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Summarize 3 economic articles - Article Example

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Name: Title: Course: Tutor: Date: Summary of Economic Articles Brekke, KR, Cellini, R, Siciliani, L & Straume, OR 2012, ‘Competition in regulated markets with sluggish beliefs about quality’, Journal of Economics and Management Strategy, vol. 21, no. 1, pp…
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Download file to see previous pages The researchers aim at showing that quality changes do not result in immediate demand response in regulated industries. This phenomenon has been attributed to imperfect information and sticky behavior among consumers due to familiar or personal habits. These sluggish behaviors imply that it would take some time before full realization of potential demand. To prove this hypothesis, the researchers conduct an analysis using a quantitative Hotelling framework in a market that has two exogenously located providers with horizontally and vertically differentiated products. The researchers also use a differential-game approach in providing open-loop and feedback solutions. Indeed, the findings defy the static relationship indicating that an elastic relationship exists between quality and demand, instead indicating a negative relationship between quality and potential demand due to decrease in marginal profit gain in quality. Firms should therefore adopt long term investment plans and provide lower monetary incentives to attain first-best quality status as opposed to making quality changes at each point of product development. The researchers’ choice of regulated industries, specifically education and health sectors of the economy has been informed by the fact that these have quality as major drivers of competitive demand. This article sheds light in the wake of rankings of institutions where even with improved competition on quality, demand would not respond. The paper fails to give any future indications of increased demand due to improved quality. Li, W, Mengistae, T & Xu, LC 2011, ‘Diagnosing development bottlenecks: China and India’, Oxford Bulletin of Economics and Statistics, vol. 73, no. 6, pp. 722 – 752. This article appreciates that in 1980, both China and India were at par economically, being the world’s most populous countries and very poor. India ranked better in its income per capita with its citizens earning averagely $2.38 per day which was about $1 more than what an average Chinese earned. While India undertook economic liberalization until 1991, China gradually adopted economic reforms. By 2000, China had its daily income per capita averaging at $7.30 while that of India averaged $4.71. The researchers in this article seek to demystify the factors that led to performance gap between these two countries. Being an analysis of only two countries, the researchers used firm-level data to examine cross-sectional and temporal variations linking firm productivity, an important contributor to income per capita, to business environment at city level such as access to finance, regulation burden, labor regulation, infrastructure and skills. The firm-level data was collected from the 2003 World Bank Investment Climate Surveys covering 2,400 Chinese enterprises from 18 cities distributes across 15 provinces and 1,860 Indian manufacturing establishments from 40 industrial cities. The findings show that firms in China are generally larger by size, value or number of employees, employ more skilled labor and have more flexible labor markets. The poor infrastructure that India has compared to China makes it significantly lag behind economically. However, Indian firms have better access to short-term bank financing though this factor minimally affects productivity in both countries. The uncertainty in regulation is also lower in India. The researchers recommend that India relaxes its labor market regulations, invest in infrastructure and ...Download file to see next pagesRead More
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