In customary international and public law, "takings" resulting from regulations designed to prote... more In customary international and public law, "takings" resulting from regulations designed to protect the public good are generally excluded from compensation rules; this exclusion is known as a police powers carve-out (PPCO). Increasingly, this PPCO is being challenged, particularly in international investment law. This paper analyzes the efficiency properties of a PPCO in a model with endogenous regulation, investment and entry. We design a one-parameter family of carve-out/compensation schemes that induce efficient regulation and firm level investment even when the regulator suffers fiscal illusion and the social benefit from regulation is private information to the regulator. We show that offering a carve-out reduces the subsidy to risky industry implicit in compensation rules; thus, a carve-out can mitigate the entry problem.
We compare the effects, on rural wages and farmer income, of public investments in either a tradi... more We compare the effects, on rural wages and farmer income, of public investments in either a traditional or a modern agricultural sector. The traditional sector has constant or decreasing returns to scale. Economies of scale that are external to farms in the modern sector create a possible engine for growth. We show that if there are moderate returns to scale in the modern sector, and labor has a moderate share of the wage bill in that sector, there is a “critical size” of the modern sector. If the modern sector is close to this critical level at the time of the public investment, then investment in the traditional sector can derail growth and worsen poverty, whereas investment in the modern sector is likely to promote growth and reduce poverty. As the magnitude of the increasing returns to scale parameter or the labor-share parameter increase, this “critical size” of the modern sector falls, increasing the likelihood that investment in the traditional sector is inimical to both grow...
The authors study a model in which a customs union trades with countries that behave strategicall... more The authors study a model in which a customs union trades with countries that behave strategically. Provided that the members of the customs unions are similar but not identical, they show that both in the case in which intraunion transfers are allowed as well as in the one in which they are not, one country may want to delegate authority for making union policy to its partner. The delegation decision depends on whether the policies used by union and nonunion countries are strategic substitutes or complements, and on which union member is more "aggressive." Copyright 1991 by The Review of Economic Studies Limited.
In customary international and public law, "takings" resulting from regulations designed to prote... more In customary international and public law, "takings" resulting from regulations designed to protect the public good are generally excluded from compensation rules; this exclusion is known as a police powers carve-out (PPCO). Increasingly, this PPCO is being challenged, particularly in international investment law. This paper analyzes the efficiency properties of a PPCO in a model with endogenous regulation, investment and entry. We design a one-parameter family of carve-out/compensation schemes that induce efficient regulation and firm level investment even when the regulator suffers fiscal illusion and the social benefit from regulation is private information to the regulator. We show that offering a carve-out reduces the subsidy to risky industry implicit in compensation rules; thus, a carve-out can mitigate the entry problem.
We compare the effects, on rural wages and farmer income, of public investments in either a tradi... more We compare the effects, on rural wages and farmer income, of public investments in either a traditional or a modern agricultural sector. The traditional sector has constant or decreasing returns to scale. Economies of scale that are external to farms in the modern sector create a possible engine for growth. We show that if there are moderate returns to scale in the modern sector, and labor has a moderate share of the wage bill in that sector, there is a “critical size” of the modern sector. If the modern sector is close to this critical level at the time of the public investment, then investment in the traditional sector can derail growth and worsen poverty, whereas investment in the modern sector is likely to promote growth and reduce poverty. As the magnitude of the increasing returns to scale parameter or the labor-share parameter increase, this “critical size” of the modern sector falls, increasing the likelihood that investment in the traditional sector is inimical to both grow...
The authors study a model in which a customs union trades with countries that behave strategicall... more The authors study a model in which a customs union trades with countries that behave strategically. Provided that the members of the customs unions are similar but not identical, they show that both in the case in which intraunion transfers are allowed as well as in the one in which they are not, one country may want to delegate authority for making union policy to its partner. The delegation decision depends on whether the policies used by union and nonunion countries are strategic substitutes or complements, and on which union member is more "aggressive." Copyright 1991 by The Review of Economic Studies Limited.
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Papers by Larry Karp