of production. It is then shown that this result holds equally true for the regional sub-economies of this economy. A legal provision of R&D tax/subsidy based on payroll changes is shown to be a second best policy that corrects the market failure with a small dead-weight loss. This policy does not require

The concept of market failure was originally presented by economists as a normative explanation of why the need for government expenditures might arise. Gradually, the concept has taken on the form of a full-scale diagnostic tool frequently employed by policy analysts to determine the exact scope

Aaron Levine suggests that income distribution, risk management and pro-duct-pricing problems warrant government intervention. It is important to use a comparative-institutions approach in assessing the effects of govern-ment action designed to correct such ’failures ’ of the market. The relevant

Market failures and the

Abstract. In a simple model of the credit market, based on Stiglitz–Weiss (1981), equilibria are computed and optimal policies to correct market failures are characterized. Some widely applied policies, notably interest–rate subsidies and investment subsidies, are compared to theoretical optimum

Scholars of the theory of the firm have begun to emphasize the sources and conditions of what has been described a s "the organizational advantage, " rather than focus on the causes and consequences of market failure. Typically, researchers see such organizational advantage a s accruing

On several occasions, I have summarized the theoretical welfare economics ofthe mid-century decades as “theories ofmarket failure” and the public choice economics of the post-middle decades as coun-terpart “theories of political failure. ” This statement captures the

Because government intervention transfers resources from one party to another, it creates room for corruption. As corruption often undermines the purpose of the intervention, governments will try to prevent it. In this process, they may create rents for bureaucrats, induce a misallocation of resources, and increase the size of the bureaucracy. Since preventing all corruption is excessively costly, second-best intervention may involve a certain fraction of bureaucrats accepting bribes. When corruption is harder to prevent, there may be both more bureaucrats and higher public sector wages. Also, the optimal degree of government intervention may be non-monotonic in the level of income.

as to overcome market failures in human capital investment. Policies for long-term growth must address the intergenerational dynamics of human capital accumulation.

In this paper we study both market risks and nonmarket risks, without complete markets assumption, and discuss methods of measurement of these risks. We present and justify a set of four desirable properties for measures of risk, and call the measures satisfying these properties “coherent.” We