Integration and Regionalization - a political economic analysis
This paper examines the incentives for political integration in a situation with a non-excludable public good. The model emphasizes inter-regional differences in sizes and preferences for the public good. In such a two-country model, Ellingsen (1998)1 characterizes the cases in which integration is an equilibrium. This paper includes a third region, and finds that a whole range of interesting and observable issues arise, which the two-country model is unable to capture. Depending on the relative differences in sizes and preferences among regions, the integration problem may be described as a prisoner’s dilemma, a coordination game or as a hawk-dove game. Multiple equilibria may exist as well as equilibria with no integration; partly integration; conditionally integration and exclusion from the coalition. The extreme case where the public good is global (beneficial to all) is discussed, as well as an extreme where it is local (beneficial only to the closest neighbors).
Globalisation and industrial location: The impact of trade policy when geography matters
The paper shows how industrial location and welfare depends on “most-favoured nation” (MFN) versus distance-related trade barriers, using a monopolistic competition model with regions located along a “Hotelling” line or on a square plain. Manufacturing production will cluster close to the periphery if transport costs are relatively high, but in central areas if MFN barriers are relatively high. The peripheries will be at a disadvantage, which increases when trade barriers are reduced. When countries or trading blocs are formed, a core-periphery pattern emerges within each of them. While lower transport costs create more centralisation within countries, lower MFN barriers between countries have the opposite effect.
Patterns of Trade and Foreign Direct Investment in Africa : A simple test of the new trade theory with multinationals
In this study, we present an empirical survey of the patterns of trade and FDI in Africa based on a sample of 28 countries and their transactions with the OECD countries. These patterns are used to test whether the predictions of the new trade theory with multinationals as described by Markusen and Venables (1995,1998) fit the development in Africa. The theory states that multinational production will gradually outgrow trade as countries converge in terms of income, yet our econometric study gives only week evidence supporting such a pattern. Alternative explanations are also investigated,and it is shown that trade barriers, geographical distance, income per capita and access to ocean explain much of the variation in trade and FDI in Africa.
Foreign Ownership, R&D and Technology Sourcing
This paper explores the relationship between domestic R&D and the inflow of foreign capital through foreign direct investment and foreign ownership. The idea that firms invest in a foreign country in order to more easily absorb the knowledge and technology of foreign firms is tested empirically using a unique firm level data set covering foreign ownership and R&D for all Norwegian firms over the period 1990 to 1996. The study gives no clear evidence supporting the existence of such a motive behind foreign ownership. On the other hand, the econometric study indicates that foreign investors may try to exploit their technological advantages in the Norwegian market. The results also show that the degree of foreign ownership is more volatile when firms are highly R&D intensive. We hypothesize that this is due to the fact that large R&D investments often result in large losses as well as gains to the firms.
Elite perceptions of ethical problems facing the Western oil industry in Azerbaijan
This is a study of the Azerbaijani political elite’s perceptions of Western oil companies and their contribution to – or hindrance of – the development of democracy and human rights. Twenty oppositional figures, including most of the party leaders and presidential candidates, plus some media, NGO and academic personalities, were subjected to an in-depth interview. There was a consensus that the Western oil industry was at best irrelevant and at worst inimical to the cause of democracy and human rights in Azerbaijan. This is because short-term commercial considerations have led it to kowtow to the dictatorship, ignore the political opposition and boycott the free media. There is also pay discrimination against Azerbaijani labour. Above all, it was almost universally agreed that the Western oil industry is aggravating the corruption of Azerbaijani life. Nobody thought Statoil worse than the other foreign oil companies, but only a minority thought it better. The result of this undesirable behaviour is likely to be the severe displeasure of any new government based on the current political opposition, which may prefer Japanese and Chinese investment. At worst, the population’s acute disillusionment with the West and the social misery caused by corruption and mismanagement may override Azerbaijan’s secular and moderate traditions and bring about an Islamic Republic. The elite makes many suggestions for what the Western oil companies can and should do to improve the situation: such as not being bluffed by the president, insisting on transparent accounting, cultivating alternative centres of power, facilitating scientific, educational and cultural exchange and supporting the Azerbaijani cause in the Nagorno-Karabakh conflict.
Corruption in former USSR countries and international oil business in Azerbaijan
This research report presents an analysis of corruption in Azerbaijan. We have mainly relied on secondary sources. Since data on observed corruption are scarce and unsystematic, we had to give much emphasis on background data that have important impact on corruption levels in general and for which quantitative observations exist: The relative size of the underground economy, the rate of tax collection and the degree of poverty. We draw background data from a sample of countries that belonged to the former Soviet Union, the FSU countries. The countries chosen we consider to be the most relevant for a study of corruption in Azerbaijan, either because they are the largest among the FSU countries or because they are at similar economic level as Azerbaijan, share borders or language. Practical considerations, such as available statistics also play a role.