Using a sample of 49 countries, we show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil...

Does national market size matter for industrial strucure? This has been suggested by theoretical work on "home market" effects, as in Krugman (1980, 1995). In this paper, I show that what apreviously was regarded as an assumption of convenience - transport costs only for the differentiated goods...

Economic agents rarely write optimally complete contracts in the Arrow-Debreu sense. Few regard this as puzzling, since contractual completeness of this kind is often technically infeasible. Our concern here is with the question of why contracts so often leave the contracting parties'...

The standard version of 'q' theory, in which investment is positively related to marginal 'q', breaks down in the presence of fixed costs of adjustment. With fixed costs, 'q' is a non-monotonic function of investment. Therefore its inverse, which is the traditional investment function, does not...

The paper characterises the choice rules that can be implemented when agents are unable to commit themselves not to renegotiate the mechanism.

The Hungarian economy's road from a centralized, planned economy to a market economy displays a number of features that distinguich it from other post-socialist countries, despite the underlying similarities. Without aiming to provide a complete picture, I will pick out four features. One or...

It is widely believed that the stock-market oriented US financial system forces corporate managers to behave myopically relative to their Japanese counterparts, who operate in a bank-based system. We hypothesize that if US firms are more myopic that Japanese firms, then episodes of financial...

There are two principal theories of why countries trade : comparative advantage and increasing returns to scale. Yet there is no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework that nests an...