Search

In the last decade we have seen two parallel developments in economics. First, we have seen economic research striking out into many new direc tions and returning to many old ones with new and sophisticated techniques. Second, we have witnessed a most disquieting and quite violent disagreement over basic methodological issues and over the scientific status of economics. This immediately raises a rather important question: "Can the foundations be shaken without having severe consequences upon the outcome, interpretation, and even the continuation of the economic research ?" It is for this reason that the author would like to expose what seem to be some of the dangers of some of the present arguments, and to suggest ways for economists to move in order to reach greater agreement on these methodological issues. Without such agreement the results of the current research boom will be subject to increasing doubt, and perhaps could turn out to be an empty bubble that might break without leaving us any wiser.

As Greece heads into its second five-year development plan-its first within the context of its associate membership in the Common Market-the vast number and magnitude of the structural changes required in Greek society and economy (if her plans are to be achieved) become increasingly apparent. The necessity of accomplishing these transformations within the time limitations of the Common Market Agreement is finally drawing the attention of Greek economists to the crucial problem of choosing between alternative strategies of development and of selecting priorities among the many investment activities which are desirable from the social point of view.

Pourgerami and Maskus (PM) (1987) find three “difficulties” in our analysis of the relationship between the rate of inflation (P) and its unpredictability (Pf) in Latin American countries.’ The first of these is a point very well taken, namely that the positive relationship we hypothesized might well be offset by a negative one arising because higher rates of inflation could be expected to induce the relevant economic agents to invest more in generating the relevant information. in utilizing it efficiently and in developing the instruments capable of hedging against inflation. However, since any such adjustments would be institutional in nature and take time to be carried out. it is obvious that this consideratipn would not be relevant for short-run analysis involving year-to-year or especially quarter-to-quarter changes in inflation rates as in our analysis. The other “difficulties.” namely that quarterly observations are more relevant than annual ones in testing such relationships and that rational expectations (RE) models of the type employed by PM are preferable to adaptive expectations models of the type we used, are criticisms more relevant to the short-run relation between inflation and its predictability, but, as we shall presently demonstrate. are not persuasive. Nevertheless. since the results presented by PM (as they have noted) show the relationship between PI and P to be considerably weaker than was indicated in earlier results (including our own). the substantial difference in results deserves explanation. Since their time coverage. frequent!. of adjustment of expectations. model of esprct;ltions and to some extent countr! coverage were all different than ours, it is not possible to learn from their results the reason for the difference. By employing the same time and country coverage as in PM, and also an estimation procedure (Hildreth-Lu) which corrects for autocorrelation, and continuing to use a modified version of our adaptive expectations model (MAE): but varying the duration of the periods, the results presented in Table 1 shed light on the source of the difference. As can be seen, the use of quarterly instead of annual data does not have a large effect on the results, thereby suggesting that PM’s use of quarterly data is not the source of their weaker results. Indeed, note that in six of the seven high inflation countries the slope coefficient is larger and more significant when quarterly data are employed than when annual data are employed. The largest differences are between the results obtained from our own MAE model estimated with quarterly data and those obtained by PM with their RE model with the same data. In all seven cases the PM estimate of @, is significantly lower than our own corresponding estimate. Which estimate is more reliable? Even if one were to agree in principle with PM that RE models are superior to AE models of price expectations, the particular RE model employed by PM can hardly be considered acceptable, let alone superior to our MAE model. With their 20 right hand side variables, i.e.. four lags of each of five different explanatory variables. relative to our four right hand side variables, it is not surprising that PM havq been able to increase the explained variation of P. correspondingly reduc

Extract In their recent paper in this journal M. and Carol Vlassoff are to be commended for helping to remedy the dearth of empirical studies on the old-age security motive for children (and particularly sons) in rural areas of developing countries.(1) However, while the questionnaire which they applied to 357 ever-married men in a rural village in Maharashtra state in India is potentially useful, several of the conclusions they derive from it are unwarranted and, if left unquestioned, would undoubtedly have the effect of setting back the serious investigation of the effects of this motive rather than furthering it. The invalid or at least questionable inferences are taken up one at a time in the order of their appearance

In a recent contribution to this Journal, Bardhan (1979) has constructed an interesting two-season model of a peasant economy to study the determinants of land tenancy. He derived a number of hypotheses and provided supporting evidence from interstate cross-section data from India in the early 1950s. The results of Bardhan's theoretical and empirical analyses have already been cited by other scholars, e.g., Hayami and Kikuchi and Quibria and Taslim, as providing evidence for the relevant propositions. Given the dearth of theoretically derived and empirically supported propositions in this important area of applied economics, Bardhan's work is sure to gain increasing recognition over time and to stimulate further research. The purpose of this note is to assist future researchers by pointing out several shortcomings of both his theoretical and empirical analyses and hence to urge caution with respect to the validity of some of his conclusions.

Publisher Summary This chapter focuses on two principal components: transaction costs and the theory of collective action. The chapter describes the domain and scope of each component and explores the interrelationships between them. The institutions and their determinants that are the subject matter of the New Institutional Economics (NIE) have long served as a battleground among the alternative leading paradigms, namely, Marxian, neoclassical, and sociobiological. NIE represents the culminating intersection of a number of different lines of investigation, including the analysis of behavioral norms, the integration of persons with different tastes and preferences into voting coalitions, interest group formation, the problems of and prerequisites for collective action, transaction costs, organization theory, limitations on the rationality of human behavior, the emergence of rules of thumb for firm decision-making, the determinants of firm structure, coordination problems, rent-seeking behavior, technological change and its relationship to institutional change, and the determinants and effects of property rights. NIE explanations of existing institutional arrangements and their functions may yield rather different policy implications than those derived from traditional approaches; therefore, the application of the NIE to development policy could lead to significant new policy initiatives in less-developed countries.

Publisher Summary This chapter presents the analysis of organizational form and contracts and focuses on a unifying transaction cost framework for explaining choices among different forms of contract. Most applications to the explanation of contractual choices have been concerned with a rather narrow range of contractual choices and have focused almost exclusively on agriculture and labor-shirking as the single form of opportunistic behavior to which contracts may be vulnerable. The nonagricultural experience reveals the importance of the largely neglected asset-misuse form of opportunistic behavior. The chapter explains the origin and consequences of contracting and the important and interrelated roles of opportunistic behavior and transaction and information costs. The chapter further illustrates the use of the transaction cost approach to contractual choices in a variety of sectors. The adherence to contracts and the efficiency of performance can be affected by perceptions about the fairness and legitimacy of contractual arrangements. These factors can be affected by ideology; therefore, ideology can also play an important role in reducing transaction costs.

Publisher Summary This chapter presents certain case studies that explain the contractual choice in a region of Tunisia—Medjez-el-bab—where there has been a discernible switch from wage- and fixed-rent contracts to share contracts, which have become much more prevalent in the region in recent years. The economies of scope in supervision, the proximity of owners to the farms, the emigration of supervisory labor, changing cropping patterns, and trends in relative factor prices all contribute to the explanation for the switch from wage and rent contracts to share contracts. The chapter discusses the observed trend toward share contracts and describes the validity of various transaction cost elements of contractual choice.

Publisher Summary The fishing industry is an important one for investigating the determinants of contractual choice in Tunisia, not only because of the fact that fishing contracts tend to be quite different than in other sectors but also because the industry is of growing economic importance to the country. This chapter describes the contractual terrain of Tunisian fishing and determines the extent to which the pervasiveness of share contracts in the fishing industry, which was mostly based on the experience of the developed countries, applies to the fishing industry in Tunisia. As a result of the dearth of sources of fresh water in the country, virtually all of Tunisia's fishing industry is coastal fishing. Nevertheless, the industry is remarkably heterogeneous. Despite all the heterogeneity, by and large, share contracts are as dominant in the fishing industry of Tunisia as they are elsewhere. The chapter explains how the disadvantages of share contracts are minimized in specific circumstances.

Publisher Summary This chapter discusses the applications of the economics of transaction and information costs and the applications of the theory of collective action. The chapter discusses the interactions between the two approaches, their common shortcomings, and presents suggestions for the future research. When transaction costs are defined to include the costs of information, negotiation, monitoring, and enforcement with respect to all the relevant inputs in the production and distribution processes, including the bearing of the relevant risks, the transaction cost framework can serve as a unifying one for analyzing contractual choices. This framework offers the potential for explaining the choices among different types of contracts and organizational forms and formulating empirical tests of the relative importance of the various factors relevant to and underlying these choices. The transaction cost framework would seem capable of identifying the factors responsible for the switch from wage and rent contracts in the agricultural sector of Tunisia's Medjez-el-Bab region. These include the outmigration of family supervisors, the increase in irrigation, and the rise in the relative cost of labor.

Publisher Summary This chapter reviews the diverse principles relevant to the analysis of collective actions and examines their usefulness in the theory and policy of economic development. The importance of the theory of collective action lies in the fact that collective action is generally required for the production and maintenance of public goods. The theory of public goods and the theory of collective action address the same issues relating to the provision of public goods, in particular the free-rider problem. The chapter presents the definition of public goods and the identification of the free-rider problem that plagues attempts at collective action. It also explains the numerous factors hypothesized to affect the likelihood of success in collective action in general. These include the type of public goods, group characteristics, environmental considerations, expectations, and other dynamic factors. The relationships between collective action and the state on the one hand and collective action and development on the other are examined in the chapter.

Publisher Summary Tax evasion is a sufficiently pervasive phenomenon to merit serious investigation of alternative incentive devices and other mechanisms for collecting more of the taxes stipulated by law. In principle, taxes can be collected with three quite different forms of contract between the tax-collecting authority and the tax collector: wage, share, and fixed-rent contracts. The rent contract approach to tax collection has generally been referred to as “tax farming.” This chapter presents a case study that highlights the time periods in which fixed rent contracts known as tax farming were dominant in Tunisia as well as elsewhere. The chapter explains how and why this seemingly anachronistic form of contract continues to dominate in one specific sector, namely, the taxation of Tunisia's weekly markets. The explanation hinges on the extremely high transaction costs and risk-aversion on the part of the local governments to whom the tax receipts accumulate. Tax farming methods could be of use in dealing with the tax collection problems of the increasingly important hidden or underground portion of most economies.

Publisher Summary This chapter explores the applicability of transaction cost economics to the determination of size of establishment and ownership type in Tunisian manufacturing. In view of the objective of an application to a developing country, it would seem appropriate to consider opportunistic behavior on the part of the different agents within the firm not only as usual with respect to each other but also with respect to parties external to the firm. The chapter presents a link between the economics of transaction costs and that of rent-seeking and discusses the choice of ownership type. The chapter discusses the effects of institutional constraints on size and ownership through their differential effects among economic activities. The manufacturing sector is disaggregated into 65 different activities that have, in most cases, relatively homogeneous products.

The following section are included:IntroductionModel of Principal and AgentMethods of Fighting Corruption and Relevant EvidenceConclusionsAcknowledgmentsReferences

Following decades of large-scale rural-urban migration in developing countries the authors note the recent growth in reverse migration or migration from urban centers to suburban or rural areas which suggests that the labor market adjustment process may be unstable. "It is our purpose here to investigate the question of stability using some recent developments in nonlinear dynamic analysis and to do so within a framework which closely resembles the original Harris-Todaro model. We find that instability is indeed a possibility and that regular or irregular nonperiodic fluctuations can be propagated--even in the absence of any exogenous shocks. The source of these results is the lag in adjustment on labour markets combined with the nonlinearity of the labour supply function." (EXCERPT)

En los ultimos quince anos se han presenciado dramaticos avances en el desarrollo de los modelos de planificacion a largo plazo y de criterios practicos para ubicar recursos en el mercado competitivo caracteristico de la mayoria de los paises menos desarrollados (PMD). En contraste, la construccion y uso de modelos macroeconomicos de corto plazo para politicas de planeacion, es relativamente primitivo en el contexto de los PMD, con formas elementales calcadas de modelos econometricos mas antiguos desarrollados en los paises desarrollados (PD). En la seccion siguiente, se pondra enfasis en los desarrollos recientes que estan comenzando a lograr la adecuacion entre los modelos utilizados tanto con las caracteristicas de los PMD como con las necesidades de los planificadores. Al mismo tiempo, se especula acerca de la naturaleza de las innovaciones que sera necesario hacer antes que los PMD pue-dan tener modelos macroeconometricos satisfactorios. En la segunda seccion, se presenta un metodo de aplicacion de modelos macroeconometricos a politicas de planeacion con el uso de tecnicas de programacion lineal. El uso de la programacion lineal en politicas de planeacion, es presentado en el contexto de la coordinacion de una politica regional (multinacional) entre paises de America Central. Se especifica un modelo de pequena escala y luego se estima separadamente para cada uno de los cinco paises de America Central.

The conditions under which the old-age security motive could be expected to be significant for fertility are described. Such conditions are likely to prevail in rural areas of developing countries and especially among women. Empirical studies on the subject are evaluated and the inconclusive and contradictory nature of the findings are attributed to failures to select appropriate samples and variables. Most findings derive from studies only marginally concerned with the old-age security motive for fertility. The paper concludes with suggestions for future research. Some of the earlier studies found surprisingly little or no relation between the old-age pension participation variables and various measures of fertility especially in developing countries. More recent studies have generally found significant negative relationships. Entwisle and Winegarden obtained evidence of a reinforcing feedback from low fertility to the expansion of the depth and breadth of coverage of participation in old-age security programs. A study done by DeVany and Sanchez concluded that the land-retention and other benefits of children to their parents are greater for those living on land which cannot be bought or sold than for those on privately owned land. Nugent and Gillaspy found that fertility changes between 1960 and 1970 across counties were negatively related to the size of the social security proxy variable. Cains 1981 study showed that the insecurity characterizing rural areas of developing countries is not limited to old age and disability but also includes calamitous events whose presence contribute to high fertility. The 1980 study of Vlassoff and Vlassoff concluded that old-age security was unimportant as a motive for fertility. There is a need for additional more systematic and more special-purpose empirical studies to investigate the impact of old-age security on fertility. Studies should be conducted in rural areas of developing countries where the old-age pension motive is expected to be strong. The sample size should be large enough to afford the opportunity to isolate the old-age pension affects from the effects of other variables and data collection should be repeated at various times. (summaries in ENG FRE SPA)

I. Linkages, 335. — II. (Dis)Aggregation, 336. — III. A tempest in a teapot, 337. — IV. Conclusion, 342.

I. Consolidated I-O tables averaged for developed and less developed countries, 159. — II. Linkage indices, 161. — III. The Hirschman-compliance index and the extreme version of the linkage hypothesis, 165. — IV. The balanced-growth version of the linkage hypothesis, 167. — V. Summary' and conclusions, 171.