| This thesis consists of four chapters. The first chapter analyzes the role of advertising as a self-imposed barrier to exit. We construct a rational expectations model in which firms use advertising as a commitment device to overcome moral hazard problems associated with exit. We then review the recent history of the dotcom industry and show that this role of advertising can help explain some of the events in this industry. We look at a unique data set of advertising behavior and exit of more than two thousand dotcom brands in the years 1999 to 2001 and find, in line with our theory, that dotcoms responded to potential risk of exit by escalating their advertising expenditures.; The second chapter investigates the determinants of international tourism. International tourism is a fast growing industry accounting for almost ten percent of total international trade, but has so far failed to receive the attention it deserves from mainstream economics. This chapter attempts to start filling this gap. We view the world as a market of differentiated products, and employ a discrete choice estimation technique to a large three-dimensional dataset of tourist flows. We find, among other things, that political risk is very important for tourism, and that exchange rates matter mainly for tourism to developed countries.; The third chapter looks at the shadow economy in transition countries. By treating the shadow as a distinct entity, rather than just a symptom of other policy failures, we are able to examine its short-term and dynamic consequences for development. First, we look at the costs and benefits of a firm facing the decision whether to operate officially. We then construct measures of the size of the shadow economy in 25 transition countries for 1990–7. Finally we examine whether the shadow economy prevents, merely slows down, or actually promotes economic growth and competitiveness in transition countries, and through what mechanisms.; The fourth chapter deals with the gains from privatization in transition countries. We seek to clarify what factors contributed to the macroeconomic gains and losses from privatization in transition economies over the past decade. In contrast to the original “Washington Consensus”, which had a tendency to equate change-of-title with privatization, we find that economic performance gains come only from “deep” privatization, that is, when change-of-title reforms occur once key, institutional and “agency”-related reforms have exceeded certain threshold levels. |
