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The Market for Illegal Goods: The Case of Drugs
Gary S. Becker, Kevin M. Murphy y Michael Grossman [pdf] [html]

[Key words: illegal goods, illegal producers, drugs, monetary tax, decriminalization, elasticity, social cost; JEL: E26, H21, K42, L51]

This paper considers the costs of reducing consumption of goods by making their production illegal and punishing illegal producers. We use illegal drugs as a prominent example. We show that the more inelastic either demand for or supply of goods is, the greater the increase in social cost from further reducing its production by greater enforcement efforts. So, optimal public expenditures on the apprehension and conviction of illegal suppliers depend not only on the difference between the social and private values of consumption, but also on this elasticity. When demand and supply are no so elastic, it does not pay to enforce any prohibition unless the social value is negative. We also show that a monetary tax could cause a greater reduction in output and increase in price than optimal enforcement against the same goods if it were illegal, even though some producers may go underground to avoid a monetary tax. When enforcement is costly, excise taxes and quantity restrictions are not equivalent.

Institutions, Recessions and Recovery in Transitional Economies
Geoffrey M. Hodgson [pdf] [html]

[Key words: institutions, recessions, transitional economies, ethnic fractionalization, index of democracy; JEL: O43, P26, P27]

This article analyses the 1989-2005 economic growth in the transitional economies in Europe and Central Asia, and signals factors that help to explain the differences in outcome. An econometric analysis finds prominent indices of property rights, corruption, economic freedom, tax incidence and civil liberties as statistically insignificant in this regard. Statistically significant variables include the degree of ethnic fractionalization and an index of democracy, both of which were negatively correlated with GDP growth. Overall, the analysis here shows the need for effective national institutions that can enforce legal and general rules of the economic game, reap positive benefits for democracy, and overcome the negative economic legacy of ethnic divisions.

Cardoso the Political Opponent vs. Cardoso the Politician: Continuity or Rupture?
Corinne Pastoret [pdf] [html]

[Key words: Fernando Henrique Cardoso, dependency theory, Latin America; JEL: N96, O14, O18]

Cardoso is among the most famous thinkers on development and dependency theory. He successfully combines sociology, economics and political science to build an interdisciplinary view of Latin America's transformations. This paper analyses Cardoso's "radical" theoretical evolution between two major books, Dependency and Development in Latin America (1970) and Charting a New Course: The Politics of Globalization and Social Transformation (2001). The positions he occupied when he wrote these two books, academician-political opponent and then politician, could explain his evolution. Cardoso claims that new political and economic conditions have taken place and a new theory is thus required in order to "chart a new course".

Money in Macroeconomic Models
Wilfredo Toledo [pdf] [html]

[Key words: money, monetary economics, overlapping generations, search models, JEL: E24, E40, E42]

An important challenge in monetary economics is the development of an endogenous theory of money, which introduces money in a natural way and not as an external imposition. This paper reviews different approaches that have been used in monetary economic literature, and argues that overlapping generation models and search models are the best choices.

Level of International Reserves and Exchange Risk in Colombia
David Fernando López Angarita [pdf] [html]

[Key words: international reserves, exchange risk, external shocks, international liquidity; JEL: E32, E58, E61, F36]

The optimal reserve level theory aims to protect the economy against external shocks to its balance of payments, providing the international liquidity needed in emergency situations. The methodological applications available have limitations that compromise the results of the analysis of the optimal level in Colombia. This article offers an alternative approach to optimal international reserves and a consistent methodological framework to overcome these limitations and add trust to the monetary authorities and international agents.

Nueva Granada's GDP in 1800: Colonial Boom, Republican Stagnation
Salomón Kalmanovitz [pdf] [html]

[Key words: Nueva Granada, colonial taxes, transferences, institutions; JEL: N16, N46]

This article measures Nueva Granada's GDP before its Independence, analyzes its economic growth during 1785-1810 and considers some hypothesis about its continuity in the 19th century, with an ending reference point in 1905. These measures are used to make international comparisons with other Latin-American countries and the U.S. economy and to evaluate the share of colonial taxes, transferences to the metropolis, the openness of the economy and the weights of the different sectors in the viceroyalty GDP. The article also highlights the costs of Independence, which are related to the ensuing political disorder and the imperfect democratic institutions built on weak foundations.

Return and Distribution Tendencies of Spanish Capitalism (1954-2003)
Maximiliano Nieto Ferrández [pdf] [html]

[Key words: Spanish capitalism, capital return, distribution, technical change; JEL: E11, E22, O33, P17]

This paper analyzes the accumulation pattern of Spanish capitalism during the last half a century, based on the evolution of the capital return and the behavior of its main determinants: distribution and technical change. First, it explains the accumulation logic of the theory of work-value and argues that the so-called "law of the falling tendency of the rate of profit" (LTDTG) provides a suitable frame to explain the movements of the capitalist development in the long term. It then shows how this dynamic has materialized in the development of world accumulation since the end of the second world war, and concludes that the evolution of the Spanish capitalism in this period follows the same world pattern, emphasizing its main singularities. 

Macroeconomics, Development and Gender
Alicia Girón [pdf] [html]

[Key words: economic development, gender, inequality, social impact, JEL: E66, O11, O21 ]

This article establishes a relationship between the Consensus of Washington and gender inequality. It considers several important points: the reforms and the social impact; development and gender; for who is the structural process; gender budgets and the millennium objectives; and the employment program. It concludes that public policies today are very far to reach the millennium objectives. It is necessary to establish a development alternative agenda.

Agricultural Sector and Competition Policy
Ricardo Arguello C.
[pdf] [html]

[Key words: agricultural sector, competition policy, free trade; JEL: F13, Q17, Q18]

Globalization has made it evident that the traditional separation between trade and competition policies is not only artificial but in overt contradiction with international economy. This paper discuses the relationship between the agricultural sector and competition policy in a free trade context. It is argued that it is convenient to apply competition policy to this sector, as it ensures the best possible conditions for enhancing technological change processes that are vital for agricultural development. It also argues that a rigorous competition policy is essential, to take into account the particular market structure characteristics of the agricultural related sectors.

Cross Subsidies: the Postal Sector Case
Leslie Bravo Chew y Luis Fernando Gamboa
[pdf] [html]

[Key words: postal sector, regulation, cross subsidies; JEL: D42, L51, L87]

This document offers a theoretical price regulation model for the postal sector to evaluate the existence of cross subsidies between the regulated and competitive parts of the postal sector. It analyzes agents' incentives to use cross subsidization when prices are regulated by the Ramsey prices or by the global price cap. It shows that cross subsidies constrain and distort the liberalization of the sector and it is important to avoid them in favor of competition.

Equity in Payments for Use in the Colombian Health Insurance System
Liliana Chicaíza, Fredy Rodríguez y Mario García
[pdf] [html]

[Key words: equity, insurance, joint payments, health; JEL: I11, I18, D12, D63]

This paper studies the mechanism for the equity of payments for using the Colombian health system, defined as the possibility of consuming services when the need arises, regardless of the individual's resources. The incentives produced by the payment system are studied, as well as a particular case of a homogeneous population. Health services are grouped together according to type of risk, and the variations in service consumption are determined as a function of income. If the mechanism is equitable, the frequency of service use in different socioeconomic levels should be the same for pathologies and treatments with high risk and vulnerability.


Revista de Economía Institucional
Universidad Externado de Colombia
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Bogotá, Colombia
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