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Contract P 5/26 1st Annual Activity Report: 2002 1

COORDINATES

COORDINATOR

Université Libre de Bruxelles European Centre for Advanced Research in Economics and Statistics (ECARES) & Centre de l’Economie de l’Education Professor Mathias DEWATRIPONT Université Libre de Bruxelles Avenue F. D. Roosevelt, 50 C.P. 114 1050 Bruxelles Phone: 02/650.4138 Fax: 02/650.4036 Email: [email protected] or [email protected]

PARTNERS

Katholieke Universiteit Leuven Faculteit Economische & Toegepaste Economische Wetenschappen Managerial Economics & Strategy Group Professor Reinhilde VEUGELERS Naamsestraat 69 3000 Leuven Phone: 016/32.69.02 Fax: 016/32.67.32 Email: [email protected]

Université de Mons-Hainaut Economics & Management Professor Bernard LUX Place Warocqué 17 7000 Mons Phone: 065/37.32.77 Fax: 065/37.30.54 Email: [email protected]

Facultés Universitaires Saint-Louis Centre de Recherche en Economie Faculté des Sciences Economiques, Sociales et Politiques Professeor Xavier WAUTHY Jardin Botanique 43 1000 Bruxelles


Phone: 02/211.79.49 Fax: 02/211.79.87 Email: [email protected]

Universiteit Antwerpen UFSIA Faculty of Applied Economics Professor Wilfried PAUWELS Prinsstraat 13 2000 Antwerpen Phone: 03/220.41.22 Fax: 03/220.47.99 Email: [email protected]

Facultés Universitaires Catholiques de Mons Le Centre de Recherche et d'Études en Gestion Industrielle (CREGI) Professor Abdelhakim ARTIBA Chaussée de Binche 151 7000 Mons Phone: 065/323.294 Fax: 065/323.363 Email: [email protected]

Université des Sciences Sociales de Toulouse Institut d’Economie Industrielle (IDEI) Professor Jean-Jacques LAFFONT Manufacture des Tabacs Allée de Brienne 21 31000 Toulouse – France Phone: + 33-5-6112.8636 Fax: + 33-5-6112.8637 Email: [email protected]


TABLE OF CONTENTS

Personnel 4.

Summary of Research 7.

Description of Research Activities

Work Done by Researchers Paid by the Contract 8.

Work Done by People Paid and Not Paid by the Contract (Abstracts) 15.

The Network 30.

Publications

Publications Written in Collaboration 33.

Publications of Each Partner 33.

National and International Contacts 37.

Equipment 41.

Annexes 42.


PERSONNEL

UNIVERSITÉ LIBRE DE BRUXELLES

Promotor Mathias Dewatripont

Financed by the Contract Tom Coupé, doctoral researcher 33%, 01.01.02-31.12.02. Ilaria Faccin, doctoral researcher 75%, 01.01.02-31.12.02. Cindy Féola, doctoral researcher 100%, 01.10.02-31.12.02. Biagio Speciale, doctoral fellow 100%, 01.10.02-31.12.02.

Not Financed by the Contract Benoît Bayenet, scientific research worker - F.N.R.S. Marco Becht, professor Imane Chaara, doctoral researcher Patricia Dekie, administrative staff Jean-Luc Demeulemeester, professor Romy Genin, administrative staff Patrick Legros, professor Anne-Sophie Micheli, researcher Fulvio Mulatero, doctoral researcher Valérie Smeets, doctoral researcher Christophe Soil, doctoral researcher Françoise Thys-Clément, professor Lydia Tsyganok, doctoral researcher Patrick Van Roy, doctoral researcher Paul Verdin, professor Alexis Walckiers, doctoral researcher Etienne Wasmer, professor. Luc Wilkin, professor

KATHOLIEKE UNIVERSITEIT LEUVEN

Promotor Reinhilde Veugelers

Financed by the Contract Stijn Kelchtermans, doctoral researcher, 100%, 21.10.02-31.12.02

Not Financed by the Contract Raymond De Bondt, professor Bert Overlaet, professor Eline Van Poeck, researcher & assistant Frank Verboven, professor


UNIVERSITÉ DE MONS-HAINAUT

Promotor Bernard Lux

Financed by the Contract Toni Mpasinas, doctoral researcher 100%, 01.01.02-31.12.02

Not Financed by the Contract Karine Comblé, professor Alain Finet, assistant

FACULTÉS UNIVERSITAIRES SAINT-LOUIS

Promotor Xavier Wauthy

Financed by the Contract Axel Gautier, post-doctoral researcher, 100%, 15.09.02-21.12.02.

Not Financed by the Contract Jean-François Caulier, doctoral researcher Aurélie Coppe, teaching assistant David Crainich, doctoral researcher Anne-Marie de Kerchove, professor Jean-Paul Lambert, professor Marianne Storme, teaching assistant Tracy Tonneau, research assistant

UNIVERSITEIT ANTWERPEN

Promotor Wilfried Pauwels

Financed by the Contract Eve Vanhaecht, doctoral researcher, 100%, 01.09.02 – 31.12.02 Sandy Bogaert, doctoral researcher, 100%, 01.09.02 – 31.12.02

Not Financed by the Contract Christophe Boone, professor Jan Bouckaert, professor Walter Nonneman, professor Daniël Vloeberghs, professor


FACULTÉS UNIVERSITAIRES CATHOLIQUES DE MONS

Promotor Abdelhakim Artiba

Financed by the Contract David Bardey, post-doctoral researcher 100%, 01/10/02-30/09/04 Hongying Fei, doctoral researcher 100%, 01/10/02-30/09/03 Vanessa Martin, administrative staff, 100%, 01/01/02-31/12/06 Jean-Philippe Vandamme, doctoral researcher 100%, 01/09/02-31/08/06

Not Financed by the Contract David Duvivier, Post-doctoral researcher Louis Eeckhout, Professor Nadine Meskens, Professor Fouad Riane, Professor

UNIVERSITÉ DES SCIENCES SOCIALES DE TOULOUSE

Promotor Jean-Jacques Laffont

Financed by the Contract/ Anastasia Kartasheva, doctoral researcher, 100%, 19/08/02-31/10/02 Lucia Quesada, doctoral researcher, 100%, 01/10/02-31/10/02 & 50%, 01/11/02-31/12/02 Daouda Diaquite, doctoral researcher, 100%, 19/08/02-30/09/02

Not Financed by the Contract Jacques Crémer, professor Guido Friebel, professor Marc Ivaldi, professor Michel Lebreton, profesor David Martimort, professor Andres Panagopoulos, post-doctorant Patrick Rey, professor Jean Tirole, professor Frédéric Warzynski, post-doctoral researcher


SUMMARY OF RESEARCH

Our previous IAP project, entitled “The Strategic Analysis of Organizations: Microeconomic and Management Perspectives, with an Application to Universities”, explored new developments in the theory of organizations and applied them to the specific case of universities. Given their key role for economic development, universities represent an interesting case study, since they are also in a challenging and changing environment, due to public budget constraints as well as exhortations to improve management practices. Moreover, they are an example of non-profit institutions, which raises interesting questions on their objective function and evaluation of their appropriate product mix (between undergraduate and graduate teaching and basic and applied research). The project was interdisciplinary in nature: while it had a strong microeconomic theory component, it also relied on management and organizational sociology perspectives. It could also count on the management expertise of a number of researchers involved in the team, acquired especially in academic, but also in non-academic institutions. The previous project has generated many insights on the university sector, and culminated in particular in a book summarizing several research outputs from team members. However, many interesting questions remained unanswered in this important area of research, and this new project is going much more systematically into the detailed behavior of universities, while taking as unifying theme a comparison with firms. Beyond this, our commitment to interdisciplinary research is maintained and we continue to benefit from the management expertise of several team members. Finally, we continue to combine theory and empirical work, but we have an added emphasis on the latter. This report details the output of this first year of research. After presenting the work of the people paid by the contract (mostly Ph.D. students), we summarize its other outputs, written by team members that are paid by other funding sources than the contract. We group these into the six themes of the proposal, each of which addresses a major set of concerns for university behavior: - Measuring Educational Performance and Behavior - Comparing Corporate Governance and University Governance - Funding Rules, R&D and Organizational Behavior - Human Resources, Technology and Globalization - Focus & Quality: Strategic Management in For-Profit & Non-Profit Institutions - Market Competition, Contractual Relations & Organizational Strategies


DESCRIPTION OF RESEARCH ACTIVITIES

PEOPLE FINANCED BY THE CONTRACT

David Bardey - FUCAM Estimation of the Health Expenditure Efficiency at the Regional Level by the DEA Method, (with Sylvain Pichetti), in Economie et Prévision, (2002). The health expenditure levels in the French regions are very heterogeneous. From the central level, it is difficult to estimate if these differences are explained by different health need or caused by a bad regulation of the health risk in some regions. We suggest to evaluate the efficiency of the health systems at a decentralized level thanks to the method DEA where health expenditure are considered as inputs whereas health states represent the outputs of the systems. We use a method for environment variables integration that allows to avoid dimensionality problem. This method can be useful for application in the education sector where the data samples are smaller. We suggest in conclusion to introduce an yardstick competition mechanism by using the DEA scores. This paper was presented at the Applied Econometrics Association Congress, Health Care and Regionalization, Ajaccio, in October 2002, and at the IAP Meeting, Mons, in December 2002. Education Choice under Uncertainty, research in progress (with David Crainich (Cereq) & Xavier Wauthy (Cereq), Saint-Louis University). We study the education policy from a regulator point of view when students choose their education level in an uncertain environment. We assume that students are risk averse and that they are heterogeneous in their risk aversion. The heterogeneity in risk aversion may be interpreted as a proxy of the wealth distribution in the population. We consider three different education levels. Taking into account that the investments increase with education levels and that the highest level is the more profitable but the riskiest. We show that policies that increase the probability of success in an education level do not systematically increase the proportions of people who choose this level according to a risk aversion effect through the alteration of the variance. The Preliminary version was presented at the Cereq seminar, in December 2002. Management of Hospital Risks In collaboration with Beatrice Rey (Lass, Lyon III University), we write a review of literature about the different payment systems used in the hospital sector for the project of the AS directed by the CNRS. Following Newhouse (1996), we analyse the risk transfers associated to the different payment systems and the incentive associated to each system.

Sandy Bogaert - UA S. Bogaert has begun research under the supervision of D.Vloeberghs and C.Boone. The general research topic of this team concerns HR-activities and practices at universities. In order to be able to define clear and specific research objectives, she started with a survey of the literature. More specifically, the topic to be investigated is the individual performance of members of the academic staff, and how HRM can help to improve this performance. The problem will be presented in terms of various tensions:


- Professional commitment versus organizational commitment. - Individual incentives versus collective incentives. - Strategy. The full academic career (promotion, intellectual mobility, etc…) will also find a place in this research project. The individual level of analysis is interesting because it is linked with different aspects of HRM. A link with the situation of knowledge workers gives rise to questions such as: - Is there a need for an integrated HR-policy at universities? - How do universities allocate people to the organization? - Is there any form of career path management? How does this relate to commitment? Sandy Bogaert is following a course on Advanced Microeconomic Theory in the doctoral program.

Tom Coupé - ULB Tom Coupé obtained his Ph.D. under the supervision of Mathias Dewatripont (September 2002), entitled “Essays on the Behavior of Scientists and Universities”. Summary: Academe, through its graduate and its faculty, plays a crucial role in the supply of “innovations”. Jaffe (1989) for example finds that firms that are located in states with higher academic R&D expenditures, patent more, even after controlling for the firm’s R&D expenditures. Mansfield (1998) shows that over 10% of the new processes and products in seven industries could not have been developed without academic research. And these innovations are considered to be crucial determinants of economic growth (see Freeman and Soete (1997), Mokyr (1990) and Scherer (1999)). Studying the behavior of scientists and universities thus has far-reaching implications as such knowledge should help us to improve the organization of the academic world that on its turn should improve economic performance. Many authors have studied the incentive and evaluation mechanisms used by firms (see Prendergast (1999) for a literature survey) and stressed their importance for a firm’s performance. Much less, however, is known about the academic world (see Stephan (1996) for a survey). But there are many signs that incentives also matter for scientists and universities. And if incentives are important, then academic also needs methods to evaluate performance. This thesis includes 5 chapters that add to the study of academe by looking at these incentives and these evaluation practices in academe. Chapter 1 studies how universities pay their top executives. Chapter 2 looks at the patent production functions of universities. In chapter three, I study the most widely used evaluation method in the academic world, peer view. In chapter 4, I present a new ranking of economics departments and economists based on their publication performance. The final chapter looks at the incentives generated by promotions in economics of departments.

Ilaria Faccin – ULB University students’ use and attitudes towards computer and Internet: an exploratory study, in collaboration with Luc Wilkin: After having launched at the end of 2001 a survey among students on use and attitudes towards Internet and computerized information tools, have been analyzing the data collected through “focus groups” and 712 questionnaires administered to the students of the SOCO faculty at the ULB. The scope of the research was to collect qualitative and quantitative information on how students are integrating these technologies in their habits and to test attitudes scales generating specific and original sub-scale construct characterising attitudes set of this specific population. Results show that in terms of technology use the ULB sample is a word processing and communication kind of user: these usages witness main approaches students have towards


technologies. They perform an instrumental kind of use for both technologies and moderation as well as control characterise the approach. Students do not ever show addiction towards technology nor cyber-lost phenomena have been registered. To push further the analysis on the kind of use and the exploration of possible user profiles, researchers were able to define different Internet user profiles (specific for Internet tools): each of them characterised by a particular “orientation” students give to the technology use. In terms of kind, frequency and extend of use for both technologies (Internet and computer) the sample can be defined as a traditional moderate user, with a communication preferred approach and rather cyber- tech fashion resistant. The attitudes have been measured and assessed through two specific scales (one for computers and the other one for Internet) formulated within both the frameworks for assessing attitudes towards computers set out by Selwyn1 and towards Internet set out by Tsai Lin. The theoretical premises have been tested (reliability and validity of the scales and internal consistency) and according with the statistical results analytically distinct sub-scales emerged from the original scales. Both technologies are positively perceived in terms of control and affection (rather self confident users that have developed positive affection feeling towards the use of the technologies, that do not intimidate or worried them) and Internet is generally perceived as a useful tool when related to university or work related issues (even if researchers have not experimented any correlation between the intensity of the use and the perceived control of the tool). Perception (subjective approach to the tool) does not translate (in this case) any objective behaviour (high frequency in the use of Internet related to university activities). Next step of the present research will be to identify whether there are factors influencing the use of these technologies (antecedent possession and/ exposure to the technologies) and to verify whether the attitudes profiles towards these tools (Internet and computers technologies) might influence the kind and mastering of the use. The findings of this study might be used as starting point for a wider discussion concerning the use of information and communication technologies in teaching and learning, bearing in mind the students’ needs, experiences and expectations. The strategic response universities must conceive towards technologies should be then done in a more user-oriented perspective considering the concrete students’ demands as the pivotal point of universities IT policy.

Hongying Fei – FUCAM The doctoral subject concerns the decision process in non-profit organizations: health care systems (hospitals). Her specific research interest deals with hospital logistics and operating theatre planning and scheduling.

Cindy Feola – ULB Organisational Configurations Drivings: an Application to European Universities: In answer to contextual evolutions always more restricting and uncertain, European universities are suggested to adopt a more entrepreneurial conception. In order to clarify the contextual conditions that are required for a transition of the "classic" university towards this new paradigm, the empirical studies recently conducted concentrate on the variety of elements constituting the external and internal contexts of universities and the identification, among these elements, of factors of contingency for the organisational development policies of universities.

1 The Selwin scale was formulated on the Kay and Davis’ Technology acceptance model. The authors’ structure of computer attitudes draws on both the tripartite model of attitude (affect, behaviour and cognition) and Ajzen’s theory of Planned Behaviour


The main argument is that if the market context exerts strong pressures to adaptation, the university’s capacity of organisational and strategic change is also contingent to the specificities of their internal context and their institutional context. The data collection is based on two main sources. Firstly, on official documents and more particularly, a report recently published by Eurydice relating to reforms in Higher Education in 16 European countries since the 80s. Secondly, a questionnaire sent to the head administrators of universities coming from one of those 16 European countries. This questionnaire covers a large number of dimensions like factual data (relative to the size, the ventilation of the budget, the academic structural development) and more descriptive and qualitative questions relating to the universities structural characteristics and practices of functioning and management (like the degree of formalisation of procedures, evaluation practices or the level of decentralisation). Although the global rate of answer is relatively weak (15 %), altogether, our sample of 76 universities represents 10 % of all the establishments of university type and more than 25 % of the total university student population for the 16 considered countries. This research can be structured into two main steps. The first step consists of the analysis of multiple dimensions authorising the construction of typologies, one relating to the external context, and more particularly, to the modes of public governance and another relating to the internal modes of functioning of universities. With regard to the paradigms of governance, two different typologies were built. The first starts from a formal point of view and is based on the study of the public reforms relative to the HE sector. The second is derived from the questionnaires. The second stage aims at putting in evidence the extent and the nature of a contextual dependence and coherence of the internal modes of functioning of universities, notably, with regard to their modes of governance, by confronting the various constructions of typologies. According with the finding of this study, the moderate impact that exerts the relatively constrained macroeconomic evolutions at the level of the modes of functioning of certain universities practices seems above all connected to the anchoring of certain contextual characteristics specific to universities, as well as to the anchoring of the links of dependencies which have been established and institutionalised from a long time and which persist today, notably, between the internal and institutional context of universities.

Axel Gauthier – FUSL He has been working since September 2002 in our team on a research program "Universities as conglomerates" in collaboration with Xavier Wauthy. The research aims at adapting corporate governance models developed for analyzing conglomerate firms to study the structure of internal decisions within universities, in particular the allocation of funds between teaching and research across departments. The Benefits and Costs of Winner Picking: Redistribution and Incentives, (with Florian Heider, University of New York, USA). A multi-divisional firm can engage in "winner-picking" to redistribute scarce funds efficiently across divisions. But there is a conflict between rewarding winners (investing) and producing resources internally to reward winners (incentives). Managers in winning divisions are tempted to free-ride on resources produced by managers in loosing divisions whose incentives to produce resources, anticipating their loss, are also weakened. Corporate headquarter's investment and incentive policy are therefore inextricably linked and have to be treated as jointly endogenous. The analysis links corporate strategy compensation and the value of diversification to the characteristics of multi-divisional firms.


Regulation of an Open Access Essential Facility, (with Manipushpak Mitra, University of Bonn) This paper concentrates on the problem of regulating an open access essential facility when the market structure is endogenous. A vertically integrated firm owns an essential input (network) and operates on the downstream market under the roof of a regulatory contract. There is a potential entrant on the downstream market. Both competitors use the same essential input to provide final services to consumers. In this context, the regulator should design a regulatory contract that guarantee both a sufficient level of competition on the downstream market and the financing of the essential input. This paper characterizes the optimal regulatory contract, taking the entry decision endogenous, when the regulator is unaware of the cost of both the potential entrant and the incumbent firm. The regulatory contract prescribes (i) above marginal cost pricing if entry does not occur but a price below the incumbent's marginal cost if entry does occur, (ii) a positive entry fee to be paid by the entrant to finance the incumbent's network cost, (iii) a public subsidy to finance the infrastructure costs uncovered by the market receipts. At the optimal contract, there is too few entry: a potential entrant more efficient than the regulated incumbent may stay out of the downstream market.

Stijn Kelchtermans - KUL Research plan: The research will consist of a performance analysis of academics on the one hand and a market share analysis of universities and colleges on the other hand. Both parts will be investigated using econometric techniques. For the performance analysis, we seek to understand research output determinants of academic staff at an individual level. In particular, we will investigate links between (basic and applied) research output, teaching load and career path. Findings will be interpreted using multitask agency theory. The research data is collected within the Katholieke Universiteit Leuven. For the market share analysis, we will analyse the choice problems faced by first-time university and college students using a data set supplied by the Flemish Ministry of Education. The main research focus will be the importance of physical distance to an education institution and the study disciplines it offers in a student’s decision process.

Toni Mpasinas – UMH Corporate Governance and Universities During the year 2002, I have studied the application of Corporate Governance on the Universities. I have made a summary about the different structure in place within the Universities. In this way, I analysed the different kind of governance in application in the sector of University. My goal was to detect the governance specificities of the university and to see if something was appropriate to a possible modification. The first step was made on the university of Mons-Hainaut because it was easier to have the different information. In the future, I would like to extend my studies in others universities. The first part of my study was to understand the structure of the university. I made a lot of interview of different people inside of the university. I choose people by different level of the decision structure. It helped me to have a different view on the same subject and to compare the different kind of advises. Then, I made a summary of the different Corporate Governance tools that were applied in the private sector. After that, I tried to see if we could apply this tool on the university sector. The conclusion of this paper is that it exists a large informal level inside of the university. That informality can hinder the good application of the rule. More of that, we can see that only a few people have a big influence on the governance university. There is a bottom up decision structure in the rules that we can see in the reality but it also exists a top down decision structure which has a bigger level of importance.


Biagio Speciale – ULB Recently there has been growing interest in the microeconomic analysis of incentives in principal-agent relationships where agents have to exert several tasks. Multitasking is very important also in the case of universities, which have to pursue several missions: research, teaching and service to the community. Some tasks are often naturally easier to measure than others. For these tasks, providing quantitative incentives not an improvement of the overall performance of the agent but essentially a substitution of effort towards the task that is incentivized and away from the other tasks that are more difficult to measure. A possible solution of the multitask agency problem is to design the jobs within the organization in such a way that agents are allocated tasks with similar degrees of measurability. In the first part of its thesis, he will try to explore from a theoretical point of view advantages and costs to specialization of agents in a subset of the tasks that universities have to pursue.

Jean-Philippe Vandamme – FUCAM Designing an Explainable Model of First-Year Students' Success at University This research has begun in September 2002, for a total period of 4 years. General description of the project: This study aims at analysing and explaining first-year students' success or failure at university. On the one hand, we will try to establish the links between various factors and academic performance. On the other hand, we will try to explain the underlying mechanisms of success and failure. Context of the project: When we analyse first-year students' results in French-speaking universities in Belgium, we notice that about 60% of first-generation students fail or give up in their first year. Droesbeke et al. (2001) have observed that the rates of success, repeating a year or withdrawal have been quite stable for more than ten years. They have shown that the rate of freshers' success is close to 41%. The proportion of students repeating a year approaches 26% whereas the rate of withdrawal is 33%. These alarming statistics are food for thought and they should also encourage people to take action in order to reduce the worrying economic, social and human costs entailed by this high failure rate in the first year at university. It is also worth noting that the majority of Belgian universities offer additional activities to the compulsory curriculum such as time management, CAL, etc. These are especially aimed at students who failed their exams in January. Specific object of the research: A lot of studies (Ardia, 2001; Boxus, 1993; Busato et al., 1999, 2000; Chidolue, 1996; Furnham et al., 1999; Gallagher, 1996; Garton et al., 2002; King, 2000; Minnaert & Janssen, 1999; Parmentier, 1994) were carried out in order to predict success or failure and to explain academic performance. They also highlighted a series of factors closely linked to the student. Parmentier (1994) did a doctoral research that provides the most relevant theoretical framework from a psycho-pedagogic point of view and on which the current research project will be based. According to Parmentier, academic performance is influenced by various factors: on the one hand, structural factors (such as the student's personal background) are rather stable and independent of the training context; on the other hand, processual factors (such as the student's perceptions and his involvement) are changing according to the university context. This research aims at discovering whether the sources of failure are to be found in the period which precedes university entry and are thus very much part of the student's personal background. Or on the contrary, we will try to show that the causes of failure are more particularly linked to the changeover from secondary school to university (perceptions of the context, methodology, etc.) and/or relate to university teaching itself (French test, intermediate performance, teaching practices, environment, the functioning of the university, etc.). In other words, we will try to find out what factors account best for the high failure rate in the first year.


Progress of the project: We have begun the review of the literature on the subject and we have also tried to identify the explanatory factors that should be taken into account. We started a postgraduate certificate in statistics and applied data processing at FUSA Gembloux, which will enable us to go over the various statistical methods of analysis that could be useful for our research. We have presented this project during a working session of PAI members.

Eve Vanhaecht - UA under supervision of W.Pauwels and J.Bouckaert, Eve Vanhaecht surveyed the existing literature on the modeling of competition between universities. The following extensions to the existing literature are being analyzed: - The demand for university education can be modeled in such a way that it depends not only

on the distance between universities and on the announced quality levels, but also on the abilities of the students. How does the introduction of this latter characteristic affect the equilibrium of the model?

- The university’s admission policy can be modeled in terms of the number of students admitted, or in terms of minimal required abilities. To what extent do the implications of these two policies differ?

- The cost of providing education of a certain quality can depend on the research ability of the staff (economies of scope). How does this affect the teaching and research output of a university?

- The government’s funding scheme may depend not only on the number of students, but also on the research output of the university. What are the implications of such a funding scheme?

- Starting from a Nash equilibrium, what is the nature of possible Pareto improvements? In March 2003, an informal seminar on this research will be given in the Department of Economics. A working paper is also planned.


PEOPLE NOT FINANCED BY THE CONTRACT

Theme I: Measuring Educational Performance and Behavior

Benoît Bayenet (ULB) Financing and Performance of Higher Education Institutions One of the major issues in debates on higher education funding concerns the question whether the allocation of public funds to higher education should be based on performance. But finding an adequate indicator for the performance of Higher Education Institutions is the most difficult obstacle. In the research, we show that public authorities could incite universities to performance in partially linking their grant to the performance’s evaluation. Our approach mixes in a same analysis two different domains of literature: the efficiency analysis based on the estimation of a production frontier and the theory of contracts (Principal-agent problem with moral hazard). Our objective consists in analyzing possible applications of these theories to the specific case of financing higher education institutions. We experimentally estimate the consequences of implementing a system of incentive grant on the base of OECD data for Higher education. Définancer l’université: un calcul myope Politique, 2002, n°24, avril, pp. 16-19. Le financement et l’organisation de l’enseignement universitaire font actuellement l’objet de réflexions, débats et décisions dans de nombreux pays occidentaux. Les universités de la Communauté française de Belgique se trouvent aujourd’hui dans une situation de blocage financier structurel qui compromet tant leur compétitivité que leur intégration internationales et les empêche de répondre pleinement aux besoins de développements régionaux. Dans cet article, il s’agit de déterminer les principales raisons permettant de comprendre la situation financière actuelle des universités et quelles sont les perspectives possibles de refinancement au niveau de la Communauté française. Une évaluation du système d’enseignement et de formation en Communauté française Introduction générale de la Commission 2, CIFoP, Congrès des Economistes belges de Langue Française, 15th Congress, November, 2002, pp.7-23. Une importance de plus en plus considérable est accordée à l’évaluation des processus d’éducation et de formation. Il existe cependant plusieurs manières de juger des résultats de l’enseignement et de la formation. Nous proposons une grille d’analyse basée sur les concepts d’efficacité interne et externe. L’analyse de l’efficacité interne consiste à comparer les inputs utilisés dans le processus d’éducation et de formation aux résultats obtenus alors que l’analyse de l'efficacité externe s'efforce de vérifier si les objectifs de plus long terme de la politique éducative ont été atteints. Une attention particulière est également accordée à l’analyse de l’égalité d’opportunité, autrement dit, le système de formation et d’éducation est-il accessible à tous et les chances de réussite sont-elles identiques pour tous

Jan Bouckaert & Wilfried Pauwels (UA) Bidding Mechanisms Used on the Markets for Professors Universities make alternating ascending salary offers to professors. Each university faces a budget constraint. The effects on the outcome of differing budgets, various detailed rules and the universities’ objectives are analyzed.

Raymond De Bondt (KUL) Theorie leren en gebruiken? Zeg gewoon ja Tijdschrift voor Economie en Management, Vol. XLVII, 2, 2002 Should students in business schools learn to understand relevant theory and if so, why? This paper argues that the right attitude is one of theory without apology. Future leaders and managers should learn to understand their organisations and environment and only good theories can serve as an infrastructure for contemplation, reasoning and evaluation. This does


not mean that education and learning should proceed on abstract and inaccessible levels. It only means that relevant and tested theories should be the inspiring and driving forces for business education.

Jean-Luc De Meulemeester (ULB) L’enseignement supérieur contribue-t-il au développement économique ? Une analyse cliométrique In collaboration with D. Rochat, Economies et Sociétés, issue on Histoire Quantitative, 2002, forthcoming. This research aims at identifying various ways through which higher education might affect (or be affected by) economic variables, (such as the level of economic development or stock of physical capital) by applying econometric tools (cointegration and Granger causality tests) on long-run time series. Three countries are investigated: Australia (1906-1986), United Kingdom (1919-1987) and Sweden (1910-1986) and the statistical evidence is confronted with material coming from more traditional economic history. The results show the importance of both economic and technological level of development, as well as of institutional framework and exogenous factors. They highlight the complex relation which links together the educational system and the economy at large along this century.

Anne-Sophie Micheli (ULB) The Transition from Compulsory Education to University. Under the supervision of F. Thys-Clément. First, my study was concerned about the characteristics of pupils in the secondary school. Their acquired competences are estimated by the results of PISA, their motivations are analyzed basically on the survey of A-M de Kerchove and J-P Lambert; the information’ supply and the assistance to help students in their orientation in higher education are criticized and a particular attention is paid to the student’ social capital because this would have influence on his choices and his success’ probabilities. After that, a second part is concerned with econometric studies that attempt to estimate the impact of the personal and familial characteristics on the choice of the number of years of study. And finally, the private return rate in terms of wages is estimated according to the number of years of study and according to the die followed in the secondary school.

Walter Nonneman (UA) Demand and Supply of Selectivity in Higher Education Demand and willingness to pay for selective higher education is explained by a simple signaling-screening-sorting model where higher education is considered as an imperfect filter. It is shown that higher productivity differentials allow for less selectivity in education, but increase the demand for selectivity. Less selectivity increases willingness to pay for selectivity. The relationship between student numbers and selectivity is non-linear, with high selectivity hampering student numbers in the short-run but increasing student numbers in the long run. The method of financing higher education affects selectivity choices. It is shown that schools depending relatively more on private tuition (and market value of the education) opt for more selectivity and lower student numbers than schools financed pro rata student numbers. Also, due the dynamics of students reacting to selectivity, there is always the lure of less selectivity.

Valérie Smeets (ULB) Incentives, Sorting and Productivity along the Career: Evidence from Economic Departments In this paper we study empirically the labor market of economists. We look at the mobility and promotion patterns of a sample of 1,000 top economists over thirty years and link it to their productivity and other personal characteristics. We find that the probability of promotion and of upward mobility is positively related to past production. However, the sensitivity of promotion and mobility to production diminishes with experience, indicating the presence of a learning process. We do not detect the presence of systematic fast tracks, quite the opposite.


Individuals promoted quickly to associate have a tendency to take more time to be promoted to professor. We also find evidence that economists respond to incentives. They tend to exert more effort at the beginning of their career when dynamic incentives are important. However, those people experiencing fast tracks seem to exert a constant level of effort along their career. Finally, we detect evidence of a sorting process, as the more productive individuals are allocated to the best ranked universities.

Françoise Thys-Clément (ULB) Comment l’enseignement obligatoire, et particulièrement l’enseignement secondaire, doit-il préparer ses élèves en fonction des réformes de l’enseignement supérieur en Europe ? in Le chef d’ établissement, facilitateur et coordonnateur d’initiatives, Actes du colloque organisé par les Sections européennes de l’Association Francophone Internationale des directeurs d’établissements scolaires (AFIDES), 2003, forthcoming. L’article couvre plusieurs des questions soulevées par la mise en place d’une politique éducative plus structurée au niveau de l'Union Européenne. Il se concentre sur quelques uns des aspects qui traitent du paradigme de la pertinence du rôle de l'éducation sur le développement économique, des modifications d'organisation que connaissent les universités, de l'articulation entre celles-ci et le système très diversifié de l'enseignement secondaire européen ainsi que des facteurs qui conditionnent l'efficacité et l'équité de ces établissements d'enseignement. Ces éléments devraient fournir un point de départ à une discussion argumentée des effets du processus de Bologne sur l'organisation de l'enseignement obligatoire et, en particulier, de l’enseignement secondaire. Il souligne que l'argument économique demande à être complété par des recherches scientifiques qui couvrent un vaste champ multidisciplinaire. A cet égard, l'on devrait mobiliser les ressources du nouvel Espace Européen de la recherche. La question du "Comment" préparer les élèves de l'enseignement obligatoire en fonction des réformes de l'enseignement supérieur doit résulter de la confrontation des projets éducatifs nationaux, des missions de chacun des niveaux d'enseignement : primaire, secondaire et supérieur, sachant que des nouvelles compétences de base ont été indiquées ; celles des technologies de l'information, des mathématiques ainsi que les sciences et les technologies. Le "comment" préparer les élèves de l'enseignement secondaire oblige à poser une cascade de questions. Celle de "avec qui" est essentielle puisque l'on connaît le rôle essentiel des élèves eux-mêmes, de leurs parents et des autorités locales de cet enseignement pour la bonne réussite de ces étudiants. De fait plusieurs études pointent l'héritage socioculturel qui encadre ce taux de réussite. Dès lors la question "avec quels moyens" redevient essentielle.

Alexis Walckiers (ULB) Multi-Dimensional Screening and University Output This essay studies the bidimensional choice of effort made by an academic within a university (research and teaching). It is first assumed that, in the end, the effort of the academic will be perfectly observed by the institution and second that academics, but not the university, know how much they like carrying out research and teaching. I show, using a model of multi-dimensional screening that the institution will optimally set up different rewarding schemes and let the academic choose the contract designed for her. I, furthermore, attempt to generalize for substitutable or complementary tasks. I would like to investigate the case of an outside option increasing in the type on a first dimension and being constant on the other. This case could be interpreted as the possibility for the academic to valorize past scientific production (but not past teaching) in a new university.


Theme II: Comparing Corporate Governance and University Governance

Marco Becht (ULB) Corporate Governance and Control In collaboration with P. Bolton & A. Roell, Handbook of the Economics of Finance, in G. Constantinides, M. Harris & R. Stulz (eds), Elsevier, North Holland, 2002, forthcoming. Corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of interest between various corporate claimholders. In this survey we review the theoretical and empirical research on the main mechanisms of corporate control, discuss the main legal and regulatory institutions in different countries, and examine the comparative corporate governance literature. A fundamental dilemma of corporate governance emerges from this overview: large shareholder intervention needs to be regulated to guarantee better small investor protection; but this may increase managerial discretion and scope for abuse. Alternative methods of limiting abuse have yet to be proven effective. Corporate Control in Europe In collaboration with C. Mayer, in The World's New Financial Landscape: Challenges for Economic Policies, Horst Siebert (ed), Springer, 2002, forthcoming. Data from the EU's Large Holdings Directive (88/627/EEC) allow detailed analyses of the control of European corporations to be undertaken for the first time. This paper reports results from an international study of these data by members of the European Corporate Governance Network. It records high levels of concentration of control of corporations in many European countries with single blockholders frequently controlling more than 50% of corporate votes. In contrast, a majority of U.K. listed companies have no blockholder owning more than 10% of shares and a majority of U.S. listed companies have no blockholder with more than 6% of shares. Distributions of voting blocks reveal that control is concentrated in forms in which regulation confers particular advantages: shareblocks are concentrated at levels at which there are significant control benefits. This suggests a relation between regulation and the structure of ownership of companies that goes beyond existing "over-", "under-" or "optimal-regulation" theories. The paper discusses an alternative view that ownership is largely irrelevant in the face of dominant management control. It also considers a contending thesis that the technology driven project realisation periods are relevant to the period for which corporate control needs to be exerted.

Christophe Soil (ULB) Share to Control: Team Incentives as a Monitoring Tool A lot of firms use incentive schemes that link worker’s return to his team performance. This doesn’t really increase the worker’s motivation when the team is large but it encourages him to check the quality of his colleague’s work. We show in this paper that this decentralized checking system can be used to manage the problem of authority delegation inside the firm.


Theme III: Funding Rules, R&D and Organizational Behavior

Mathias Dewatripont & Patrick Legros (ULB) Moral Hazard and Capital Structure Dynamics In collaboration with S. Matthews. We base a contracting theory for a start-up firm on an agency model with observable but non verifiable effort, and renegotiable contracts. Two essential restrictions on simple contracts are imposed: the entrepreneur must be given limited liability, and the investor’s earnings must not decrease in the realized profit of the firm. All message game contracts with pure strategy equilibria (and no third parties) are considered. Within this class of contracts/equilibria, and regardless of who has the renegotiating bargaining power, debt and convertible debt maximize the entrepreneur’s incentives to exert effort. These contracts are optimal if the entrepreneur has the bargaining power in renegotiation. If the investor has the bargaining power, the same is true unless debt induces excessive effort. In the latter case, a non-debt simple contract achieves efficiency — the non-contractibility of effort does not lower welfare. Thus, when the non-contractibility of effort matters, our results mirror typical capital structure dynamics: an early use of debt claims, followed by a switch to equity-like claims.

Mathias Dewatripont (ULB) & Patrick Rey (Toulouse) On Partial Contracting In collaboration with P. Aghion, in European Economic Journal, 2002, vol.46, 4/5, pp 633-962. This paper investigates contracting situations where giving away some control rights enhances both the donor’s and the receiver’s incentives to cooperate in the future. We define a partial contracting framework with nonverifiable actions for which either control is contractible (contractible control actions) or the right to transfer control ex post to another party is contractible (transferable control actions). Under incomplete information, when control over particular actions is transferable but not contractible, it can be optimal to give one party the right to transfer control over a particular action to the other party, in order for that party to build a reputation regarding her willingness to cooperate in the future.

Reinhilde Veugelres (KUL) R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium In collaboration with B. Cassiman, American Economic Review, 92, 4, 1169-1184. In this paper, we empirically explore the effects of knowledge flows on R&D cooperation, highlighting the distinction between two measures of knowledge flows, namely incoming spillovers and appropriability. Incoming spillovers are measured by the importance of publicly available information for the innovation process of the firm, obtained from survey data on Belgian manufacturing firms. Using the same survey data, we also construct a measure of appropriability, which rates the effectiveness of different mechanisms for protecting the innovations of the firm. The advantage of our measures of incoming spillovers and appropriability is that they are direct and firmspecific, allowing for heterogeneity among firms. The ability to create incoming spillovers from the general pool of knowledge can be a function of other innovation activities of the firm such as own R&D, participation in cooperative agreements, the type of research the firm engages in, or the technological opportunities in the industry. At the same time, firms that cooperate pay special attention to protecting their proprietary knowledge. A firm’s effectiveness in protecting commercially sensitive information might be reduced by the knowledge flows created through participating in cooperative R&D agreements. The ability to protect valuable information from reaching other firms also depends on the firm’s innovation activities such as own R&D, on the competitive environment of the firm and the appropriability conditions in the industry. We find that there is a significant relation between external information flows and the decision to cooperate in R&D. Firms that rate generally available external information sources as more important inputs to their innovation process—the incoming spillovers—are more likely to be actively engaged in cooperative R&D agreements. At the same time, firms that are more effective in appropriating the results from their innovation


process, are also more likely to cooperate in R&D. Differentiating between incoming spillovers and appropriation proves particularly important when examining their effect on different types of cooperative agreements such as agreements with suppliers and customers, or, agreements with research institutions. Furthermore, our results suggest that the level of knowledge in- and outflows is not exogenous to the firm. Through their innovation activities, firms affect their incoming spillovers and appropriation capabilities. Endogeneizing Know-How Flows through the Nature of R&D Investments In collaboration with B. Cassiman & D. Perez-Castrillo, International Journal of Industrial Organisation, 20, pp. 775-799. In this paper we carefully link knowledge flows to and from a firm’s innovation process with this firm’s investment decisions. Three types of investments are considered: investments in applied research, investments in basic research, and investments in intellectual property protection. Only when basic research is performed, can the firm effectively access incoming knowledge flows and these incoming spillovers serve to increase the efficiency of own applied research. The firm can at the same time influence outgoing knowledge flows, improving appropriability of its innovations, by investing in protection. Our results indicate that firms with small budgets for innovation will not invest in basic research. This occurs in the short run, when the budget for know-how creation is restricted, or in the long-run, when market opportunities are low, when legal protection is not very important, or, when the pool of accessible and relevant external know-how is limited. The ratio of basic to applied research is non-decreasing in the size of the pool of accessible external know-how, the size and opportunity of the market, and, the effectiveness of intellectual property rights protection. This indicates the existence of economies of scale in basic research due to external market related factors. Empirical evidence from a sample of innovative manufacturing firms in Belgium confirms the economies of scale in basic research as a consequence of the firm’s capacity to access external knowledge flows and to protect intellectual property, as well as the complementarity between legal and strategic investments. Improving Industry Science Links through University Technology Transfer Units: an Analysis and a Case In collaboration with K. Debackere, Onderzoeksrapport 0258, DTEW, KULeuven. Connectivity has become one of the critical success factors in generating and sustaining high-performing National Innovation Systems. Industry Science Links (ISLs) are an important dimension of this connectivity. Over the last decades, multiple insights have been gained (both from theory and practice) as to how “effective” ISLs can be fostered through the design and the development of university-based technology transfer units. In this paper, we document and analyze the evolution of “effective” university-based technology transfer mechanisms, towards a matrix structure allowing an active involvement of the research groups in commercial exploitation of their research findings, while specialized supporting services like intellectual property management and business plan development are centralized. We show that the establishment of: (1) an appropriate context within academia; (2) the design of stimulating incentive structures for academic research groups and, (3) the implementation of appropriate decision and monitoring processes within the interface

unit itself, are critical elements in fostering “effective” linkages between industry and the academic science base.

Do Science-Technology Interactions Pay Off When Developing Technology? An Exploratory Investigation of 10 Science Intensive Technology Domains In collaboration with B. Van Looy, E. Zimmerman, A. Verbeek & K. Debackere, Onderzoeksrapport 0244, DTEW, KULeuven . In this paper we investigate the impact of science – technology (S&T) interactions on the effectiveness of technology development. The number of references in patents to scientific articles is considered as an approximation of the intensity of S&T interaction whereas a country’s technological performance is measured both in terms of its technological productivity


(i.e. number of patents per capita), and its relative technological specialization (i.e. RTA-index). We use USPTO patent-data for eight European countries in ten technological domains. A variance analysis (ANOVA) is applied. Country as an independent variable does not explain a significant portion of the observed variance in science interaction intensity (p=0.25). Technology domain, however, explains a significant portion of the observed variance (p<0.001). In science intensive fields we find a positive relation between the science linkage intensity of these fields and the technological productivity of the respective countries involved. These findings seem to suggest the relevancy of fostering interaction between knowledge generating actors and technology producers, especially in science intensive areas.


Theme IV: Human Resources, Technology and Globalization

Benoît Bayenet (ULB) Capital humain et marché du travail: Constats et Perspectives In collaboration with R. Deschamps, Conclusions générales de la Commission 2, CIFoP, Congrès des Economistes belges de Langue Française, 15th Congress, November, 2002, pp. 267-276. Cette contribution synthétise les principaux résultats des différents travaux présentés dans le cadre de la commission « Enseignement et formation - marché du travail : quelles articulations ? » du Congrès des Economistes belges de langue française qui s'est déroulé en novembre 2002 à Namur. Ces travaux permettent de dresser une première évaluation de notre système d'enseignement et de formation tout en le replaçant dans un contexte international. Une autre partie de cet article est consacrée à une analyse des principales propositions formulées lors des travaux de la Commission pour améliorer l’efficacité de notre système d'enseignement.

Benoît Bayenet & Françoise Thys-Clément (ULB) Gestion du personnel scientifique et académique en Communauté française de Belgique : premiers aspects d’une mise en perspective européenne Fonds National de la Recherche Scientifique, research report, March 2002.

Imane Chaara (ULB) What About the Career Prospect for Ph.D. Graduates? Under the supervision of F. Thys-Clément. The research deals with the thesis-to work transition of Ph.D. graduates. The purpose of the study is twofold. On the one hand, we will focus on the labor market prospects of Ph.D. graduates (academic vs. non academic position, tenured vs. non tenured position…) and, on the other hand, on their wage earning prospects. We will try to identify the quantitative and qualitative transformations of the labor market for Ph.D. graduates. We will focus more particularly on the development of post-docs in the academic sector and on the role of the reinforcement of the industry-academic links. In fact, one can ask whether post-docs have an impact on the wage earning prospects or if they essentially increase the probability to get a particular job. Moreover, openings towards non-university professional world and external experiences may represent a solution in a world where the number of “traditional” academic position has declined. Regarding the wage earning prospects, we will concentrate our analysis on the academic sector. We will check if significant differences between universities and disciplines exist. Interesting questions also include whether some disciplines obtained larger salary increases than others and whether wage differences due to the rank have changed over time.

Tom Coupé & Valérie Smeets (ULB), & Frédéric Warzynski (Toulouse) Incentives, Sorting and Productivity along the Career: Evidence from Economic Departments In this paper, we study empirically the labor market of economists. We look at the mobility and promotions patterns of a sample of 1000 top economists over thirty years and link it to their productivity and other personal characteristics. We find that the probability of promotion and of upward mobility is positively related to past production. However, the sensitivity of promotion and mobility to production diminishes with experience, indicating the presence of a learning process. We do not detect the presence of systematic fast tracks, quite the opposite. Individuals promoted quickly to associate have a tendency to take more time to be promoted to professor. We also find evidence that economists respond to incentives. They tend to exert more effort at the beginning of their career when dynamic incentives are important. However, those people experiencing fast tracks seem to exert a constant level of effort along their career. Finally, we detect evidence of assorting process, as the more productive individuals are allocated to the best ranked universities.


Incentives in Economic Departments: Testing Tournament Theory ? We use a dataset of average wages by rank in US economic departments over the period 1977-1997 to test empirical implications of tournament theory (Lazear and Rosen, 1981) against other theories that have similar effects, like standards and basic marginal productivity theory (Gibbs, 1995; Prendergast, 1999). We link this information to individual production data to test whether wage gaps affect the productivity and cooperative behaviour of economists and to control for marginal productivity theory. We find that the wage gap is increasing along the hierarchy, even when controlling for production by rank. Moreover, wages are more sensitive to productivity for higher ranks. We find some evidence that higher wage gaps lead to higher productivity but not that wage gaps depend on the number of contestants nor they lead to less cooperation. These findings tend to go in favour of the use of standards rather than tournaments in economic departments.

Jean-Luc Demeulemeester (ULB) Les politiques européennes d’éducation et de formation à travers les textes : une évaluation critique In collaboration with D. Rochat, in Agone, Philosophie, politique et sociologie, 2003, forthcoming.

Valérie Smeets (ULB) Incentives in Economic Departments: Testing Tournaments Theory? We use a dataset of average wages by rank in US economic departments over the period 1977-1997 to test empirical implications of tournament theory (Lazear & Rosen, 1981) against other theories that have similar effects, like standards and basic marginal productivity theory (Gibbs, 1995; Prendergast, 1999). We link this information to individual production data to test whether wage gaps affect the productivity and cooperative behavior of economists and to control for marginal productivity theory. We find that the wage gap is increasing along the hierarchy, even when controlling for production by rank. Moreover, wages are more sensitive to productivity for higher ranks. We find some evidence that higher wage gaps lead to higher productivity but not that wage gaps depend on the number of contestants nor that they lead to less cooperation. These findings tend to go in favor of the use of standards rather than tournaments in economic departments.

Françoise Thys-Clément (ULB) Changes in Research Management: the New Working Conditions of Researchers in The Belgium Innovation System: Lessons and Challenges, Federal Office for Scientific, Technical and Cultural Affairs, 2002, Vol. II. The paper presents points of view and empirical results obtained from studies recently carried out in Europe or which have included European countries in their scope of investigation. Their fragmented character, in a geographical, thematic or temporal sense, and the unusual empirical evidence, sometimes result in an ad hoc juxtaposition of arguments, and consequently this study makes no claims to being exhaustive. It will thus consider the researcher in the university environment and focus on the problems of fundamental research without taking into account the specific problems of the working conditions of the researchers, particularly in the innovative phase of products or processes. The conclusion will call for a proper multidisciplinary research programme for scientific activity as well as for an accompanying institutional and financial policy to allow Europe, and particularly Belgium, to update its scientific knowledge. The New Working Conditions of Researchers: the Case of Université Libre de Bruxelles In collaboration with V. Cabiaux, in Processes and Strategies for Growing Research at New and Emerging Higher Educational Institutions, OECD/IMHE research programme, 2003, forthcoming.

Reinhilde Veugelers (KUL) Foreign Subsidiaries as Channel of International Technology Diffusion: Some Direct Firm Level Evidence from Belgium


in collaboration with B. Cassiman, European Economic Review, to appear and CEPR Discussion Paper 2337. External knowledge is an important input for the innovation process of firms. Increasingly, this knowledge is likely to originate from outside of their national borders. This explains the preoccupation of policymakers with stimulating local technology transfers coming from international firms. We find that firms that have access to the international technology market are more likely to transfer technology to the local economy. In doing so, we qualify the traditional assertion that multinational firms are more likely to transfer technology to the local economy. Once controlled for the superior access to the international technology market that multinationals enjoy, we find that these firms are not more likely to transfer technology to the local economy compared to exporting or local firms that have access to the international technology market. In summary, the main result of this paper is that it is not so much the international character of the firms, but rather their access to the international technology market that is important for generating external knowledge transfers to the local economy.

Etienne Wasmer (ULB) Higher Education Levels, Firm's Outside Option and the Wage Structure In collaboration with A. Rosen. We analyze the consequences of an increase in the supply of highly educated workers on relative and real wages in a search model where wages are set by Nash-bargaining. A key insight is that an increase in the average education level exerts a negative externality on wages through its positive externality on the firms' outside option. As a consequence, the real wage of all workers decreases in the short-run. Since this decline is more pronounced for less educated workers, wage inequality increases. In the long-run a better educated work force induces firms to invest more in physical capital. Wage inequality and real wages of highly educated workers increase while real wages of less educated workers may decrease. These results are consistent with the U.S. experience in the 70s and 80s. Based upon differences in legal employment protection we also provide an explanation for the diverging evolution of real and relative wages in Continental Europe. Labour Supply Dynamics, Unemployment and Human Capital Investments In the last decades, the OECD labor markets faced important labor supply changes with the arrival of women and the cohorts of the baby-boom. Using a survey where workers declare their true employment experience, this paper argues that these supply trends imply more inexperienced workers. It then investigates the important consequences of this fact on the skill composition of the labor force, between-groups wage inequality and the level of unemployment. The main result is that a labor market with wage rigidities may not recover from such a temporary labor supply shock: with a younger and less experienced labor force, there is higher unemployment among low-experience workers, they do not accumulate enough on-the-job human capital, this reduces in the long-run the supply of skilled (experienced) workers and the demand for unskilled workers. This intertemporal multiplication of supply shocks generates multiple equilibria, and the rigid economy is stuck to the bad equilibrium even after the shock. In a competitive market, in contrast, wage inequality and notably, the wage return to experience becomes higher but there is no persistence of the supply shock. Higher education prevents this intertemporal multiplication of supply shocks.


Theme V: Focus & Quality: Strategic Management in For-Profit and Non-Profit Institutions

Cindy Feola & Luc Wilkin (ULB) Quels types de configuration pour les universités ? Formes structurelles et processus organisationnels Revue de l'Institut de Sociologie, 2003, forthcoming. Si le secteur universitaire a engendre une litterature abondante, peu nombreuses sont les etudes qui abordent directement les modes de fonctionnement internes des universites dans une perspective comparative. Au travers de l'analyse de questionnaires standardises, adresses a des responsables d'universites europeennes, notre contribution aborde la question de l'intensite avec laquelle des facteurs de contexte externes ont un role structurant sur les modes d'organisation internes, amenant celles-ci a adopter des modes de fonctionnement et de gestion plus "entrepreneuriaux", voire a se differencier entre elles suivant, notamment, leur localisation geographique.

Christophe Soil (ULB) Subcontracting and Internal Wage Constraint Some firms decide to subcontract tasks, which are part of their own production process. In this paper, we try to link this behaviour with internal constraints the manager faces. In particular, we show that manager can have an interest to subcontract a task in order to circumvent the internal wage scale which is often negotiate with the workers’ union. An important result of our work is that manager can decide to subcontract a task either to decrease his production cost (to a low wage subcontractor) or to increase his quality product (to a high wage subcontractor).


Theme VI: Market Competition, Contractual Relations and Organizational Strategies

Raymond de Bondt (KUL) Mensen, organisatie en innovatie. Leuven Research & Development: 30 jaar doorbraak en innovatie aan een ondernemende universiteit (redactie: K. Debackere & R. De Bondt). Universitaire Pers Leuven, 2002, 222 p. Innovative activities are the result of market forces, human creativity, and entrepreneurial spirit, all operating in an appropriate economic, scientific, technological and institutional environment. There does not exist a unique best profile of an entrepreneur or a venture capitalist, nor is it possible to say what organisations are always most conductive to change. Sometimes, for example, competition is most stimulating and sometimes cooperation is the best venue for technological change. This means that innovative activities have to rely to a large extent on the creativity of people as well as on market forces. In numerous cases human players will invent organisations that facilitate change and innovation. Perhaps “K.U. Leuven Research and Development” is a convincing example of this point.

Louis Eeckhoudt (FUCAM) The Economic Notion of Prudence, Development and Perspectives. In this paper I discuss the link between the recent concept of prudence and the notion of risk aversion which is more widespread in the literature. I also present the relationship between prudence and stochastic dominance.

Guido Friebel (Toulouse) Career Concerns in Teams In collaboration with E. Auriol & L. Pechlivanos, Journal of Labor Economics, 2003, forthcoming. We study the impact of changes in the commitment power of a principal on cooperation among agents, in a model in which the principal and her agents are symmetrically uncertain about the agents' innate abilities. When the principal cannot commit herself to long-term wage contracts, two types of implicit incentives emerge. First, agents become concerned about their perceived personal productivity. Second, agents become more reluctant to behave cooperatively - they have an incentive to `sabotage' their colleagues. Anticipating this risk, and in order to induce the desired level of cooperation, the principal must offer more collectively oriented incentive schemes. We also show that temporary workers are not affected by the sabotage effect and that as a result, their incentives are more individually oriented. Abuse of Authority and Hierarchical Communication In collaboration with M. Raith, RAND Journal of Economics, 2003, forthcoming. If managers and their subordinates have the same basic qualifications, organizations could benefit from replacing unproductive superiors by more productive subordinates. In response to the threat of being replaced, however, superiors might deliberately recruit unproductive subordinates or abuse their personnel authority in other ways, in order to protect themselves. We show that the common practice of requiring intra-firm communication to pass through a “chain of command" can be an effective way of securing the incentives for superiors to recruit the best possible subordinates and support their development. We discuss some alternative instruments and general implications of our analysis for organizational design.

Axel Gauthier (FUSL) The Benefits and Costs of Winner Picking: Redistribution and Incentives In collaboration with F. Heider. A multi-divisional firm can engage in "winner-picking" to redistribute scarce funds efficiently across divisions. But there is a conflict between rewarding winners (investing) and producing


resources internally to reward winners (incentives). Managers in winning divisions are tempted to free-ride on resources produced by managers in loosing divisions whose incentives to produce resources, anticipating their loss, are also weakened. Corporate headquarter's investment and incentive policy are therefore inextricably linked and have to be treated as jointly endogenous. The analysis links corporate strategy compensation and the value of diversification to the characteristics of multi-divisional firms. Regulation of an Open Access Essential Facility In collaboration with M. Mitra. This paper concentrates on the problem of regulating an open access essential facility when the market structure is endogenous. A vertically integrated firm owns an essential input (network) and operates on the downstream market under the roof of a regulatory contract. There is a potential entrant on the downstream market. Both competitors uses the same essential input to provide final services to consumers. In this context, the regulator should design a regulatory contract that guarantee both a sufficient level of competition on the downstream market and the financing of the essential input. This paper characterizes the optimal regulatory contract, taking the entry decision endogenous, when the regulator is unaware of the cost of both the potential entrant and the incumbent firm. The regulatory contract prescribes (i) above marginal cost pricing if entry does not occur but a price below the incumbent's marginal cost if entry does occur, (ii) a positive entry fee to be paid by the entrant to finance the incumbent's network cost, (iii) a public subsidy to finance the infrastructure costs uncovered by the market receipts. At the optimal contract, there is too few entry: a potential entrant more efficient than the regulated incumbent may stay out of the downstream market.

Patrick Legros (ULB) Audit Competition in Insurance Oligopolies In collaboration with B. Boccard. We provide a simple framework for analyzing how competition aspects the choice of audit structures in an oligopolistic insurance industry. When the degree of competition increases, fraud increases but the response of the industry in terms of investment in audit quality follows a U-shaped pattern. Following increases in competition, the investment in audit quality will decrease if the industry is initially in a low competition regime while it will increase when the industry is in a high competition regime. We use these results to show that firms will benefit from forming a joint audit agency only when the degree of competition is intermediate and that cooperation might improve total welfare; we also analyze the effects of contract innovation on the performance of the industry. Monotone Matching in Perfect and Imperfect Worlds In collaboration with A. Newman. We study frictionless matching in large economies with and without market imperfections, providing sufficient conditions for monotone matching that are weaker than those previously known. Necessary conditions, which depend on a key analytical object we call the surplus function, are also offered. Changes in the surplus yield valuable information about the comparative statics of matching patterns across environments. We apply our framework to some examples adapted from the literature, accounting for and extending several comparative-static and welfare results. We also explore the dependence of the matching pattern on the type distribution. Partners: Assortative Matching in a Nontransferable World In collaboration with A. Newman. Progress in the application of matching models to environments in which the utility between matching partners is not fully transferable has been hindered by a lack of characterization results analogous to those that are known for transferable utility. We present sufficient conditions for matching to be monotone that are simple to express and easy to verify. We illustrate their application with some examples that are of independent interest. Global vs. Local Competition


In collaboration with K. Stahl. We analyze the impact of increased outside opportunities brought to consumers by improved access to a global market on local market performance under monopoly vs. oligopoly. If consumers choose once where to buy, we show that under all forms of organizing the local market, increased competition from the global market will locally crowd out variety. The effect on prices is much less clear. While increased global competition yields a price reduction under monopoly, prices may increase under oligopoly. We check the robustness of these results in various extensions and draw consequences on competition and industrial policies.

Jean Tirole (Toulouse) Willpower and Personal Rules In collaboration with R. Benabou This paper studies the internal commitment mechanisms or “personal rules” (diets, exercise regimens, resolutions, moral or religious precepts, etc.) through which people seek to achieve self-control. Our theory is based on the idea of self-reputation over one’s willpower, which potentially transforms lapses in a personal rule into precedents that undermine future self-restraint. The foundation for such effects, in turn, is the imperfect recall of past motives and feelings, which leads people to draw inferences from their own past actions. We thus model the behaviour of individuals who are unsure of their willpower (ability to delay gratification) in certain states of the world , and show how self-control can be sustained by the fear of creating , damaging precedents. We also show, however, that people will sometimes adopt excessively rigid rules that result in compulsive behaviours such as miserliness, workaholism, or anorexia. These represent costly forms of self-signalling where the individual is so afraid of appearing weak to himself that every decision becomes a test of his willpower, even when self-restraint is not even desirable ex-ante. Such common behaviours which appear to display a “salience of the future” are thus not only consistent, but actually generated by (a concern over) present-oriented preferences. Finally, we analyze the cognitive underpinnings of self-regulation. We first show how equilibrium behaviour is shaped by the extent to which the individual’s self-monitoring is subject to opportunistic distortions of memory or attribution. We then study how recall and inference processes can themselves be endogenously determined through the use of self-sustaining cognitive rules and resolutions. Self-Control in Peer Groups In collaboration with M. Battaglini & R. Benabou People with a self-control problem often seek relief through social interactions than binding commitments. Thus, in self-help groups like Alcoholic Anonymous, Narcotic Anonymous etc., members are said to achieve personal outcomes by mainly sharing their experiences. In other settings, however, peer influences can severely aggravate individual tendencies towards immediate gratification, as is often the case with interactions among schoolmates or neighbourhood youths. Bringing together the issues of self-control and peer effects, we study how observing the behaviour of others affects individuals’ ability to resist their own impulses towards short-run gratification. We show how these purely informational spillovers can give rise to multiple equilibria, where agents’ choices of self-restraint or self-indulgence are mutually reinforcing. More generally, we identify conditions on agents’ initial self-confidence, confidence in others, and degree of correlation that uniquely lead to either a “good news” equilibrium where social interactions improve self-discipline , a “bad news equilibrium” where they damage it, or to both. We also conduct a welfare analysis to determine when group membership is preferable to, or worse than, isolation. Individuals will generally find groups useful for self-control only if they have at least a minimal level of confidence in their own and their peers’ ability to resist temptation. At the same time, having a partner who is “too perfect” is no better than being alone, since one learns nothing from his actions. The ideal partner is shown to be someone


with a slightly worse self-control problem, as this makes his successes more encouraging, and his failures less discouraging. Our paper thus provides a psychologically grounded theory of endogenous peer effects, as well as of importance of group morale. Self-Confidence and Personal Motivation In collaboration with R. Benabou, Quarterly Journal of Economics, 2002, 117(3), pp. 871-915. We analyze the value placed by rational agents on self-confidence, and the strategies employed in its pursuit. Confidence in one’s abilities generally enhances motivation, making it a valuable asset for individuals with imperfect willpower. This demand for self-serving beliefs (which can also arise from hedonic or signalling motives) must be weighed against the risks of overconfidence. On the supply side, we develop a model of self-deception through endogenous memory that reconciles the motivated and rational features of human cognition. The resulting intrapersonal game of strategic communication typically leads to multiple equilibria. While “positive thinking” can improve welfare, it can also be self-defeating (and nonetheless pursued). Xavier Wauthy (FUSL) Ensuring Quality Provision in Deregulated Industry In collaboration with N. Boccard. The deregulation of public monopolies has often generated a decrease in quality and reliability of service. Governments have coped with this issue by imposing Minimum Quality Standards to entrants but a recent stream of literature has raised concerns about the inadequacy of this instrument. We propose an alternative, a sales quota to be imposed on the incumbent, to overcome the competition effects that tend to generate quality downgrading. In our model an entrant invests into quality because the limit on the incumbent sales eliminates price wars and enable him (as well as the incumbent) to recoup investments in quality. The maximal welfare is obtained when the sales quota is fixed at 71\% of the initial market. Laisser-faire leads to entrant's differentiation and a welfare of 91,6\% of the Pareto optimum while our solution leads to a welfare of 99,4$. To reach this level a MQS should be set 66% above the ideal level chosen by the entrant under laisser-faire. Quality Selection, Quotas and the Mode of Competition In collaboration with N. Boccard. We compare the effect of a trade quota on products' quality selection under Cournot and Bertrand competition. In contrast with the Cournot case, a quota never induces quality downgrading under Bertrand competition, moreover the domain of effective quotas is larger under Bertrand than under Cournot. University Competition when Enrolment Size Affects Students’ Decisions In collaboration with E. Del Rey. We consider the case of two departments competing for mobile students. Departments differ by the quality of the degree they deliver and the cost of obtaining a degree depends on the number of students registered in the program. This introduces an externality which deeply alters the nature of competition. The equilibrium outcomes are characterized and shown to depend on the sign of the externality effect.


THE NETWORK

IAP MEETINGS These meetings are held several times a year and hosted by the different partners. The researchers of each team present their own work to interact with the others. In 2002, three meetings were organized and took place at the Université Libre de Bruxelles, the Universiteit Antwerpen and the Facultés Universitaires Catholiques de Mons.

Kick-Off Meeting: 25 January 2002 hosted by ECARES (ULB). This meeting allowed the promoters of each team to agree with different guidelines to lead the project.

3 June 2002 hosted by Universiteit Antwerpen (UFSIA), its programme was as follows: Anne-Marie de Kerchove (FUSL): Choix des Etudes Supérieures et Motivations des Etudiants. Cindy Feola (ULB): Organizational Configurations Drivings: Application to European Universities. W.Nonneman (UA): The Unification Process of the University of Antwerp. Wilfried Pauwels (UA): Duopoly Models of Universities: A Survey of the Issues. F Riane (FUCAM): Performance Measurement in Industrial Enterprises. Louis Eeckhoudt (FUCAM): The Economic Notion of Prudence: Development and Perspectives Toni Mpasinas (UMH) : Corporate Governance appliqué à l’organisation universitaire. Mathias Dewatripont, Françoise Thys-Clément & Luc Wilkin (ULB): Managing University Complexity.

10 December 2002 hosted by FUCAM, its programme was as follows Mathias Dewatripont (ULB): Royalties versus Academic Research Incentives: Toni Mpasinas (UMH): Le Corporate Governance appliqué aux organizations universitaires. Wilfried Pauwels (UA): Competition Among Universities: Meager Means and Noble Ends. David Bardey (FUCAM): Estimation de l’efficience des dépenses de santé à l’échelon départemental par la méthode DEA. Xavier Wauthy (FUSL): University Competition When Enrolment Size Affect Students. Bernadette Noël, Jean-Philippe Vandamme et Nadine Meskens (FUCAM): Conception d’un modèle explicatif de la réussite universitaire en première candidature. Reinhilde Veugelers (KUL): Improving Industry Science Links through University Technology Transfer Units: An Analysis and a Case. Ilaria Faccin (ULB): Governing the Autonomy: a Preliminary Overview of the Italian Case.

WORKING GROUP MEETINGS ON STEERING GROUP HUMAN RESOURCES MANAGEMENT IN UNIVERSITIES The goal of these meetings is to allow researchers from different IAP teams in the perspective of further publications.


25 October 2002 hosted by the Universiteit Antwerpen: Sandy Bogaert (UA), Anne Marie DeJonghe (KUL), Ilaria Faccin (ULB), Wilfrid Pauwels (UA), Daniël Vloeberghs (UA) and Luc Wilkin (ULB).

29 November 2002 hosted by the Katholieke Universiteit Leuven: Sandy Bogaert (UA), Christophe Boone (UA), Ilaria Faccin (ULB), Cindy Feola (ULB), Anne-Marie Dejonghe (KUL), Wilfried Pauwels (UA), Paul Verdin (ULB & KUL), Daniel Vloebergh (UA), Luc Wilkin (ULB).

WORKSHOP We tend to organize one workshop a year with economists from other foreign universities to interact with the systems and problems of other countries. This year, the workshop was held at ULB and we have planned to organize the next one in Toulouse (the European partner) in January 2004.

Universities and Firms: A Comparative Analysis of the Interactions Between Market Processes, Organizational Strategies & Governance This workshop was hosted by ECARES (ULB) on 2-3 September 2002 and organized by Mathias Dewatripont, Françoise Thys-Clément & Luc Wilkin. Its programme was as follows:

Introduction Mathias Dewatripont (ECARES): Summary of the book European Universities: Change and Convergence ? and the new project.

Session I Chair: Jean-Paul Lambert (Facultés Universitaires Saint-Louis). Ilaria Faccin & Luc Wilkin (ULB): University Students’ Usage and Attitudes Towards Computer and Internet: ULB an Exploratory Study. Discussion: Paul Verdin (ULB & Katholieke Universiteit Leuven).

Session II Chair: Wilfried Pauwels (Universiteit Antwerpen). Reinhilde Veugelers (Katholieke Universiteit Leuven): Industry and Science : Partners in R&D Cooperation ? Some Empirical Evidence from Belgium. Michele Cincera (ULB): Industry-University S&T Transfers: What Can We Learn from Belgian CIS-2 Data ?. Discussion: Philippe Aghion (Harvard University).

Session III Chair: Mathias Dewatripont (Université Libre de Bruxelles). Jørgen Rasmussen (Aalborg University): After Collegial Governance in Universities: the End of History ? Arild Tjeldvoll (University of Oslo): University Staff Development. Discussion: Luc Wilkin (ULB).


Session IV Chair: Abdelhakim Artiba (Facultés Universitaires Catholiques de Mons). Bruno van Pottelsberghe (ULB): Patenting Performances of Belgian Universities. Discussion: Jean-Pierre Contzen (Instituto Superior Técnico, Lisboa).

Session V Chair: Frank Verboven (Katholieke Universiteit Leuven). Guido Friebel (Université des Sciences Sociales de Toulouse): Career Concerns and Public Good Provision. Some Implications from an Incentive Model. Discussion: Patrick Legros (ECARES).

Session VI Chair: Frank Verboven (Katholieke Universiteit Leuven). Michael Shattock (University of London): Is There a Relationship Between the Current Crisis in Corporate Governance and Problems in University Governance ?. Discussion: Marco Becht (ECARES).


PUBLICATIONS

THE NETWORK Aghion P., M. Dewatripont & P. Rey, “On Partial Contracting”, European Economic Review, 2002, pp. 745-753. Aghion P., M. Dewatripont & P. Rey, “Transferable Control”, 2002, mimeo. Bardey D., D. Crainich & X. Wauthy, "University Attendance as a Choice under Uncertainty", 2002, mimeo. Coupé T., V. Smeets & F. Warzynski, “Incentives, Sorting and Productivity along the Career: Evidence from Economic Departments”, 2003, mimeo, forthcoming. Coupé T., V. Smeets & F. Warzynski, “Incentives in Economic Departments: testing Tournament Theory ?”, 2003, mimeo, forthcoming. De Koning A., E. Van Poeck, V. Subramanian & P. Verdin, “Regional Organisations: Beware of the Pitfalls”, in J. Birkinshaw, G. Yip, C. Markides and S. Ghoshal, The Future of the Multinational Company, London: Wiley, forthcoming Spring 2003.

UNIVERSITÉ LIBRE DE BRUXELLES Bolton P. & M. Dewatripont, Contract Theory, MIT Press, 2003, forthcoming. Bayenet B., « Définancer l’université: un calcul myope », Politique, 2002, n°24, avril, pp. 16-19. Bayenet B., « Une évaluation du système d’enseignement et de formation en Communauté française », Introduction générale de la Commission 2, CIFoP, Congrès des Economistes belges de Langue Française, 15th Congress, November, 2002, pp.7-23. Bayenet B. & R. Deschamps, «Capital humain et marché du travail: Constats et Perspectives », Conclusions générales de la Commission 2, CIFoP, Congrès des Economistes belges de Langue Française, 15th Congress, November, 2002, pp. 267-276. Bayenet B. & F. Thys-Clément, «Gestion du personnel scientifique et académique en Communauté française de Belgique: premiers aspects d’une mise en perspective européenne », Fonds National de la Recherche Scientifique, research report, March 2002. Becht M. & E. Boehmer, “Voting Control in German Corporations”, International Review of Law and Economics, 2002, forthcoming. Becht M., P. Bolton & A. Roell, “Corporate Governance and Control”, Handbook of the Economics of Finance, in G. Constantinides, M. Harris & R. Stulz (eds), Elsevier, North Holland, 2002, forthcoming. Becht M. & C. Mayer, “Corporate Control in Europe”, in The World's New Financial Landscape: Challenges for Economic Policies, Horst Siebert (ed), Springer, 2002, forthcoming. Boccard N. & P. Legros, “Audit Competition in Insurance Oligopolies”, CEPR Discussion paper 3478, July 2002. Cabiaux V. & F. Thys-Clément, “The New Working Conditions of Researchers: the Case of Université Libre de Bruxelles”, in Processes and Strategies for Growing Research at New and Emerging Higher Educational Institutions, - OECD / IMHE research programme, 2003, forthcoming. De Meulemeester J.L. & D. Rochat, « L’enseignement supérieur contribue-t-il au développement économique ? Une analyse cliométrique », Economies et Sociétés, issue on Histoire Quantitative, 2002, forthcoming.


De Meulemeester, J.L. & D. Rochat , « Les politiques européennes d’éducation et de formation à travers les textes : une évaluation critique », in Agone. Philosophie, politique et sociologie, 2003, forthcoming. Dewatripont M., L. Hansen & S. Turnovsky, Advances in Economics and Econometrics, the Eighth World Congress, 3 volumes, Cambridge University Press, Cambridge, 2003, forthcoming. Dewatripont M., P. Legros & S. Matthews, “Moral Hazard and Capital Structure Dynamics”, CEPR Discussion paper 3487, August 2002, forthcoming in the Journal of the European Economic Association. Dewatripont M., F. Thys-Clément & L. Wilkin, European Universities: Change and Convergence?, Editions de l’Université Libre de Bruxelles, 2002, 248 p. Dewatripont M., F. Thys-Clément & L. Wilkin, «Managing University Complexity», in European Universities : Change and Convergence ?, M. Dewatripont M., F. Thys-Clément & L. Wilkin (eds), in Collection « Education » - Editions de l’Université de Bruxelles, pp.221-237. Feola C. & L. Wilkin, « Quels types de configuration pour les universités ? Formes structurelles et processus organisationnels », Bruxelles, Revue de l'Institut de Sociologie, 2003, forthcoming. Hawawini G., V. Subramanian & P. Verdin, “Are ‘old’ Strategy Concepts Still Working?”, European Business Forum, Issue 8, Winter 2001/2002. Hawawini G., V. Subramanian & P. Verdin, “Is Performance Driven by Industry - or Firm-Specific Factors? A New Look at the Evidence”, Strategic Management Journal, Vol.24, Issue 1, pp. 1-17, Jan 2003. Hawawini G., V. Subramanian & P. Verdin, “The Home Country in the Age of Globalization: How Much Does it Matter for Firm Performance?”, Journal of World Business (formerly Columbia Journal of World Business), forthcoming 2003. Legros P., “Adverse Selection and Contracts: a Discussion”, in M. Dewatripont, L. Hansen & S. Turnovsky (eds), Advances in Economics and Econometrics, the Eighth World Congress, 3 volumes, Cambridge University Press, Cambridge, 2002, forthcoming. Legros P. & A. Newman, “Courts, Contracts and Interference”, European Economic Review, 2002, 46/4-5, pp. 734-744. Legros P. & A. Newman, “Monotone Matching in Perfect and Imperfect Worlds”, Review of Economic Studies, October 2002. Legros P. & A. Newman, “Partners: Assortative Matching in a Non-Transferable World”, CEPR Discussion Paper 3469, July 2002. Legros P., A. Newman & N. Pavoni, “A Theory of Reorganization Waves”, mimeo, 2002. Legros P., A. Newman & E. Proto, “Growth through Creative Organization”, mimeo, 2002. Legros P. & K. Stahl, “Global versus Local Competition”, CEPR Discussion Paper 3333, April 2002. Rosen A. & E. Wasmer, “Higher Education Levels, Firm's Outside Option and the Wage Structure”, mimeo, 2001. Thys-Clément F., «Changes in Research Management: the New Working Conditions of Researchers», in The Belgium Innovation System: Lessons and Challenges, Federal Office for Scientific, Technical and Cultural Affairs, 2002, Vol. II. Thys-Clément F., « Comment l’enseignement obligatoire, et particulièrement l’enseignement secondaire, doit-il préparer ses élèves en fonction des réformes de l’enseignement supérieur en Europe ? », in Le chef d’établissement, facilitateur et coordonnateur d’initiatives, Actes du colloque organisé par les Sections européennes de l’Association Francophone Internationale des directeurs d’établissements scolaires (AFIDES), 2003, forthcoming. Verdin P., Wereldberoemd in eigen land. Een strategisch perspectief op inernationaal management, (Lannoo/Scriptum), 2002.


Wasmer E., “Labour Supply Dynamics, Unemployment and Human Capital Investments”, Discussion Paper 1998, revised in 2002. Wasmer E. & Y. Zenou, “Does City Structure Affect Search and Welfare”, Journal of Urban Economics, 2002, forthcoming.

KATHOLIEKE UNIVERSITEIT LEUVEN Cassiman B., M. Colombo, M. Garrone & R. Veugelers, “The Impact of M&As and Relatedness on R&D: an Empirical Analysis Using Indepth Cases”, mimeo, KUL, 2002. Cassiman B., D. Perez-Castrillo & R. Veugelers, “Endogeneizing Know-How Flows Through the Nature of R&D Investments”, International Journal of Industrial Organization, 2002, 20, pp. 775-799. Cassiman B. & R. Veugelers, “Foreign Subsidairies as Channel of International Technology Diffusion: Some Direct Firm Level Evidence from Belgium”, European Economic Review, 2002, forthcoming. Cassiman B. & R. Veugelers, “R&D Cooperation and Spillovers : Some Empirical Evidence from Belgium”, American Economic Review, 92, 4, pp. 1169-1184. Cassiman B. & R. Veugelers, “Industry and Science: Partners in R&D Cooperation? Some Empirical Evidence from Belgian Manufacturing”, 2002, mimeo, KUL. Debackere K., B. Van Looy, A. Verbeek, R. Veugelers & E. Zimmerman, “Do Science-Technology Interactions Pay Off When Developing Technology? An Exploratory Investigation of 10 Science Intensive technology Domains”, Onderzoeksrapport 0244, DTEW, 2002, KUL. Debackere K. & R. Veugelers, “Improving Industry Science Links Through University Technology Transfer Units: an Analysis and a Case”, Onderzoeksrapport 0258, DTEW, 2002, KUL. De Bondt R., Theorie leren en gebruiken ? Zeg gewoon ja », Tijdschrift voor Economie en Management, vol. XLVII, 2, 2002. De Bondt R., « Mensen, organisatie en innovatie », in Leuven Research & Development : 30 jaar doorbraak en innovatie aan een ondernemende universiteit, K. Debackere & R. De Bondt (eds), Universitaire Pers leuven, 2002.

UNIVERSITÉ DE MONS-HAINAUT None.

FACULTÉS UNIVERSITAIRES SAINT-LOUIS Boccard N. & X. Wauthy, "Ensuring Quality Leapfrogging Through Quotas", Review of International Economics, 2002, forthcoming. Boccard N. & X. Wauthy, "Export Restraints and Horizontal Product Differentiation", Japanese Economic Review, 2002, forthcoming. Crainich D., L. Eeckhout & H. Blaichrodt, "Comorbidities in Cost Benefit Analysis of Health Care", Journal of Public Economics, 2002, forthcoming. Crainich D., "Essais sur les décisions médicales en situation de risques multiples ", Ph.D., Faculté des Sciences économiques, sociales et politiques, FUSL, 2002. de Kerchove A.M., J.P. Lambert & G. Van der Stichele, « Les aspects financiers de l’Accord de la Saint-Boniface », special issue « Lambermont, Lombard et Saint-Boniface », Administration publique, Fall 2002. Gabszewicz J. & X. Wauthy, "Quality Underprovision by a Monopolist When Quality Is Not Costly”, Economics Letters, 2002, 77, pp. 65-72. Gabszewicz J. & X. Wauthy, "The Option of Joint Purchase in Vertically Differentiated Industries", Economic Theory, 2002, forthcoming.


Lambert J.P., « L’enseignement supérieur à la croisée des chemins : régression ou vision d’avenir ? », Bulletin d'information des Facultés universitaires Saint-Louis, 55, July 2002. Wauthy X., "Research and Development, Voluntary Export Restrictions and Tariffs: a Comment", 2002, Economics Bulletin, 6, pp. 6-11. Wauthy X. & Y. ZÉNOU, "How Does Imperfect Competition in Labour Market Affect Unemployment Policies", Journal of Public Economic Theory, 2002, 4, pp. 213-233.

UNIVERSITEIT ANTWERPEN None in the context of the project.

FACULTÉS UNIVERSITAIRES CATHOLIQUES DE MONS Aït Kadi D., A. Artiba, A. & S Iassinovski, « Apport de la simulation dans l'analyse des politiques de maintenance », CIRO 2002 Conference in Marrakech 4-6 June 2002. Artiba A., V. Dhaevers & D. Duvivier, “Simulation Based Performance Measurement and Analysis: An Industrial Application”, CARS&FOF 2002, Proceedings vol. 2, ISBN 972-95194-5-5, Porto, Portugal, 3-5 July 2002, pp 427-434. Artiba A., S.E. Elmaghraby & F. Riane, “Sequencing a Hybrid Two-Stage Flowshop with Dedicated Machines”, International Journal of Production Research, 2002, vol. 40, n°17, pp. 4353-4380, ISSN 0020-7543. Artiba A., S. Iassinovski & D. Pichel, “A Strategic and Operational Tool for Production Systems Management”, 12th Mini Euro Conference, 2-5 April 2002, Brussels, Belgium. Artiba A., S. Iassinovski , F. Pirard & F. Riane, « Apport des techniques de simulation pour la gestion du réseau logistique d'entreprises multisites », JTEA 2002, Conference proceedings, p. 6, 21-23 March 2002, Sousse Nord, Tunisia. Lebon F., P. Levecq & N. Meskens, “Multivariate Analysis and Rough Sets: Two Approaches for Software Quality”, International Transactions in Operational Research, volume 7, 2002.

UNIVERSITÉ DES SCIENCES SOCIALES DE TOULOUSE Auriol E., L. Pechlivanos & G. Friebel, “Career Concerns in Teams”, Journal of Labor Economics, 2003, forthcoming. Battaglini M., R. Benabou & J. Tirole, “Self-Control in Peer Groups”, 2003, mimeo, forthcoming. Benabou R. & J. Tirole, “Self-Confidence and Personal Motivation”, Quarterly Journal of Economics, 2002, 117(3), pp. 871-915. Benabou R. & J. Tirole, “Self-Knowledge and Self-Regulation : An Economic Approach”, in The Psychology of Economic Design , vol. 1: Rationality and Well-Being, I. Brocas & J. Carillo (eds), Oxford University Press, 2003, forthcoming. Benabou R. & J. Tirole, “Willpower and Personal Rules”, 2003, mimeo, forthcoming. Friebel G. & M. Raith, “Abuse of Authority and Hierarchical Communication”, RAND Journal of Economics, 2003, forthcoming.


NATIONAL AND INTERNATIONAL CONTACTS

UNIVERSITÉ LIBRE DE BRUXELLES

Seminars Wouter Dessein (University of Chicago): Adaptive Organizations. Jean-Pierre Finance (CPU, Conference of the Presidents of French Universities) : L’autonomie des Universités: pour quel projet ? Garance Genicot (University of California, Irvine & New York University): Contract and Exploitation. Maria Alice Lahorgue (Former Vice-Recteur, Federal University of Rio Grande do Sul (Porto Alegre, Brazil)): Le système brésilien – les défis de la gestion des universités de recherche. Monica Merz (Universität Bonn): Labor Market Frictions, Capital Adjustment Cost, and Stock Prices.

Conferences not financed by the IAP Contract These two conferences were financed by our IAP contract, but were directly connected to its subject. L’enseignement – Europe et Communauté française : quels enjeux ? organized by Françoise Thys-Clément on 26 September 2002, and based on the publication of Revue Reflets et Perspectives de la vie économique, Tome XL, 2001, n° 4, De Boeck Université. Un Pôle … pourquoi ? co-organized by Françoise Thys-Clément and M. Verrept (Directeur général, Département de l’Instruction Publique de la Ville de Bruxelles) on 2 December 2002, in the framework of « Pôle universitaire européen de Bruxelles Wallonie ».

Missions Benoit Bayenet - Lyon, France : presentation on Performance et financement des universités, Journées de

l’Association française de Sciences économiques. Jean-Luc Demeulemeester The following missions weren’t financed, but they directly concerned the subject of our IAP project. - Köln, Germany presentation on Expected Return versus Chances of Success in Higher

Education (Belgian case): some new results", Workshop on Human and Social Capital - Data, Methods, Theories, University of Köln, March.

- Brussels : presentation on Les politiques européennes d ‘éducation et de formation à travers les textes : une évaluation critique, conference on L’enseignement-Europe et Communauté française : quels enjeux ?, September 26.

Mathias Dewatripont - Mons, Belgique: Université de Mons-Hainaut, Colloquium on « New Research on Corporate

Governance », March. - Toulouse, France: IDEI, Université des Sciences Sociales, research with the IAP team,

September.


- Toulouse, France: IDEI, Université des Sciences Sociales, research with the IAP team, October.

- Chicago, USA: Chicago Business School, invited to give a seminar on “Moral Hazard and Capital Structure Dynamics”, November.

- Toulouse, France: IDEI, Université des Sciences Sociales, research with the IAP team, December.

Christophe Soil - Toulouse, France: Jamboree for doctoral researchers organized by Université des

Sciences Sociales, January. Françoise Thys-Clément The following missions weren’t financed, but they directly concerned the subject of our IAP project. - Porto Alegre, Brazil: presentation on Research and Researchers Management in the

University Context, Seminar on Technology Management in Universities: from Discourse to Practice , University of Porto Alegre, July.

- Brussels : presentation on Comment l’enseignement obligatoire, et particulièrement l’enseignement secondaire, doit-il préparer ses élèves en fonction des réformes de l’enseignement supérieur en Europe ?, Colloque des Sections européennes de l’Association Francophone Internationale des directeurs d’établissements scolaires (AFIDES) on Le chef d’établissement, facilitateur et coordonnateur d’initiatives, Parlement Européen, 27-29 October.

- Lille, France : presentation on La recherche et le développement régional, Conference in Pôle universitaire européen, 22 November.

- Tokyo, Japan: Member of the Council of the United Nations University. - Administrator of the European Centre for Strategic Management of Universities (ESMU). - Member of the European Universities Association Research Working Group (EUA). - Paris, France: Member of the Scientific Council of CNRS. - Brussels: Member of the Advisory Group dealing with “Structuring the European Research

Area - Human Resources and Mobility. This group will contribute to the implementation of the 6th EU Framework Programme for Research on the basis of an increased concentration of S/T priorities and as one of the tools to achieve a true European Research Area. (European Commission – Ph. Busquin).

- Brussels: Expert in the Group Concerning the support for policy-making on research infrastructures in the European Research Area created by the European Commission with the following remit: to support a coherent and strategy-led approach to policy making on research infrastructures in Europe and to facilitate multilateral initiatives leading to a better use and development of research infrastructures.

- Denmark: Belgium expert in the RTD Evaluation Network in charge to produce structured information concerning systems, activities, methodologies, tools and evaluation results, including the use of evaluation; operational suggestion, criteria and guidelines; practical and experimental. (European Commission), 27-28 November.

- Expert in the European University Association (EUA) Project MORESS (Mapping of Research in European Social Science).

- France: Evaluating of the Laboratoire d’analyse et de techniques économiques (LATEC), Université de Bourgogne, 9 October.

Luc Wilkin None of the following missions were financed, but they directly concerned the subject of our IAP project. - Louvain-la-Neuve: presentation on Modes de gestion de l'université et politiques des

ressources humaines, Midis de la CNE-UCL, Université Catholique de Louvain.


- Athens, Greece: Member of the Standing Committee for the Social Sciences in the European Science Foundation (Strasbourg), 18-19 April.

- France: Member of the Methodology Committee of the Comité National d’Evaluation des Universités.

- Brussels: Member of the Economics Commission of the Fonds National de la Recherche Scientifique.

- Paris, France : Séminar on Enseignement supérieur, organized by Ch. Musselin & S. Mignot-Gerard, Centre de Sociologie des Organisations.

KATHOLIEKE UNIVERSITEIT LEUVEN

Missions Raymond De Bondt - Evanston, USA: Kellogg School of Management, Northwestern University, January-June

2002.

UNIVERSITÉ DE MONS-HAINAUT

Seminars Gérard Charreaux, professor at the IAE Dijon, invited to attend the colloquium on Corporate Governance held at Mons in March 2002. Eddy Wymeersch, Président of the CBF, invited to attend the colloquium on Corporate governance had at Mons in March 2002. Real Labelle, Professor at the HEC Montréal, invited to come to UMH to interact on problems on corporate governance.

Missions Toni Mpasinas - IAE Dijon, France: IAE, research on the governance, with G.Charreaux. - Strasbourg, France: colloquium of AFFI. Alain Finet - Montréal, Canada: HEC, rresearch on the changes of managers. - Strasbourg, France: colloquium of AFFI.

FACULTÉS UNIVERSITAIRES SAINT-LOUIS

Missions Jean-François Caulier - London, UK: International Workshop on Voting Power and Procedures, London School of

Economics, London (UK), august 2002. Xavier Wauthy: - Paris, France: Public Economic Theory Conference, July 2002 (PET02). Presentation:

"Ensuring quality provision in deregulated industries". - Girona, Spain: Scientific visit to University of Girona (Spain), july 2002, to start a research

project on university competition with Professor Elena Del Rey.

UNIVERSITEIT ANTWERPEN None.


FACULTÉS UNIVERSITAIRES CATHOLIQUES DE MONS

Seminars Dr. Roux was invited to present recent advances in meta-heureustics for Decision Support Systems. These results are promising and would be integrated in our research work. He is now member of CREGI. V. V. Emelyanov (Moscow State Bauman University of Technology): Process Modeling Methods for Simulation.

Lectures S.E. Elmaghraby (North Carolina University): lectures on The Theory of Activity Networks. Lecture 1: Introduction to the field of activity networks. The representation of projects. Temporal analysis: the critical path and critical activities in deterministic and stochastic conditions. The “Chance Constrained” approach. Node slacks and activity floats, and the role played by the floats in activity scheduling. Lecture 2: Exact and heuristic treatments of the “Net Present Worth Problem” and the “Resource Constrained Project Scheduling Problem (RCPSP)” under deterministic conditions. The special case of unit availability of the resources. Lecture 3: The stochastic view: a new paradigm for the management of resources to achieve a stated economic objective. The fallacy of averages. A dynamic programming approach to the “state space” based on the concepts of uniformly directed cut sets. An introduction to Markov programming.

Missions Abdelhakim Artiba - Paris, France: Bermudes meeting on 6th June 2002. - Marseille, France: Ecole Polytechnique, from 12th to 19th December 2002. David Bardey - Ajaccio, France: Seminar on Applied Econometrics Association, Santé et Régionalisation,

from 9th to 11th October 2002. Louis Eeckhoudt - Toulouse, France: Université des Sciences Sociales, from 12th to 23rd May 2002. - Zurich, Switzerland: University of Zurich from 4th to 7th July 2002. - Coaen, France: Université de Caen et INRA de Rennes (France) from 31st July to 5th

August 2002. Fouad Riane - Paris, France: Bermudes meeting on 6th June 2002.

UNIVERSITÉ DES SCIENCES SOCIALES DE TOULOUSE None. An IAP workshop will be held in Toulouse in January 2004.


EQUIPMENT

UNIVERSITÉ LIBRE DE BRUXELLES 8 computers Intel Pentium III. 1 hard disk 15 GB 1 printer Hewlett Packard Laserjet 4100M. Contrat de maintenance Software HP DDS-4-Data Cartridge 40 GB Installation et configuration d’un serveur Windows 2000 1 Monitor SONY 17’’ white ref. Sony SDH-S71

KATHOLIEKE UNIVERSITEIT LEUVEN 1 computer Intel Pentium.

UNIVERSITÉ DE MONS-HAINAUT 2 computers Intel Pentium.

FACULTÉS UNIVERSITAIRES SAINT-LOUIS 1 Laptop Apple I-book 700, with an external TFT screen 17'.

UNIVERSITEIT ANTWERPEN None.

FACULTÉS UNIVERSITAIRES CATHOLIQUES DE MONS 2 computers Pentium 4 2.4 GHz/512k 1 printer HP Deskjet 3820 4 USB cables 50 CDR 80’ 1 pack Linux Suse 8.1 version professionnelle 7 licences Scientific Word 4.1 4 licences Visio Professionnel 2002 1 PC Dell Pentium 4 1.8GHz/512k

UNIVERSITÉ DES SCIENCES SOCIALES DE TOULOUSE None.


ANNEXES

1. List of Personnel: Université libre de Bruxelles 2. List of personnel: Katholieke Universiteit Leuven 3. List of personnel: Université de Mons-Hainaut 4. List of personnel: Facultés Universitaires Saint-Louis 5. List of Personnel: Universiteit Antwerpen 6. List of Personnel: Facultés Universitaires Catholiques de Mons 7. List of Personnel: Université des Sciences Sociales de Toulouse

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