We introduce naive traders in bilateral trading. These traders report their true types in direct mechanisms and bid/ask their values/costs in auctions. We show that by expropriating naive traders in direct mechanisms, the mechanism designer can subsidize additional trades by strategic traders and improve efficiency ex-post compared to when both traders are surely strategic. In fact, complete ex...

In this paper we compare the two standard forms of international investments in developing countries, debt and foreign direct investment, from a finance perspective. It is shown that the sovereign risks associated with debt finance are generally less severe than the ones which come with FDI. FDI is chosen only if the foreign investor is more efficient in running the project, if the project is r...

High quality institutions, such as rule of law, bureaucratic quality, freedom from government expropriation, and freedom from government repudiation of contracts, mitigate the adverse economic consequences of ethnic fractionalization identified by Easterly and Levine 1997 and others. In countries with sufficiently good institutions, ethnic diversity does not lower growth or worsen economic poli...

Patent pendencies create uncertainty in research and development (R&D) collaboration agreements, resulting in a threat of expropriation of unprotected knowledge by potential partners, reduced bargaining power and enhanced search costs. In this paper, we show that depending of the type of partner uncertain intellectual property rights (IPR) lead to reduced collaboration between firms and may hin...

This paper explores principal-principal conflicts in corporate governance during times of economic crisis. We address the question: What external and internal governance mechanisms can best protect minority shareholders? Drawing on 877 publicly listed large corporations with concentrated ownership in seven Asian countries and regions, we compare different control structures between family firms...

This document examines foreign direct investment (FDI) when multinationals and labour unions bargain over labour contracts and lobby the self-interested government for taxation and labour market regulation. It is shown that FDI is best protected from expropriation in unionized economies with right-to-manage bargaining, not bargaining over wages and employment. When the labour market is nonunion...

While much scholarly attention has been paid to whether institutions encourage or discourage ethnic mobilization, many of these theories leave little room for the choices of individual voters and thus risk being overly deterministic. This paper seeks to define a rough theory that allows for individual voters to have varying preferences over the provision of public goods along ethnic or non-ethn...