Do institutions matter for economic fluctuations? Weak property rights in a business cycle model for Mexico

This paper shows that introducing weak property rights in the standard real business cycle (RBC) model can help to explain economic fluctuations. This is motivated by the empirical observation that changes in institutions in emerging markets are related to the evolution of the main macroeconomic variables. In particular, in Mexico, the movements in productivity in the data are associated with changes in institutions, so that we can explain productivity shocks to a large extent as shocks to the quality of institutions. We find that the model with shocks to the degree of protection of property rights only - without technology shocks - can match the second moments in the data for Mexico well. In particular, the fit is better than that of the standard neoclassical model with full protection of property rights regarding the auto-correlations and cross-correlations in the data, especially those related to labor. Viewing productivity shocks as shocks to institutions is also consistent with the stylized fact of falling productivity and non-decreasing labor hours in Mexico over 1980-1994, which is a feature that the neoclassical model cannot match.

Choice of Contracts in the British National Health Service: An Empirical Study

Following major reforms of the British National Health Service (NHS) in 1990, the roles of purchasing and providing health services were separated, with the relationship between purchasers and providers governed by contracts. Using a mixed multinomial logit analysis, we show how this policy shift led to a selection of contracts that is consistent with the predictions of a simple model, based on contract theory, in which the characteristics of the health services being purchased and of the contracting parties influence the choice of contract form. The paper thus provides evidence in support of the practical relevance of theory in understanding health care market reform.

The Prospects for Activity in the UKCS to 2035: the 2008 Perspective

NORTH SEA STUDY OCCASIONAL PAPER No. 109