Alex Kostin

Foreign direct investment in the service sector has been gaining importance in the past decade as more countries transform themselves into post-industrialised economies. The transition from a centrally planned economy to market-based economy has generated a surge of foreign direct investment from industrialised countries to Central and Eastern European Countries. This paper examines the impact of ownership and location factors on the extent of internalisation for service multinationals seeking to enter into the Czech Republic, Hungary, and Poland, as these countries launch their economies towards increased privatisation, deregulation, and liberalisation. Using foreign direct investment data of 76 firms during 1990–2000, we find significant support for our main hypotheses.

This article describes the origins, and traces the subsequent evolution of the eclectic paradigm from the mid-1950s to the present day. It does so in the light of the changing characteristics of MNE activity and of the global economic scenario. The article concludes by asserting that the eclectic paradigm still remains a powerful and robust framework for examining contextual specific theories of foreign direct investment and international production.

The prevailing ownership-based theories of the firm are increasingly being challenged by new forms of organising, as exemplified by the Asian network multinational enterprise (MNE). We believe that an institutional approach, that tries to bridge both the macro and micro levels of analysis, and that encompasses both formal and informal institutions, offers a promising way to advance our understanding of the different forms of the contemporary MNE. This paper introduces a theoretical framework that draws substantially on the work of Douglass North, and examines how an institutional dimension can be incorporated into the three components of the OLI paradigm. What determines the boundaries or scope of the firm? This question has been fundamental to economics and organisational studies since the seminal paper by Coase (1937). Since then, many attempts have been made to articulate a satisfactory theory of the firm, perhaps the most prominent of which—certainly among management scholars—is the resource-based view inspired by Penrose (1959). Alongside these theories, evolutionary economists, who have placed their main focus on the accumulation of technological assets and knowledge by firms across borders, have contributed to our theoretical understanding of what determines the boundaries of multinational enterprises (MNEs) over time and space.

Globalization is the outcome of the interface between national states and MNEs. It is a negotiated solution rather than perfect market equilibrium. Even in a global liberalized world, national states are trying to generate as much welfare for their residents as they can, while MNEs try to maximize their value. This creates a bargaining situation. A stylized game theory model is presented and discussed, in order to gain insights into the income distributional effects of the globalization process. Two important features of the model are: (a) that there is a need for a carefully spelt out strategy, and (b) that optimal solutions depend on an ability to identify the elements of the bargaining where the opportunity cost is low. A case study of the negotiation between the State of Israel and Intel is presented as an illustration for this general model.

When people know who is influencing the elected politicians and they may 'put the rascals out' in case they feel that the incumbents are corrupt, ceteris paribus, their perception of the level of corruption should not be affected by lobbying. If on the other hand people are not sure which or how many actors are influencing public policy and they are not able to hold the government truly accountable as interest group influence is constant with different governments, people will be more likely to perceive the government as corrupted. The former system is a characteristic of corporatism and the latter of pluralism. This problem is exacerbated by the fact that interest groups with resources such as business groups or firms in pluralist systems are more influential than groups with few resources. Thus, people may perceive pluralist policy-making system as more corrupt than corporatist policy-making system where fewer visible actors have more or less equal weight in the policy-making process.

It was the preoccupation of the military security concerns that dominated political thinking, strategies and even the foreign policies of the European and Mediterranean countries till the end of the Cold War. However with the termination of the Cold War and end of the bi-polar military structure, new or neglected issues of the Cold War Era could reappear in the Mediterranean region. The focus of this paper is to visit these new security concerns from the Euro-Mediterranean relations' perspective. Specifically, the discussion addresses the globalisation process, the motivations that pave the way for Barcelona Declaration and the problems within the Euro-Mediterranean partnership. Simply, it would be argued that within the changing nature of the security in the post Cold War Era, it is hard to separate the security of Europe from the security of the Mediterranean. In this connection for the stability and prosperity in the region both shores of the Mediterranean should cooperate on equal basis since the initiatives are not at the hands of the European anymore. JEL Classification Codes: Z00.

E conomists tell stories about how people behave. The setup is always the same: an actor is confronted with a choice and must make a decision. Should he (it's usually a he) take a quick, assured return or wait for a less certain but larger payofff? Should he place his trust in another actor and collaborate for a larger joint profit, or act alone to make sure he is not cheated, so that at any rate he comes away with something? When he's played the same game for a long time, will he keep paying attention as the next decision comes? The game experiments used by economists to predict human behavior generate a certain range of stories as diffferent players try out diffferent strategies in successive iterations of the game. The stories also change insofar as economists with diffferent commitments observe the outcomes. In one common story, it pays to seek short-term gain in a context of extreme uncertainty; in alternative versions, staying the course for the long term leads to far greater profit. In a second much-told story, the maximization of self-interest can only be pursued alone. But a diffferent telling discovers that cooperation brings not only greater stability but also bigger long-term benefit for all parties. The limited matrix of elements becomes an arena in which fundamental human tendencies play themselves out: rationality, habit,

Many researchers have found that estimating the New Keynesian Phillips Curve (NKPC) using the output gap to proxy for real marginal cost tends to produce a counter-intuitive coefficient sign in the model, whereas using the labour income share produces the expected coefficient sign. This article investigates the potential cause of this puzzle: What causes these differing signs for the coefficient for real marginal cost? We find that this coefficient sign crucially depends on the covariance between inflation and marginal cost. Moreover, this covariance in turn critically depends on the cyclicality of the marginal cost proxy that is used.

Modern economics is based on the idea that every good and service is scarce, but the standard defenses of this premise by reference to zero prices and infinite resources are invalid. The concept of scarcity is defined and used to show that ordinary scarcities are not economic scarcities. The errors regarding scarcity are traced to the methodology of modern economics, and an alternative method is suggested for a science whose subject matter is real human beings. The concept of relative scarcity is explained, and used to illuminate some important aspects of the functioning of a market economy. Some of the consequences are identified for economics if economists recognized that universal scarcity is not a fact.

Marginal cost may be used in pricing transport services in several ways.' Rates may be equated with marginal cost pursuant to the ngorous requirements of welfare economic theory." Rates may be pre-scnbed at demand price at the output at which marginal cost and marginal revenue are equal. Such rates are calculated to majdnuze net revenue and must be dis-tmguished &om TnmimiiTn rates equated with marginal cost. Rates may also be set by adding to marginal cost a uniform increment. Such rates must be distinguished from rates equated with fully distributed or avoage total cost. Discussions of the application of the marginal cost concq>t to pricing transport services have often been marred by misunderstanding of its real nature. A frequent source of misunderstanding has been failure to recognize that long-run marginal costs are directly variable with changes in Mr. Bate ii Frafefor of Tnmiportofjon, vernty of Pennsifivmia. TM» paper wot preamted at the Fottrfii Animal MeeUng of ihe Trantpor-uakm Bie$earch Forum and appear* wiA U* per-mitsion. output as are short-nm marginal costs and that "out-of-pocket" costs as the term is used by the Intei^ate Commerce Commission are not variable costs in any economic sense. This paper after defining the margmal cost concept and distmguishing it from the others considers the specific problem of computing marginal cost and then explores the limits on the application of marginal cost to each of the pridng methods mentioned above. THE MARGINAL COST CONCEPT Recent proposals to apply marginal cost to rate-making have revealed confusion as to the meaning of the term, and therefore need to clarify ft. In its strictest meanii^ marginal cost is the di£Ferential in calculus , it is die rate of change in total cost associated with the rate of diange in total output. Perhaps the clearest exposition of tlds concept, particularly as it related to the railroad industry, has been made by Bortz.^ He distinguishes b^weoi fixed costs, whidi are unassodated willi changes in output, constant costs, which include

Despite the clear prescription from economic theory that a firm should set price based only on variable costs, firms routinely factor fixed costs into pricing decisions. We show that full-cost pricing (FCP) can achieve the optimal price. FCP marks up variable cost with the contribution margin per unit, which, in equilibrium, includes the fixed cost. FCP converges to the optimal price when the firm can estimate its equilibrium income. We compare FCP to alternative pricing algorithms that require less information, but converge to optimal price under more narrow conditions than FCP.