producer services comparative advantage and international trade patterns we unite the theories of factor abundance and monopolistic competition to explore the general equilibrium relations between trade in producer services economies of scale and factor markets in our model two final goods are produced using capital labor and a variety of differentiated producer services that are produced under increasing returns to scale we analyze the implications for comparative advantage and trade in goods between two countries that differ in factor endowments and in technology of service provision moreover we use the concept of the integrated world equilibrium to investigate trade in goods and services also when services require foreign direct investments

migrants in a guest worker system a utility maximizing approach this paper examines the behavior of utility maximizing migrants in a system of guest worker migration their pattern of leisure and commodity consumption at home and abroad is analysed and related

constructing bounds on per capita income differentials across countries the results of purchasing power parity ppp based comparisons of income across countries can be quite sensitive to the choice of index number formula tighter bounds on per capita income differentials can be constructed either by assuming homothetic preferences or by estimating a demand system both approaches are used to construct bounds on per capita income differentials across the oecd countries the paper concludes by discussing the strengths and weaknesses of each approach

note on international differences in service prices and some related empirical phenomena abstract this paper provides an alternative explanation of some important stylized facts of development including the phenomenon of international differences in service prices in terms of differences in factor endowments between countries in so doing this paper advances a general equilibrium model of a small open economy which features non traded goods as well as demand factors thereby incorporating important economic aspects which were neglected by many others an interesting finding which emerges from this exercise is that many puzzles in development can be explained simply in terms of differences in factor endowments between countries

engaging private actors in transport planning to achieve future emission targets upscaling the climate and economic research in organisations cero process to regional perspectives sustainable transport analyses are traditionally carried out from two fundamentally different perspectives a internal travel analysis at an organisational level often as part of corporate enviro

an exploration of the changes in the international comparison program s global economic landscape abstract the purchasing power parity ppp rates from the 2011 round of the international comparison program icp imply some dramatic revisions to price levels and real incomes across the world as compared to the prior 2005 round this has important implications for many cross country comparisons including measures of poverty and inequality without presuming that either round is better methodologically the paper tries to help the community of icp users better understand the economic factors underlying the estimated changes in price levels across countries differences in domestic inflation rates have played a role as expected two other factors are identified the excess sensitivity to changes in market exchange rates suggests that the ppps may put higher weight on internationally traded goods than do domestic deflators additionally faster growing countries have seen a steeper rise in their ppp relative to market exchange rates this can be explained by a tendency for wage increases in growing economies to lead to a higher price level together these factors account for over 70 of the variance in ppp changes even ignoring methodological changes however an independent downward drift in price levels is also evident concentrated in the icp s asia region a possible explanation lies in the asia region s greater success relative to other regions in removing urban bias in the price surveys

a framework for strategic sustainable development the purpose of this paper is to give a comprehensive and cohesive description of the most recent version of the framework for strategic sustainable development fssd and also to describe and discuss the overall method for developing the fssd elaborate on the general rational for and general benefits of a framework of this type and validate benefits of the fssd through examples of its application the purpose is also to point to pertinent future work in preparation of this paper we have reviewed previous publications and other documents related to the fssd and reflected on the 25 year learning process between scientists and practitioners we conclude that the fssd has proven to aid organizations in thoroughly understanding and putting themselves in context of the global sustainability challenge and to move themselves strategically towards sustainability i e to stepwise reduce their negative impacts on ecological and social systems at large while strengthening the own organization through capturing of innovation opportunities including new business models exploration of new markets and winning of new market shares and through reduced risks and operation costs specifically we conclude that the fssd aids more effective management of system boundaries and trade offs makes it possible to model and assess sustainable potentials for various materials and practices before investments are made and offers the possibility for more effective collaboration across disciplines and sectors regions value chains and stakeholder groups we also conclude that the fssd makes it possible to prevent damages even from yet unknown problems and not the least to guide selection development and combination of supplementary methods tools and other forms of support which makes it possible to increase their utility for strategic sustainable development finally we have shown that the fssd is useful for structuring transdisciplinary academic education and research several examples of ongoing fssd related research as well as ideas for future work are given

stock market development and cross country differences in relative prices abstract we document a positive correlation between stock market capitalization and price levels wages within the group of countries with poorly developed stock markets and a negative correlation between these two variables within the group of countries with more developed stock markets this paper argues that there is a causal relationship behind these correlations stock markets initially stimulate growth pushing the demand for nontradables and increasing prices and wages stock markets also promote a shift toward more capital intensive technologies in the tradable sector increasing the migration of workers to services and eventually putting downward pressure on wages and prices

trade in producer services a heckscher ohlin approach trade in services has become topical but little theory has been developed this paper assumes that one commodity and the services of capital are tradable and examines the traditional trade results service trade can produce the same equilibrium as commodity trade but substantial differences exist depending on whether the tradable commodity is capital or labor intensive tariffs on either commodity have the same commodity price effects and will always increase the welfare of the immobile factor labor factor income taxes can also affect trade patterns when both goods and capital services are tradable there is an indeterminacy in trade patterns and tariffs while reducing commodity trade may not reduce welfare

are international monetary fund quotas unfavorable to less developed countries a normative historical analysis abstract the international monetary fund criterion of economic size receives normative justification as the determinant of quotas but size must be represented by appropriately measured income reserves and trade the fund s income measure is deficient because it uses exchange rates rather than purchasing power parities to convert figures to a common currency if a favourable quota disparity is defined as an actual quota above the quota predicted by economic size less developed countries had adverse disparities early in imf history but increasingly favorable disparities over time given the inertia of relative quotas members would do well to maximize their initial quota

energy backcasting a proposed method of policy analysis abstract there have recently emerged a number of analyses which suggest that there exists a large potential for soft energy policy paths it is difficult to illustrate this argument using conventional forecasting techniques therefore these analyses tend to use an alternative method called energy backcasting this involves setting policy goals and then determining how those goals could be met as yet however little attention has been paid to the theoretical aspects of backcasting techniques in this article a specific backcasting method is proposed which it is argued allows consideration of many factors obscured in traditional energy supply and demand forecasts

an international comparison of prices and exchange rates a new test of purchasing power parity abstract this paper introduces a new approach based on divisia index numbers to test ppp with both short run and long run data for all major currencies simultaneously the short run results indicate that the predictions of ppp do not hold up at all well on the other hand however the long run data are quite consistent with the ppp hypothesis the results also identify five years as a broad measure of the length of the long run insolar as ppp is concerned

a model of real national price levels this paper is concerned with the price level in the sense used in a recent paper by kravis and lipsey entitled toward an explanation of national price levels 15 the price level of a particular country relative to the base country is defined as the ratio of the purchasingpower parity ppp to the exchange rate it has become generally recognized that the ppp need not equal the exchange rate even in long run free trade equilibrium and the explanation of the discrepancy is a natural subject of scientific interest there is a voluminous literature on temporary deviations of ppp from the exchange rate that are explained in terms of monetary disturbances and random shocks there is a much smaller literature on long run or structural factors that explain why ppp does not coincide with the exchange rate the present paper falls in the second category we shall assume the economy is in monetary and balance of payments equilibrium the term price level as used in kravis and lipsey 15 may be confusing because that term usually refers to the price of goods in terms of money the term real price level seems more appropriate in that the concept refers to a ratio of two prices the real price level is what the tourist has in mind when he goes to a poor country and remarks my but prices are low here a major feature of the existing literature on long run or structural explanations of the real price level is the emphasis on the distinction between tradables and nontradables it is typically assumed that the law of one price holds for tradables but not for nontradables which are dominated by services the productivity differential model as stated by balassa 2 for example assumes that international differences in labor productivity are greater in commodities tradables than in services it follows that services will be relatively cheap in poor low productivity countries and that consequently the real price level relative to a base country will rise with per capita income recently bhagwati 5 has shown that the low relative price of services in poor countries can be explained by a capital labor model without recourse to the assumption that production functions differ internationally in bhagwati s model rich countries export capital intensive commodities and poor countries export labor intensive commodities but even though commodity prices are equalized through trade complete specialization prevents factor prices from being equalized since services are assumed to be labor intensive relative to any commodity they are cheaper in poor countries than in rich countries

on economic growth and domestic saving in india nomic reforms since the 1980s and comprehensive reforms with a para digm shift in the stance of macroeconomic policies since the beginning of the 1990s the pre reform economy has been characterised by low growth for a prolonged period until the 1970s the numerically large shares and implied heavy dominance of agriculture and industry in aggregate output have been the major sources of regular disruptions to economic growth and time inconsistencies in the savings plans of households until services accelerated as a sector providing resilience smoothing the amplitudes of economic fluctuations and virtually controlling the growth impulse of the economy since the 1990s the growth of the agriculture and services sectors had been quite costly in terms of resources in the initial stages of development in india in the 1950s and the 1960s since these sectors absorbed disproportionately large chunks of scarce capital this study examines economic growth and domestic saving in india and draws some policy lessons for a similar set of developing economies the analysis is carried out using data taken from various issues of the reserve bank of india publication handbook of statistics on the indian economy and the central statistical organisation publication national accounts statistics

alternative measures of output in global economic environmental models purchasing power parity or market exchange rates the study examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models it compares three approaches mer accounts world price ppp accounts and superlative ppp accounts it concludes that the best approach is to use superlative ppp accounts this approach uses cross sectional ppp measures for relative incomes and outputs and relies on national accounts price and quantity indexes for time series extrapolations under ideal circumstances this approach will provide accurate and consistent cross sections and time series this approach will require relatively little change in model structure from ones using mer accounts the main concern would be to ensure that behavioral and reduced form relationships in the models have been correctly estimated

why are services cheaper in the poor countries in their important work on international comparisons of national incomes and of comparative price structure kravis heston and summers i982 p 8 have noted that services are much cheaper in the relative price structure of a typical poor country than in that of a rich country this phenonomen has been documented now fairly systematically by the data gathered under their guiding hand of the united nations international comparison icp which covers 34 countries table i reproduced from their work i982 and fig i based on rows 3 and ii 13 indeed show this tendencyfor the relationship between relative service prices and real per capita gdp in this kravis heston summers 34 country 6 group sample the tendency is strongly evident except for the intermediate groups iii and iv

productivity bias hypothesis and the purchasing power parity a review article abstract productivity differentials among countries are said to be one of the major sources that contribute to the deviation of the purchasing power parity based exchange rate from the equilibrium rate hence the productivity bias hypothesis prior to last review article on the productivity bias hypothesis in 1976 almost all studies relied upon cross sectional regression analysis since then two groups of empirical studies have emerged while one group has employed time series data the other one has used panel data these two later groups have provided more support to the hypothesis than the earlier cross sectional studies this paper reviews and criticizes each group separately and provides tables that summarize main features of each study

tariffs transfers and the real exchange rate the deviation of exchange rates from purchasing power parities ppp s has recently become the subject of theoretical and empirical attention the massive body of data collected and presented by the international comparisons project icp under the direction of kravis heston and summers khs 9 11 has permitted new empirical investigation of an old topic and has stimulated the construction of theoretical models to account for observed patterns in the icp project and the related literature the focus is on the ratio of the exchange rate to the ppp the concept of this ratio is closely related to the concept of the real exchange rate which is defined as the actual exchange rate multiplied by the ratio of an index of foreign prices to an index of domestic prices the term real exchange rate a term widely employed in both economics journals and in the financial press is frequently used to describe changes over time in a particular country and its calculation requires only time totime changes in exchange rates and price indexes the ratio of the exchange rate to the ppp on the other hand refers to a comparison of the levels of the exchange rate and the ppp at a moment in time and its calculation requires the availability of a ppp survey of the kind performed by the icp the purpose of the present paper is to analyze the effects of tariffs and transfers on the real exchange rate of a small country in this theoretical endeavor we shall hold constant the prices in foreign countries in this context it can easily be seen that the real exchange rate and the ratio of the exchange rate to the ppp are identical concepts provided that the expenditure weights used in the index of domestic prices are the same as those used in the calculation of the ppp

a formalisation and test of the factor productivity explanation of international differences in service prices this paper extends and integrates previous models of the determinants of international differences in the prices of services relative to tradable commodities the authors provide a model capable of identifying the effects of differences in total factor productivity on service price differences separately from the effects of factor endowment differences they propose a method for measuring these factor productivity difference effects and apply this to a sample of sixty countries in 1980 the authors results provide support both for the endowment difference and productivity difference explanations suggesting that in this context at least the two hypotheses are complements rather than competitors copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

structural determinants of real exchange rates and national price levels some empirical evidence contrary to the long held notion of purchasing power parity ppp economists have found systematic evidence that the general level of prices across countries at a point in time varies dramatically irving b kravis alan w heston and robert summers 1982 for example report that some countries national price levels are no more than one third the u s price level extensions of this work show that such departures from ppp have persisted for decades recently efforts have been made to explain systematically these persistent or structural departures from ppp pioneering work by kravis and robert e lipsey 1983 1987 1988 has demonstrated that a positive correlation between the price level and real per capita gross domestic product is robust across numerous cross sectional specifications for instance using data from kravis et al 1982 table 6 12 87 percent of the variation in national price levels pl of 21 countries in 1975 is explained by per capita gdp y and a constant

real exchange rates ppp and the relative price of nontraded goods the purchasing power parity hypothesis ppp states that nominal exchange rates move with differences in relative prices between economies the theory has received considerable attention in the economic literature since cassell 6 and is the foundation of many long run theoretical hypotheses in international finance yet its empirical validity remains in question many tests of ppp focus on the stationarity of the real exchange rate the nominal exchange rate adjusted for changes in price levels between economies if domestic and foreign price levels and the nominal exchange rate are integrated then cointegration between these variables implies the existence of both a long run equilibrium relationship and ppp the residual the real exchange rate then follows a stationary process the paper uses the multivariate cointegration methodology of johansen 16 and johansen and juselius 17 18 to examine the source of real exchange rate nonstationarity is the nonstationarity due to shifts in the domestic and foreign price of nontradeables or productivity differentials between traded and nontraded sectors or is the nonstationarity a possible outcome of difficulties in intercountry comparisons of prices movements associated with construction of these price indices most research finds the real exchange rate follows a nonstationary process due to the presence of a unit root 8 12 1 9 19 27 however the existence of a variable trend in the real exchange rate does not imply the absence of a long run relationship between relative prices levels and nominal exchange rates for two reasons first a long run relationship between price levels and nominal exchange rates may exist but not the one for one relationship implicit in the calculation of real exchange rates due to measurement differences in the construction of price indices between economies second ppp violations may occur due to the presence of permanent productivity innovations which affect the relative price of nontradeables if these shocks are not represented by measurable variables a cointegrating relationship will not exist the paper constructs traded and nontraded gdp price indices and productivity rates for 14 oecd economies and tests 1 if the variable trend the nonstationary process in the real exchange rate is due to permanent innovations in relative price of domestic and foreign nontradeables 2 if long run ppp violations are due to permanent movements in the relative price of nontradeables 3 if the nonstationarity in the real exchange rate is due to permanent innovations in domestic and foreign productivity differentials between the traded and nontraded sectors 4 if the variable trend in the relative price of nontradeables is due to permanent innovations in productivity between sectors lastly the paper constructs a cointegrating error correction model

purchasing power parities and phase iv of the international comparison project do they lead to real estimates of gdp and its components abstract this paper analyzes results from phase iv of the united nations international comparison project icp it examines the icp s estimates of real gdp and per capita gdp for 60 countries along with the estimates of detailed components of gdp for india and sri lanka as compared with some industrial countries we conclude that although detailed results are often illuminating levels of per capita gdp tend to be incorrect a systematic bias seems to be present in the icp leading to a strong overvaluation of developing countries gdp icp results therefore as judged also by the statistical commission of the united nations cannot be accepted for policy purposes at the world level

economic policy and the relative price of services in ldcs abstract low relative prices of nontraded services are a feature of developing economies recent explanations focus on structural issues such as factor endowments and returns to scale this paper argues that economic policy may also contribute to low ldc service prices in a three sector model with wage differentials financial repression unambiguously depresses both per capita real income and the price of nontraded goods in contrast to most current models tariffs and production subsidies can also depress nontraded goods prices

restaurant prices and the mexican peso 1 introduction balance of payment concerns facing latin american economies have caused international currency valuations to receive ongoing scrutiny throughout the past decade and a half given its importance to regional economic performance border areas between countries such as the united states and mexico canada and the united states colombia and venezuela and ecuador and colombia also monitor exchange rate developments very closely typically one of two types of monitoring tools have been utilized for formal econometric work in this branch of international economics nominal purchasing power parity ppp indices and trade weighted real exchange rates both of the latter rely on easily obtained macroeconomic data a widely cited exception to those macroeconomic data approaches is published quarterly by the economist magazine utilizing hamburger prices from a well known restaurant corporation with worldwide franchises the research at hand develops a similar tool utilizing a variety of international restaurant franchises with operations in el paso texas and ciudad juarez chihuahua on the border between the united states and mexico more than 70 signature menu item prices are sampled every month in order to develop an exchange rate measure based on the so called law of one price hypothesis parametric and nonparametric statistical testing is then conducted to examine whether the border restaurant price ratio bears any relationship to the exchange rate value of the peso over the 36 month sample period for which data are available july 1997 june 2000 section 2 of the paper includes a literature review data and methodology are described in section 3 section 4 provides an empirical analysis of the results concluding remarks and suggestions for future research are included in section 5 2 literature review exchange rate monitoring has become a staple of international corporate and public policy analysis in the two plus decade period subsequent to the demise of the bretton woods fixed exchange rate system a common approach is the measurement of trade weighted real exchange rates designed for country risk analysis and balance of payments pressure gauging such indexes will generally indicate overvaluation with respect to a preselected base with values in excess of 100 and undervaluation with values below 100 batten and belongia 1986 fullerton 1989 another practice is the calculation of theoretical nominal exchange rates under a ppp approach beltran del rfo 1999 the latter are often popular among financial market analysts because they are defined in the actual units in which trades are conducted international restaurant franchise menu pricing has given rise to a new empirical variant on the law of one price in recent years the economist magazine runs a periodic comparison of hamburger prices to nominal exchange rates for a group of 20 plus countries the economist 1998 hamburger prices in local currency units are divided by a corresponding dollar price whenever the resulting price ratio is higher than the exchange rate it implies that the local currency is overvalued when the ratio is below the prevailing exchange rate it implies the opposite the popularity of this readily identifiable index has spawned several subsequent studies that study both geographic and time series characteristics and implications of the approach while cumby 1996 and ong 1997 find fairly good evidence in favor of the hamburger index pakko and pollard 1996 conclude that nontradability and institutional factors cause it to perform unreliably a growing number of studies examine the ppp principle using data that involve more than one product and take into account geographic factors such as distance engel and rogers 1996 parsley and wei 2000 in one such effort james gerber sampled individual menu items from seven restaurants in san diego and tijuana regents of the university of california 1997

majoritarian electoral systems and consumer power price level evidence from the oecd countries a straightforward extension of the standard stigler peltzman model of regulation coupled with a taagepera shugart analysis of electoral system effects suggests a that the greater seat vote elasticities of majoritarian electoral systems will tilt policy in favor of consumers while propor tional systems should strengthen producers and b that the pro con sumer bias of majoritarian systems should be manifested in systemati cally lower prices empirical tests controlling for the structural determi nants of national price levels estab lished in the earlier law of one price literature establish majoritarian elec toral systems as a significant and robust predictor lowering national price levels in the mean oecd coun

backcasting and econometrics for sustainable planning information technology and individual preferences of travel this paper develops a framework building on backcasting from sustainable outcomes or more sustainable outcomes in combination with econometric modelling to arrive at the outcomes to reach lon

alternative measures of output in global economic environmental models purchasing power parity or market exchange rates comment abstract nordhaus nordhaus w 2006 alternative measures of output in global economic environmental models purchasing power parity or market exchange rates energy economics doi 10 1016 j eneco 2006 02 003 examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models he concludes that the best approach is to use ppp measures for relative incomes and outputs and national accounts prices and quantity indexes for time series extrapolations in this comment we argue and show that international real income comparisons based on ppp measures overstate the real incomes of poorer countries and underestimate the real incomes of richer regions this is the case because the ppp approach fails to account for the differences in various non traded attributes such as availability of public goods and the location attached to the final sale of the goods being compared additionally using a teleporting consumer model we show that the use of real exchange rates to convert real quantities and the use of market exchange rates to convert nominal incomes preserve real income rankings across nations and this approach is consistent with standard economic theory

financial repression and the relative price of non traded goods abstract the financial structure of ldcs affects differences in relative prices among nations we show empirically that financial repression depresses the relative price of non traded goods

nontradable goods prices and per caita income an application to regional korean data pooled time series cross sectional regional data for korea over the period 1985 1991 are used to investigate points which emerged from the united nations international comparison project the results based on a regional analysis are opposite to those of the icp the prices of services do not increase more rapidly in fast growing than in slow growing regions this regional analysis provides constradictory evidence to the widely recognized stylized fact that the prices of nontradables increase with real per capital income by a larger margin than the prices of tradables increase

non sequential consumer search and the consequences of a deregulation of trading hours abstract this paper analyzes the consequences of a liberalization of shopping hours in a market where consumers collect price information through non sequential search it is first shown that with as well as without restrictions on search time an equilibrium price distribution and possibly a single price equilibrium with the monopoly price exist then it is demonstrated that a liberalization is either ineffective or leads to price reductions increases in consumer welfare and larger market shares of more efficient firms

a model of trade and growth with a non traded service sector this paper incorporates a nontraded service sector into an otherwise neoclassical model of trade and growth the author s model can explain why the relative price of services the expenditure share of services and the employment share of the service sector all tend to rise with the level of per capita income which is determined in the long run by the ratio of the saving rate to the rate of labor growth and the level of labor augmenting technical progress the author also finds that a rich country with a high level of technical progress ceteris paribus has comparative advantage in producing capital intensive goods

equilibrium exchange rates in transition economies taking stock of the issues in this paper we present an overview of a number of issues relating to the equilibrium exchange rates of transition economies of the former soviet bloc in particular we present a critical overview of the various methods available for calculating equilibrium exchange rates and discuss how useful they are likely to be for the transition economies amongst our findings is the result that the trend appreciation usually observed for the exchange rates of these economies is affected by factors other than the usual balassa samuelson effect such as the behaviour of the real exchange rate of the open sector and regulated prices we then consider three main sources of uncertainty relating to the implementation of an equilibrium exchange rate model namely differences in the theoretical underpinnings differences in the econometric estimation techniques and differences relating to the time series and cross sectional dimensions of the data the ensuing three dimensional space of real misalignments is probably a useful tool in determining the direction of a possible misalignment rather than its precise size copyright blackwell publishers ltd 2006

on the efficiency of the first price auction we provide a natural setting in privatizations in which the equilibrium of the first price auction gives greater expected surplus than any equilibrium of the open ascending auction