Martin C. McGuire

REGULATION, FACTOR REWARDS, AND INTERNATIONAL TRADE

This paper develops an approach for incorporating regulation into the theory of production, distribution, and trade, using environmental regulation as an example. Four major conclusions emerge in the course of the analysis. 1. Production process regulation is equivalent in its effect on other cooperating factors to neutral technical regress (i.e. negative progress). 2. Specific unambiguous income redistribution consequences follow from such regulation. If commodity prices are held constant. the factor used relatively intensively in the non-regulated industry will gain absolutely in terms of both goods. 3. Unilateral or uncoordinated regulation destroys the link between uniform world commod- ity prices and identical factor proportions/factors prices across trading countries or regions. 4. If any factor of production is freely mobile across frontiers, the least differential regulation as between countries will entirely drive out the regulated industry from the more to the less regulated economy.

Group Segregation and Optimal Jurisdictions

Even if people are entirely devoid of any feelings toward each other (sympathetic or antipathetic) at a personal level, they may find it in their interests to set up and join associations which are segregated on the basis of income and/or tastes. This paper constructs a model to show how wealth, technology, and preferences can interact to provide common incentives for people to form segregated groups for the provision of local collective goods-that is, goods which cannot readily be supplied and priced on a variable unit-of-services basis, but which are best provided communally at the same level to all members of the association, in such a way that nonmembers are excluded from enjoying them altogether.

A METHOD FOR ESTIMATING THE EFFECT OF A SUBSIDY ON THE RECEIVER'S RESOURCE CONSTRAINT: WITH AN APPLICATION TO U.S. LOCAL GOVERNMENTS 1964-1971

Most studies of the effects of subsidies or recipient behavior accept the nominal legal provisions of a grant as defining the actual effective resource constraint faced by the receiver. This paper argues that to the contrary the true effect of a subsidy on the receiver’s resource constraint can not be read from nominal administrative requirements. Therefore, an indirect statistical method is required to discover the shape of the post subsidy budget line. This paper develops such a method, which is then applied to U.S. local government expenditure decisions on education for the period 1964-71.

Identifying the free riders: A simple algorithm for determining who will contribute to a public good

Abstract When a heterogeneous group of people provide themselves with a pure public good the resulting Nash equilibrium outcome will divide the group into contributors and free riders. This paper proposes a general algorithm for discovering which individuals in the group fall into which of these two classes. The algorithm is based on identifying, for each individual, how much of the public good must be provided by others to drive that individuals contribution to zero.

U.S. Assistance, Israeli Allocation, and the Arms Race in the Middle East

This paper constructs an econometric model of Israels allocation of resources as between defense, public nondefense, and private consumption goods. Because these allocations are influenced by and simultaneously influence U.S. assistance and Arab military outlays, equations for U.S. and Arab allocations are also constructed. This entire multiequation system represents a multicountry allocation and arms race process in the Middle East. A comprehensive body of data on Israeli expenditures, surrounding Arab states expenditures, and U.S. assistance has been assembled for the period 1960 to 1979, and the multiequation model has been estimated. Several conclusions of both theoretical and policy importance emerge from the analysis.

Paying to improve your chances: Gambling or insurance?

Will a more risk-averse individual spend more or less to improve probabilities, say on marketing efforts that enhance the chance of a sale? For any two payoffs and starting probabilities, the answer is unfortunately indeterminate. However, interpreting gambling as increasing small chances of good outcomes and insurance as reducing small chances of bad outcomes, the more risk-averse individual will pay less (more) to gamble (insure). We find a critical switching probability that depends on the individuals and outcomes involved. If the good outcome is less (more) likely than this critical value, the expenditures represent gambling (insurance).

Foreign Assistance, Investment, and Defense: A Methodological Study with an Application to Israel, 1960-1979

This paper develops a method for examination of the relations among outlays on capital formation and national defense and receipts of foreign assistance in developing and other aid-receiving countries. This model and its results should be of interest to any policy analyst concerned with the effects of aid on the indigenous allocation choices by recipients, since it allows one to trace out the effect of aid on these allocative decisions. The essence of the method, and its novelty, is to exploit the price-changing feature of foreign aid (as seen from the recipients viewpoint) to obtain an estimate of the price responsiveness of the recipient country. With the response to prices so determined, ownand cross-price elasticities with respect to defense, investment, consumption, and so forth can be calculated, and the corresponding complementarities or substitutabilities among these categories of demand inferred. As will become clear, this question is closely related to the question of the extent to which there is a de facto diversion of military or nonmilitary foreign aid to other uses.1 This method is applied to Israel-chosen because of the urgency of its security and development objectives, the availability of data, and the magnitude of its foreignassistance receipts. However, the method is applicable to LDCs in general, many of which, in a struggle to improve living standards and simultaneously guard against perceived security threats, turn increasingly to developed states for assistance. The effect of aid on investment and growth has concerned economists for a generation. And the possibility that aid might be diverted into consumption has long been recognized as well.2 But trade-offs between development and defense, especially, have concerned economists in recent years. E. Benoit found strong positive relations be-

Mixed public‐private benefit and public‐good supply with application to the NATO alliance

This paper examines the issue of defence impurity of benefits on both the demand and supply side. In particular, imperfect substitutability of defence benefits between allies and unequal cost advantages between allies are incorporated into models of public‐good provision. Alternative versions of partial substitutability on either the benefit or cost side are modeled. These alternatives emphasize a crucial distinction between emitters and absorbers of defence spillovers. Theoretical results are related to the behavior of allies in the NATO alliance. In addition, the paper derives reduced‐form equations that would enable econometric estimates to distinguish the degree of substitutability and the underlying allocative process ‐ i.e., Nash‐Cournot or Lindahl processes.

A Quantitative Study of the Strategic Arms Race in the Missile Age

Abstract : The study has assembled data on the inventories of strategic weapons held by the United States and the U.S.S.R. over the period 1960-74 and has calculated alternative indexes of strategic strength.

Defense economics and international security

Defense economics derives from and is embedded in the multi-dimensional array of issues each country must address when providing for its national security. Applying economic concepts and methods, it attempts to evaluate this great diversity of security related questions, and to understand how each countrys security interacts and fits in with the security of all nations in the international system. Included in Defense Economics are such overarching questions as: definition of what security actually is; how resource scarcity, distribution, and stage of economic development influences the security obtainable by each nation in the international system; relationships between defense sectors and national economies within and across countries; efficiency in provision of security; incentive structures which promote or resolve conflict; institutional arrangements which promote or retard peace, stability, and equity.