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National Competitiveness and Economic Growth

The Changing Determinants of Economic Performance in the World Economy

Timo J. Hämäläinen

The current paradigm shift in the world economy is challenging the traditional competitiveness and growth theories with their few explanatory variables. This book offers a more holistic framework to synthesise the key findings of the various branches of competitiveness and growth research. The author illustrates this framework with a new long wave theory of socio-economic development. This theory emphasises the competitiveness and growth benefits of rapid structural adjustment in the rapidly changing techno-economic environment. Based on thorough analysis the author argues that both markets and governments have become less efficient due to the current transformation of the world economy. His empirical data from 22 OECD countries in the 1980s and 1990s illustrates that efficiency and growth-oriented governments have significantly contributed to their countries’ economic success.
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Chapter 17: Private, public and third sector porganizational solutions for overcoming specific market failures

Timo J. Hämäläinen


17. Private, public and third sector organizational solutions for overcoming specific market failures This chapter uses the theoretical framework laid out in the previous chapter to discuss different organizational arrangements that have been used to overcome specific market failures (governance problems) over time. Our discussion shows that there are usually many potential alternatives in the organization of specific market failures (see also Foldvary 1994). We also analyze how the recent changes in the world economy have influenced the division of labor between the different organizational arrangements. As before we take one category of market failures at a time: institutional, macroeconomic, transaction and coordination costs, structural, public goods, uncertainty, externalities, scale, scope and learning economies and structural adjustment rigidities. Institutional market imperfections Almost all modern activities of governments have also been undertaken by firms in the past (Coase 1972). This includes the provision of institutional framework for markets. Coase provides an example of the regulation of local markets in medieval England: The provision of markets is an entrepreneurial activity and has a long history. In the medieval period in England, fairs and markets were organized by individuals under a franchise from the King. They not only provided the physical facilities for the fair or market but were also responsible for security (important in such unsettled times with a relatively weak government) and administered a court for settling disputes (Coase 1990, p. 8). Also cooperatively provided private institutions were common in medieval Europe. Trade partnerships, guilds and merchant leagues provided security for...

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