Short-Run Strategies For Attracting Foreign Direct Investment

This paper empirically investigates the effectiveness and feasibility of two FDI policies, fiscal incentives and deregulation, aimed at improving the attractiveness of a country in the short run. Using disaggregated data on sales by US MNEs’ foreign affiliates in 43 developed and developing countries over the 1982-1994 period, results show that the provision of fiscal incentives or the deregulation of the labour market would exert a positive impact on total FDI. Given the drawbacks frequently associated with the use of incentive packages, economy-wide policies which ease firing procedures and reduce severance payments would certainly be the best policy option. This paper also highlights the different aggregation and omitted variable biases that have affected results of previous studies and provides some support to recent theoretical models of FDI by showing that third country effects and spatial interdependence influence respectively the location of export-platform FDI and vertical FDI.

Short-Run Strategies For Attracting Foreign Direct Investment

This paper empirically investigates the effectiveness and feasibility of two FDI policies, fiscal incentives and deregulation, aimed at improving the attractiveness of a country in the short run. Using disaggregated data on sales by US MNEs’ foreign affiliates in 43 developed and developing countries over the 1982-1994 period, results show that the provision of fiscal incentives or the deregulation of the labour market would exert a positive impact on total FDI. Given the drawbacks frequently associated with the use of incentive packages, economy-wide policies which ease firing procedures and reduce severance payments would certainly be the best policy option. This paper also highlights the different aggregation and omitted variable biases that have affected results of previous studies and provides some support to recent theoretical models of FDI by showing that third country effects and spatial interdependence influence respectively the location of export-platform FDI and vertical FDI.

Affirmative Action Policy and Effort Levels. Sequential-Move Contest Game Argument

In this paper we analyse a simple two-person sequential-move contest game with heterogeneous players. Assuming that the heterogeneity could be the consequence of past discrimination, we study the effects of implementation of affirmative action policy, which tackles this heterogeneity by compensating discriminated players, and compare them with the situation in which the heterogeneity is ignored and the contestants are treated equally. In our analysis we consider different orders of moves. We show that the order of moves of contestants is a very important factor in determination of the effects of the implementation of the affirmative action policy. We also prove that in such cases a significant role is played by the level of the heterogeneity of individuals. In particular, in contrast to the present-in-the-literature predictions, we demonstrate that as a consequence of the interplay of these two factors, the response to the implementation of the affirmative action policy option may be the decrease in the total equilibrium effort level of the contestants in comparison to the unbiased contest game.

How private is private information? The ability to spot deception in an economic game

We provide experimental evidence on the ability to detect deceit in a buyer-seller game with asymmetric information. Sellers have private information about the buyer's valuation of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary (1) whether or not the buyer can interrogate the seller, and (2) the contextual richness of the situation. We find that the buyers' prediction accuracy is above chance levels, and that interrogation and contextual richness are important factors determining the accuracy. These results show that there are circumstances in which part of the information asymmetry is eliminated by people's ability to spot deception.

Monetary policy strategies, financial institutions and financial markets in the Middle East and North Africa: an overview

Three polar types of monetary architecture are identified together with the institutional and market infrastructure required for each type and the kinds of monetary policy feasible in each case: a ‘basic’ architecture where there is little or no financial system as such but an elementary central bank which is able to fix the exchange rate, as a substitute for a proper monetary policy; a ‘modern’ monetary architecture with developed banks, financial markets and central bank where policy choices include types of inflation targeting; and an ‘intermediate’ monetary architecture where less market-based monetary policies involving less discretion are feasible. A range of data is used to locate the various MENA countries with respect to these polar types. Five countries (Iran, Libya, Sudan, Syria and Yemen) are identified as those with the least developed monetary architecture, while Bahrain and Jordan are identified as the group at the other end of the spectrum, reaching beyond the intermediate polar type in some dimensions but not others. The countries in between vary on different dimensions but all lie between basic and intermediate architectures. The key general findings are that the MENA countries are both less differentiated and less ‘developed’ than might have been expected. The paper ends by calling for research on the costs and benefits of different types of monetary architecture.