than inadequate finance are insecure property rights.

Abstract:
Our survey of private manufacturing firms finds the size of hidden 'unofficial' activity to be much larger in Russia and Ukraine than in Poland, Slovakia and Romania. A comparison of cross-country averages shows that managers in Russia and Ukraine face higher effective tax rates, worse bureaucratic corruption, greater incidence of mafia protection, and have less faith in the court system. Our firm-level regressions for the three Eastern European countries find that bureaucratic corruption is significantly associated with hiding output.

Corruption, taxation, legal system, unofficial economy

Abstract:
Our survey of private manufacturing firms finds the size of hidden "unofficial" activity to be much larger in Russia and Ukraine than in Poland, Slovakia and Romania. A comparison of cross-country averages shows that managers in Russia and Ukraine face higher effective tax rates, worse bureaucratic corruption, greater incidence of mafia protection, and have less faith in the court system. Our firm-level regressions for the three Eastern European countries find that bureaucratic corruption is significantly associated with hiding output.

Abstract:
This paper investigates how start-up firms in Vietnam operate in the face of two significant market frictions: a poorly developed legal system and inadequate market information. We argue that these two market frictions actually offset each other. Poor market information and the consequent difficulty of locating trading partners can help make self-enforcing contracts workable. Firms that have nowhere else to go will refrain from breaking their agreements. If it is difficult to locate alternative trading partners, firms will invest in maintaining their existing relationships. Our empirical analysis is consistent with this hypothesis.