John Bonin
Wesleyan University, Economics, Faculty Member
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* I am extremely grateful to the National Council for Soviet and East European Research for financial support of this research (Contract #807-07) and to the people in Hungary and Poland who educated me about these issues. I wish to thank... more
* I am extremely grateful to the National Council for Soviet and East European Research for financial support of this research (Contract #807-07) and to the people in Hungary and Poland who educated me about these issues. I wish to thank especially Istvan Abel, Ryszard Kokoszcznski, ...
Research Interests: Business, Economics, Institutional Economics, Capitalism, Economic policy, and 15 moreRegulation, Economic Development, Applied Economics, Emerging Markets, Reconstruction, Economic System, Market economy, Economic Reform, Restructuring, Planned Economy, Commercial Banks, Economic Institutions, Capital Market, Comparative Economic Studies, and Finance and Investment Banking
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... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect to influence norm reporting or actual performance. To introduce the ratchet effect requires explicit consideration of the inter-action between... more
... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect to influence norm reporting or actual performance. To introduce the ratchet effect requires explicit consideration of the inter-action between ...
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Abstract In this paper we establish the robustness of the comparative static results under managerial risk aversion and discretionary behavior for the Bonin- and Weitzman-type Soviet incentive schemes. Specifically, we show that the... more
Abstract In this paper we establish the robustness of the comparative static results under managerial risk aversion and discretionary behavior for the Bonin- and Weitzman-type Soviet incentive schemes. Specifically, we show that the self-imposed target (forecasted performance) responds appropriately to changes in the penalty piecerates and that the share parameter can be used to encourage a higher norm and an accompanying higher level of managerial effort. Our results correct an error in the literature on the Bonin-type scheme and impose weaker conditions than previous work on the Weitzman-type scheme.
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... be larger than the previous full-employment level (Q*). Although initial membership is an important element of the short-run supply curve for our egalitarian cooperative, we find none of the abnormalities present in Brewer-Browning... more
... be larger than the previous full-employment level (Q*). Although initial membership is an important element of the short-run supply curve for our egalitarian cooperative, we find none of the abnormalities present in Brewer-Browning because we assume that the debt obligation is ...
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Abstract The collective farm household's optimal allocation of time among work on both the collective and private plots and leisure is analyzed in certain and uncertain environments. The examination of static equilibrium solutions... more
Abstract The collective farm household's optimal allocation of time among work on both the collective and private plots and leisure is analyzed in certain and uncertain environments. The examination of static equilibrium solutions indicates that the collective farm need not be inefficient nor provide poor work incentives. Uncertainty is shown to exert a distinctive influence on work allocations. Implications are drawn from comparative static analysis to discuss the effects of government policy, e.g., increased crop quotas, on work incentives. The Soviet development period, recent agricultural reforms in the Khrushchev-Brezhnev era, and general policy implications are considered in the light of these new analytical results.
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ABSTRACT
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Research Interests: Business, Applied Mathematics, Economics, Panel Data, Profitability, and 12 moreStochastic Frontier Analysis, Bank Efficiency, Cost Efficiency, Transition Countries, Foreign Ownership, Stochastic Frontier, Variables, Banking finance, Return on Assets, Finance and Investment Banking, Ownership Types, and Efficiency Measurement
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In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure model” of the labor-managed firm whose objective is to maximize short-run dividend per worker by varying freely a single input, labor. Following... more
In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure model” of the labor-managed firm whose objective is to maximize short-run dividend per worker by varying freely a single input, labor. Following the Ward(1958) tradition, Muzondo assumes that any variation in labor requires a change in the membership base on which the dividend is calculated. For this “pure model” of the labor-managed firm (hereafter, L-M), Muzondo claims four main results: (1) a risk-averse L-M firm produces more output than a risk-neutral L-M firm; (2) under constant risk aversion the responses of an L-M firm under price uncertainty are, generally, the same as those under certainty; (3) under decreasing absolute or increasing relative risk aversion, the responses of an L-M firm are, generally, unpredictable; and (4) except for result (2), the responses of L-M firms under price uncertainty are, generally, different from those under price certainty. Although results (1) and (2) are correct, results (3) and (4) are incorrect due to a recurring error in the proofs contained in the appendix of Muzondo’s paper. In fact, we show in this note that many of the responses of an L-M firm under price uncertainty are qualitatively the same as those under price certainty given Muzondo’s assumptions. In particular, the L-M firm will increase employment when fixed charges are increased and decrease output in response to an upward shift in the distribution of output price. Both are equivalent to the results shown by Ward for the price-certain case. From a policy perspective, the response of the L-M firm to tax changes is important. However, except for the result that is ambiguous, Muzondo’s qualitative results are incorrect and should not be used for policy prescriptions. Furthermore, when signable, the responses of the L-M firm to a change in a tax parameter are always the opposite of those of the capitalist-managed (hereafter, C-M) counterpart.
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... 1 Giacomo Bonanno Department of Economics University of California Davis, CA 95616-8578, USA 1. Risk and uncertainty ... An example of this is the uncertainty whether a second-hand car we are considering buying was involved in a... more
... 1 Giacomo Bonanno Department of Economics University of California Davis, CA 95616-8578, USA 1. Risk and uncertainty ... An example of this is the uncertainty whether a second-hand car we are considering buying was involved in a serious accident in the past. ...
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The theory of a multiperiod monopolist incurring nonseparable labor adjustment costs is developed when investment is irreversible. Optimal input stocks are shown to exist and be unique in any period for any finite horizon model. Optimal... more
The theory of a multiperiod monopolist incurring nonseparable labor adjustment costs is developed when investment is irreversible. Optimal input stocks are shown to exist and be unique in any period for any finite horizon model. Optimal input policies are characterized by considering the difference between initial stocks and optimal ones in each period. The sensitivity of disequilibrium policies to parametric changes is examined. A potentially dangerous result for macroeconomic policy makers is derived under recessionary conditions. Even though the optimal labor stock is negatively related to changes in the discount rate, the optimal labor policy is positively related to such changes. Hence, in recessionary situations, decreases in the interest rate may weaken present employment demand from the multiperiod monopolist–monopsonist. This result is attributable to a horizon effect that operates only in disequilibrium situations. Under our assumptions and in contrast to other work, several well-known comparative static results are derived, and a link between the durability of capital and employment policies is demonstrated.
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Banking in Transition Economies is a modern analysis of banking in the transition economies of Central and Eastern Europe and includes a detailed examination of banking in the first five years of transition as well as policy... more
Banking in Transition Economies is a modern analysis of banking in the transition economies of Central and Eastern Europe and includes a detailed examination of banking in the first five years of transition as well as policy recommendations for banking reform in the region.
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economies: Lessons from the first decade
For the past decade, the painfully slow groping of a command economy in search of more effective planning procedures would aptly describe economic reform in the USSR. The industrial reform of 1966, following on the famous Liberman debate,... more
For the past decade, the painfully slow groping of a command economy in search of more effective planning procedures would aptly describe economic reform in the USSR. The industrial reform of 1966, following on the famous Liberman debate, introduced a price for capital and trumpeted the arrival of profits as an important managerial motivator. Although the number of centrally determined constraints on managerial decisions was reduced, quantity targets are still used to implement planners' objectives within the materials supply network, hereafter MSN. During the implementation of the reform, some retrenchment occurred as previously discarded targets were reapplied. In 1973, a second reform was begun with a less heralded organizational change in which production units are to be integrated into larger decision-making units called associations. The purpose of this note is to understand the logic of these reforms by analyzing the effect of various combinations of incentive structures and quantity targets on the production decisions of the socialist manager. Recently in this journal, W. Leeman [3, 434] has argued that value considerations, implicit in managerial reward schemes, should be examined. Following this suggestion, we calculate optimal expansion paths for Soviet reform managers and find the implicit own factor price ratio to contain the
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... be larger than the previous full-employment level (Q*). Although initial membership is an important element of the short-run supply curve for our egalitarian cooperative, we find none of the abnormalities present in Brewer-Browning... more
... be larger than the previous full-employment level (Q*). Although initial membership is an important element of the short-run supply curve for our egalitarian cooperative, we find none of the abnormalities present in Brewer-Browning because we assume that the debt obligation is ...
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We take a retrospective look at Hungary's experiment with a particularly draconian bankruptcy law. For an eighteen-month period in 1992-93, the Hungarian bankruptcy code contained an unusual automatic trigger that required the... more
We take a retrospective look at Hungary's experiment with a particularly draconian bankruptcy law. For an eighteen-month period in 1992-93, the Hungarian bankruptcy code contained an unusual automatic trigger that required the managers of firms that held overdue debts of any size to any creditor to initiate organisation or liquidation proceedings to avoid prosecution under the civil code. We analyse the impact of this 'legislative shock therapy' on the economy during the period and examine its effects on resource reallocation and institution building. We argue that, although a key motivation for introducing the automatic trigger was to harden the budget constraints of firms, the empirical evidence suggests that hard budget constraints were already being imposed by banks and by other firms, and the effect of the automatic trigger was rather the exacerbation of a credit crunch and disruption of economic activity. We also suggest that other features of the Hungarian bankrup...
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In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure model” of the labor-managed firm whose objective is to maximize short-run dividend per worker by varying freely a single input, labor. Following... more
In a recent issue of this journal, Muzondo (1979) introduces price uncertainty into the “pure model” of the labor-managed firm whose objective is to maximize short-run dividend per worker by varying freely a single input, labor. Following the Ward(1958) tradition, Muzondo assumes that any variation in labor requires a change in the membership base on which the dividend is calculated. For this “pure model” of the labor-managed firm (hereafter, L-M), Muzondo claims four main results: (1) a risk-averse L-M firm produces more output than a risk-neutral L-M firm; (2) under constant risk aversion the responses of an L-M firm under price uncertainty are, generally, the same as those under certainty; (3) under decreasing absolute or increasing relative risk aversion, the responses of an L-M firm are, generally, unpredictable; and (4) except for result (2), the responses of L-M firms under price uncertainty are, generally, different from those under price certainty. Although results (1) and (2) are correct, results (3) and (4) are incorrect due to a recurring error in the proofs contained in the appendix of Muzondo’s paper. In fact, we show in this note that many of the responses of an L-M firm under price uncertainty are qualitatively the same as those under price certainty given Muzondo’s assumptions. In particular, the L-M firm will increase employment when fixed charges are increased and decrease output in response to an upward shift in the distribution of output price. Both are equivalent to the results shown by Ward for the price-certain case. From a policy perspective, the response of the L-M firm to tax changes is important. However, except for the result that is ambiguous, Muzondo’s qualitative results are incorrect and should not be used for policy prescriptions. Furthermore, when signable, the responses of the L-M firm to a change in a tax parameter are always the opposite of those of the capitalist-managed (hereafter, C-M) counterpart.
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PurposeThis essay is a tribute to Jaroslav Vanek who spent 32 years at Cornell University where he founded the Program on Participation and Labor-Managed Systems (PPLMS) in 1970, which became the home for economic research on these issues... more
PurposeThis essay is a tribute to Jaroslav Vanek who spent 32 years at Cornell University where he founded the Program on Participation and Labor-Managed Systems (PPLMS) in 1970, which became the home for economic research on these issues in the US. It is a brief intellectual history of a multi-dimensional scholar.Design/methodology/approachVanek's seminal work in the American Economic Review in 1969 marked the culmination of a decade of work on labor management inspired by his brother Jan's work on Yugoslavia, considered then to be a worker-managed economic system. In two rapidly following tomes, Vanek laid out the landscape for the development of a new subfield in economics by providing precursors to many of the results to follow. In that previous decade, Vanek produced papers in traditional economic theory, e.g. international trade and economic growth.FindingsVanek's mindset persists in the interplay between the emerging theory of labor-managed firms and traditional e...
... Banking in transition economies: Developing market oriented banking sectors in Eastern Europe. Post a Comment. ... SUBJECT(S): Europe, Eastern; Europe, Central; Economic policy; 1989-; Banks and banking; Post-communism. DISCIPLINE: No... more
... Banking in transition economies: Developing market oriented banking sectors in Eastern Europe. Post a Comment. ... SUBJECT(S): Europe, Eastern; Europe, Central; Economic policy; 1989-; Banks and banking; Post-communism. DISCIPLINE: No discipline assigned. ...
Page 1. Fundamentals of Pure and Applied Economics Editors-in-chief: Jacques Lesourne and Hugo Sonnenschein Economics of Cooperation and the Labor-Managed Economy John P. Bonin and Louis Putterman harwood academic publishers Page 2. Page... more
Page 1. Fundamentals of Pure and Applied Economics Editors-in-chief: Jacques Lesourne and Hugo Sonnenschein Economics of Cooperation and the Labor-Managed Economy John P. Bonin and Louis Putterman harwood academic publishers Page 2. Page 3. ...
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... III. SHORT RUN ALLOCATIVE EFFECTS AND INCENTIVES By considering a somewhat more general condition on the innovative shift parameter, allocative differences between the egalitarian cooperative and the Page 8. 320 JOHN P. BONIN profit... more
... III. SHORT RUN ALLOCATIVE EFFECTS AND INCENTIVES By considering a somewhat more general condition on the innovative shift parameter, allocative differences between the egalitarian cooperative and the Page 8. 320 JOHN P. BONIN profit maximizer can occur. ...
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... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect to influence norm reporting or actual performance. To introduce the ratchet effect requires explicit consideration of the inter-action between... more
... Despite remarks to the contrary (see p. 227), Fan does not allow the infamous ratcheteffect to influence norm reporting or actual performance. To introduce the ratchet effect requires explicit consideration of the inter-action between ...
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This paper discusses three aspects of stabilization and international integration: the real wage; inflation; and the real effective exchange rate. Using empirical evidence on inflation and the real effective exchange rate, we evaluate the... more
This paper discusses three aspects of stabilization and international integration: the real wage; inflation; and the real effective exchange rate. Using empirical evidence on inflation and the real effective exchange rate, we evaluate the gradualist option represented by the Hungarian reforms. The prospect for continuing a programme based on a real exchange rate anchor supported by a crawling peg tied to a basket of convertible currencies is assessed. These issues are compared with the experience of Poland, which is considered to be an example of shock therapy using a nominal anchor.
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... First and foremost this antagonism put its stamp on political thinking, on the foreign po-licy and ... Katalin N. Szabo has been my closest associate for many years. ... She was succeeded chronologically by Agnes Benedict, Janos... more
... First and foremost this antagonism put its stamp on political thinking, on the foreign po-licy and ... Katalin N. Szabo has been my closest associate for many years. ... She was succeeded chronologically by Agnes Benedict, Janos Varga, Zdenek Kudrna, Noemi Peter, and Eszter Nagy ...