nep-net New Economics Papers
on Network Economics
Issue of 2005‒12‒20
six papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Regulation of telecommunication and deployment of broadband By Machiel van Dijk; Machiel Mulder
  2. Trade Integration and Production Networks in Asia: The Role of China By Sven W. Arndt
  4. Do market failures hamper the perspectives of broadband? By Machiel van Dijk; Bert Minne; Machiel Mulder; Joost Poort; Henry van der Wiel
  5. Inertia and Incentives: Bridging Organizational Economics and Organizational Theory By Rebecca Henderson; Sarah Kaplan
  6. The empirics of social capital and economic development. A critical perspective By Fabio Sabatini

  1. By: Machiel van Dijk; Machiel Mulder
    Abstract: This paper explores the question whether regulation in telecommunications encourages or hampers the development of new technologies. <P> Contrary to other network industries, the telecommunications industry is more and more characterized by competing network technologies, such as cable, copper, and wireless. Regulation is, however, still needed as in several components of telecommunications sources of market power remain. The key issue in the regulation of access to a network is the possible trade-off between static efficiency and dynamic efficiency. Favourable conditions for access to the network contribute to allocative efficiency and productive efficiency, but can negatively affect incentives for investments in upgrading of existing infrastructures and developing new ones. <P> In the Netherlands, regulation of the telecommunication industry is designed to enhance competition between alternative infrastructures without affecting the technology choice of both incumbents and entrants. In the market for unbundled access to the local loop and the market for high quality wholesale access, a trade-off exists between static efficiency and dynamic efficiency. Regulated access tariffs, which are based on average costs, seem to be a good compromise between static and dynamic efficiency. Tariffs for access to the local loop reflect actual costs of the existing copper infrastructure, giving entrants incentives to make efficient make-or-buy decisions. In addition, the threat of infrastructure competition in the local loop, as well as the service-based competition between providers using different infrastructures, i.e. copper and cable, provide incentives for the incumbent to increase efficiency. <P> Our overall conclusion is that Dutch regulation of the telecommunication industry gives efficient incentives for technological developments such as the deployment of broadband.
    Keywords: telecommunication; telecom; network; network industries; broadband; regulation; market failure
    JEL: L51 O38
    Date: 2005–12
  2. By: Sven W. Arndt (Lowe Institute of Political Economy, Claremont McKenna College)
    Abstract: This paper examines the implications of cross-border component sourcing and production networks for trade competitiveness and welfare. Offshore sourcing of components in which it has comparative disadvantage, enables a country to enhance its comparative advantage in the final product. This option provides emerging countries with an important alternative to capital accumulation and technical change as paths to economic development. In addition, production sharing changes the nature of trade-balance accounting and tends to reduce the sensitivity of trade flows to movements in exchange rates. This has important implications for trade policy and for the choice of exchange-rate regime. In the context of regional trade areas, for example, deeper integration allowing for production sharing has welfare effects superior to those of standard preferential trade liberalization.
    Keywords: cross-border sourcing, trade integration, production sharing, exchange rate elasticities
    JEL: F11 F15 F32
    Date: 2004
  3. By: Hultkrantz, Lars (Department of Business, Economics, Statistics and Informatics); Karlström, Urban (VTI); Nilsson, Jan-Eric (VTI)
    Abstract: The Stockholm – Arlanda airport rail link is a public-private build-operate-transfer project (sometimes referred to as PPP), opened for traffic in late 1999. At the time of decision in 1993, the project was seen as a role model for funding rail infrastructure; it infused private money into the sector, with a hope of improving cost efficiency performance; it broke up the train service monopoly of the national railway company; and it opened up the sector for ideas and impulses from a new actor. <p> The paper seeks to identify the costs and benefits of providing a private company with a monopoly franchise over one particular section of the network. It also highlights tradeoffs present in public-private partnerships and in creating facility-based competition within the railroad industry without ex ante regulation of access. Evidence indicates that losses of allocative efficiency, due to that the number of passengers is far below expectations, are substantial. Since available information about construction costs, due to commercial secrecy, is scarce it is not possible to say whether the overall result of this particular PPP project is efficiency enhancing or not. Our best guess is, however, that a radical change in the present pricing strategy may not mean a financial disaster and would boost the prospective of ex post efficiency.
    Keywords: public private partnership; public transport; build-operate-transfer; outsourcing; contracting out
    JEL: H43 H54 L52 L92
    Date: 2005–12–12
  4. By: Machiel van Dijk; Bert Minne; Machiel Mulder; Joost Poort; Henry van der Wiel
    Abstract: As broadband telecommunication is seen as a source of productivity gains, the European Union and other regions are encouraging the deployment of a secure broadband infrastructure. In the Netherlands, there is some concern whether the supply of broadband capacity will meet the strongly increasing demand. <P> This report analyses the broadband market and asks whether a specific role of government is necessary. <P> The main conclusions are that presently, given current broadband policy, no considerable market failures exist. Firms have adequate incentives to invest in broadband, partly induced by specific regulation of access to the local copper loop. Hence, there is no need for changes in current broadband policy. Market failures in terms of knowledge spillovers are taken care of by other policies. As the broadband markets are very dynamic, unforeseen developments may emerge such as the appearance of new dominant techniques and market players. <P> The best strategy for the government, in particular the competition authority, is to continuously monitor these markets, making timely intervention easier when needed.
    Keywords: telecommunication; telecom; network; network industries; broadband; regulation; market failure
    JEL: D61 D62 L51 O38
    Date: 2005–12
  5. By: Rebecca Henderson; Sarah Kaplan
    Abstract: Organizational theorists have long acknowledged the importance of the formal and informal incentives facing a firm’s employees, stressing that the political economy of a firm plays a major role in shaping organizational life and firm behavior. Yet the detailed study of incentive systems has traditionally been left in the hands of (organizational) economists, with most organizational theorists focusing their attention on critical problems in culture, network structure, framing and so on -- in essence, the social context in which economics and incentive systems are embedded. We argue that this separation of domains is problematic. The economics literature, for example, is unable to explain why organizations should find it difficult to change incentive structures in the face of environmental change, while the organizational literature focuses heavily on the role of inertia as sources of organizational rigidity. Drawing on recent research on incentives in organizational economics and on cognition in organizational theory, we build a framework for the analysis of incentives that highlights the ways in which incentives and cognition -- while being analytically distinct concepts -- are phenomenologically deeply intertwined. We suggest that incentives and cognition coevolve so that organizational competencies or routines are as much about building knowledge of “what should be rewarded” as they are about “what should be done.”
    JEL: L0 M0
    Date: 2005–12
  6. By: Fabio Sabatini (University of Rome La Sapienza, Department of Public Economics)
    Abstract: This paper provides an introduction to the concept of social capital, and carries out a critical review of the empirical literature on social capital and economic development. The survey points out six main weaknesses affecting the empirics of social capital. Identified weaknesses are then used to analyze, in a critical perspective, some prominent empirical studies and new interesting researches published in last two years. The need emerges to acknowledge, also within the empirical research, the multidimensional, context-dependent and dynamic nature of social capital. The survey also underlines that, although it has gained a certain popularity in the empirical research, the use of “indirect” indicators may be misleading. Such measures do not represent social capital’s key components identified by the theoretical literature, and their use causes a considerable confusion about what social capital is, as distinct from its outcomes, and what the relationship between social capital and its outcomes may be. Research reliant upon an outcome of social capital as an indicator of it will necessarily find social capital to be related to that outcome. This paper suggests to focus the empirical research firstly on the “structural” aspects of the concept, therefore excluding by the measurement toolbox all indicators referring to social capital’s supposed outcomes.
    Keywords: Social capital, Social networks, Social norms, Trust, Economic development, Relation of economics to other disciplines, Relation of economics to social values
    JEL: O P
    Date: 2005–12–16

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