policy rivalry among industrial states what can we learn from models of strategic trade policy the economic theory of international trade has changed dramatically over the last decade by admitting into its mainstream a body of literature that focuses on the implications of monopolistic and oligopolistic elements in international markets by applying the tools of the new industrial organization in an international context two new classes of models have emerged models of intra industry trade and models of strategic trade policy the policy implications of models of strategic trade policy were quite disturbing for the economics profession since these models demonstrated that the classical harmony between national and cosmopolitan welfare maximization does not exist if one assumes opportunities for strategic manipulation of oligopolistic international industries this article reviews two prominent models of strategic trade policy the brander spencer model and the krugman model and relates them to more familiar earlier concepts such as stackelberg s asymmetrical duopoly solution and the venerable infant industry argument for government intervention the primary purpose of this article however is to provide a synopsis of the large literature addressing the question of whether models of strategic trade policy can give guidance for government policy

stable matchings and rematching proof equilibria in a two sided matching market abstract in this paper we introduce the notion of a rematching proof equilibrium for a two sided matching market to resolve roth s open question what kind of equilibria of the game induced by any stable mechanism with respect to misreported profiles produce matchings that are stable with respect to the true profile we show that the outcome of a rematching proof equilibrium is stable with respect to the true profile even though the equilibrium profile may contain misreported preferences we also show that a rematching proof equilibrium exists moreover the nash equilibria in roth j econ theory34 1984 383 387 are shown to be rematching proof equilibria journal of economic literature classification numbers c78 d71

absorbing a windfall of foreign exchange dutch disease dynamics abstract the permanent income rule is seldom the optimal response to a windfall of foreign exchange such as that from a resource discovery absorptive capacity constraints require domestic investment and investment in structures requires non traded inputs the supply of which is constrained by the initial capital stock this particularly when combined with intra sectoral capital immobility delays adjustment and creates short run dutch disease symptoms as the real exchange rate sharply appreciates and overshoots its long run value optimal revenue management requires investing in the domestic non traded goods sector and a slow build up of consumption accumulation of foreign assets adjusts to accommodate the time paths of domestic consumption and investment

towards a knowledge based theory of the geographical cluster co located firms within related industries enhance the ability to create knowledge by variation and a deepened division of labour the interdependent development between economic activities and local institutions make the cluster attractive to some industries and hostile to others the very reasons why cognitive distance might be small within the cluster tend to make cognitive distance great between clusters and make interfirm co operation across bodies of knowledge more costly the additional value created when clustering may justify the additional cost copyright 2001 by oxford university press

did the invisible hand need a regulatory glove to develop a green thumb some historical perspective on market incentives win win innovations and the porter hypothesis the idea that properly designed environmental regulations can improve a firm s competitiveness while simultaneously contributing to a cleaner environment through the development of so called win win innovations i e that reduce environmental damage while simultaneously increasing profits is usually credited to porter 1991 numerous studies have since attempted to assess the validity of the concept with mixed results this paper contributes to this debate by surveying a nearly forgotten body of literature written in the late nineteenth and early twentieth century that discussed the impact of market incentives on the development of valuable by products out of industrial waste based on the opinions held by several industrial chemists engineers technical journalists and economists the development of win win manufacturing practices seems to have been primarily the result of the profit motive although actual or potential legal actions based on private property rights and or government regulations occasionally triggered this process after reviewing some important historical writings on the latter issue a suggestion is made that perhaps the best way to craft well designed environmental regulations is to return to a private property rights approach to mitigating pollution problems whenever possible

the role of unions in hiring procedures for job markets this paper studies simple hiring procedures for job markets we show that when agents act strategically only individually rational outcomes should be expected moreover if agents can form unions thereby gaining the possibility to commit on the decision to be chosen only stable allocations are implemented

competitiveness of regions from an evolutionary perspective boschma r a 2004 competitiveness of regions from an evolutionary perspective regional studies38 993 1006 do regions compete as firms do how does one deal with the fact that regions unlike organizations are entities that do not act does it make sense to talk about the ability of regions to generate new variety this paper aims to address these questions from an evolutionary perspective it is meaningful to talk about regional competitiveness when the region affects the performances of local firms to a considerable degree this is especially true when the competitiveness of a region depends on intangible non tradable assets based on a knowledge and competence base embedded in a particular institutional setting that are reproduced and modified through the actions and repeated interactions of actors although regions are increasingly becoming collective players actively responding to an increasing exposure to extra regional competition the paper explains why there are serious limits in enhancin

green electricity market development lessons from europe and the us this study compares the development and implementation of green electricity policies in germany the netherlands sweden and the united states a set of countries applying a range of policy instruments to encourage electricity from renewable energy sources a general tendency is identified that policies shift emphasis from r d stimulation towards dissemination and market application of renewable energy technologies we argue that in light of the long term nature of policy goals on energy security mitigation of climate change and environmental protection the applied range of policy instruments may be lacking in providing incentives for the long term development of new technologies clarifying policy objectives would allow careful selection of policy instruments including support for r d improved capacity building for policy implementation is also important

three decades of italian comparative advantages he structure of italian exports its characteristics its changes over time its causes and implications in terms of income and growth employment and fragility with respect to domestic and international shocks has been the issue around which at least three generations of italian economists have discussed and disagreed over the last 30 years if one has to attribute to one single cause the origin of this multi faceted debate that very cause would be the perplexity associated with the evidence of italy being on the one hand a large industrialised country with per capita income comparable to the top high income oecd members world bank 2004 and on the other hand being characterised by an export composition where traditional low skilled labour intensive sectors oecd 2001 and peneder 2003 such as textiles wearing apparel leather products furniture and footwear still play a relevant role this anomaly in the italian trade structure with respect to one of its fellow members of the g7 and its high level of persistence is what makes of italy a case in the international trading system this paper describes the primary feature giving rise to this debate the italian export composition and its evolution over time the analysis makes use of the revealed comparative advantage rca index associated with the name of bela balassa and through non parametric statistical techniques estimates the empirical the author is very grateful to miur prin pie 2003 and jetro for the financial support and to giancarlo spagnolo for his encouragement discussions with matteo bugamelli giuliano conti davide castellani sergio de nardis paolo guerrieri fabrizio onida and lucia tajoli are gratefully acknowledged the author thanks riccardo faini for sharing his work on the topic and lucia piscitello for making her districts taxonomy available he also benefited from the comments of two anonymous referees that largely influenced the restructuring of the paper many of the arguments of this paper come from the inspiring discussions the author had over the years with massimo tamberi all remaining errors and omissions are the author s own responsibility the data sets and the rscript used in the paper can be downloaded from the webpage http www economiamc org debenedictis

maximal manipulation of envy free solutions in economies with indivisible goods and money abstract we consider the problem of the fair allocation of indivisible goods and money with non quasi linear preferences the purpose of the present study is to examine strategic manipulation under envy free solutions we show that under a certain domain richness condition each individual obtains the welfare level of his optimal envy free allocation by maximally manipulating the solutions this maximal manipulation theorem is helpful in analyzing the set of nash equilibrium allocations in the direct revelation games associated with a given envy free solution if an envy free solution satisfies a mild condition the set of nash equilibrium allocations in its associated direct revelation game coincides with that of envy free allocations

the dutch disease a disease after all many third world oil producers are encountering serious problems in building up a diversified export base while west european oil and gas producers netherlands united kingdom are suffering a decline in their traded goods manufacturing sector induced by real wage pressures it is becoming increasingly clear that high but temporary oil revenues may be somewhat ora mixed blessing the quip of the economist notwithstanding the mechanism behind this unbalance is clear enough part of the oil revenues is spent on non traded goods which leads to a real appreciation i e a rise in the relative price of non traded goods in terms of traded goods this in turn draws resources out of the non oil traded sector into the non traded goods producing sector corden and neary 1982 van wijnbergen 1980 one may say that this is an efficient response to the increase in income from oil production the united kingdom mexico egypt simply should move into oil derived industries and non traded goods and forget about their manufacturing sector until oil reserves are exhausted however many developing countries are hesitant to take this advice after all the post world war ii success stories in economic development involve without exception countries that promoted their traded goods sector aggressively moreover it is a well established stylised fact that technological progress is faster in the traded non sheltered sectors of an economy than in the non traded sector balassa 1964 is an early reference considering the hypothesis that technological progress rather than taking place exogenously with the passage of time is a function of accumulated experience the concern of countries like egypt mexico or indonesia is much easier to understand since solow 1957 and denison 1962 it is known that capital accumulation explain only a small part of economic growth if most of economic growth is caused by learning by doing induced technologica

bounded rationality and tacit knowledge in the organizational capabilities approach an assessment and a re evaluation the famous three chapters in nelson and winter s an evolutionary theory of economic change 1982 that focus on firm routines and capabilities are often taken to be solidly founded on an assumption of bounded rationality i argue that in actuality bounded rationality plays a rather limited role in nelson and winter 1982 that the very different assumption of tacit knowledge is much more central and that the links between bounded rationality and routines capabilities are not clear i then argue that the absence in nelson and winter of a clear methodological individualist foundation for notions such as routines capabilities competencies etc has resulted in certain explanatory difficulties in the modern organizational capabilities approach that has taken so much inspiration from their work copyright 2003 oxford university press

on the effectiveness of capital controls the experience of colombia during the 1990s abstract this paper analyzes the effectiveness of capital controls in colombia the evidence presented points towards a relative inability of the measures adopted to reduce the level of capital inflows nonetheless the evidence suggests that non remunerated deposits have been successful in inducing a recomposition of foreign liabilities in favor of long term maturities it is likely that this is a positive result as it has made the country less vulnerable to a reversal in capital flows in this sense controls may be viewed as an effective way of internalizing the negative externality imposed by short term maturities

cursed by resources or institutions natural resource abundant countries constitute both growth losers and growth winners and the main difference between the success cases and the cases of failure lays in the quality of institutions with grabber friendly institutions more natural resources push aggregate income down while with producer friendly institutions more natural resources increase income such a theory finds strong support in data a key question we also discuss is if resources in addition alter the quality of institutions when that is the case countries with bad institutions suffer a double resource curse as the deterioration of institutions strenghtens the negative effect of more natural resources

stages of diversification this paper studies the evolution of sectoral concentration in relation to the level of per capita income we show that various measures of sectoral concentration follow a u shaped pattern across a wide variety of data sources countries first diversify in the sense that economic activity is spread more equally across sectors but there exists relatively late in the development process a point at which they start specializing again we discuss this finding in light of existing theories of trade and growth which generally predict a monotonic relationship between income and diversification

behind methodological individualism methodological individualism has become a more fashionable slogan for economistsin recent years in specific terms we are being urged to accept a doctrine within whichall explanations of social phenomena have to be couched in terms of statements aboutindividuals however the term has a wide and sometimes ambiguous usage and is beingemployed as a packaging for all kinds of methodological and theoretical prescriptions forexample it has been regarded as a commandment that thou shalt where possible placemacroeconomic statements on firm microeconomic foundations e g blaug 1980 or aninjunction against reckless aggregation particularly in regard to welfare criteria orsocial welfare functions e g kirzner 1980 littlechild 1978 or as an inspiration forrecent theoretical developments in economics with pro market policy conclusions e g furubotn and pejovich 1974 one of the further problems in discussing this topic is that often the term methodo logical individualism carries an ideological charge indeed by both advocates and itsopponents it is too frequently confused with individualism of a political variety however the connection between political and methodological individualism is merely assumed bythese supporters or critics or supported by cursory argument it is never demonstratedwith any rigour although there is a lack of uniformity in the use of the label it is argued here that the keyelement in the classic statements of methodological individualism is a refusal to examinethe institutional or other forces which are involved in the moulding of individual pref erences and purposes we are thus confronted with a remarkable optimism about thepossibility of explanation of social phenomena in terms of individuals but an extremereluctance to give even partial explanations of individual behaviour in social or evenpsychological terms this refusal is both dogmatic and as will be argued below unaccept able on analytical grounds this reduction of explanation and thereby causality solely to individuals has a furtherimplication the explanation of social phenomena proceeds even by a circuitous route

the behavior of manufacturing firms under the new economic model abstract a study of medium and large domestic manufacturing firms in latin america shows that the region s new economic model has led to significant transformations in firm behavior the study results may not be generalizable however since the sample is small and not statistically representative nevertheless they provide insights into the behavior of the most modernizing domestic manufacturing firms and into the role of policy aimed at encouraging firms to upgrade

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

the division of labor need not imply regional specialization the regional specialization of economic activities is generally deemed desirable for three reasons 1 the law of comparative advantage 2 localized economies of scale and 3 knowledge spillovers taking a methodological individualist perspective we claim that 1 the law of comparative advantage while valid for individuals and firms does not necessarily imply regional specialization when regions are viewed as consisting of heterogeneous individuals 2 localized economies of scale are seldom specific to one industry and external in all but the regional level and 3 the study of knowledge spillovers is inconclusive and would benefit from a more disaggregated perspective

in search of advice for participants in matching markets which use the deferred acceptance algorithm many centralized entry level labor markets use the firm proposing deferred acceptance da algorithm to compute the matching that is implemented among workers and firms we propose a definition of the strategic options a worker faces in the da algorithm then we develop a theory to advise workers who distinguish between the firms from which they believe not to receive a proposal the firms from which they might receive a proposal and the firms from which they certainly receive a proposal if a worker is not able to deduce which new proposals she receives after having rejected others then it is not profitable for her to submit a list that reverses the true ranking of any two acceptable firms furthermore it is not beneficial for her to include a firm in her submitted list that is unacceptable to her

games of manipulation in marriage problems abstract we analyze the equilibrium outcomes of thepreference revelation gamesinduced bypareto efficientandindividually rationalsolutions in the context ofmarriage problems we employ a nash equilibrium refinement which allows deviations by a set of permissible coalitions and show that the set of equilibrium outcomes coincides with a variant of the core that allows blocking by only permissible coalitions journal of economic literatureclassification numbers c71 c78 d71 d78

profit maximizing matchmaker abstract this paper considers a resource allocation mechanism that utilizes a profit maximizing auctioneer matchmaker in the kelso crawford 1982 many to one assignment problem we consider general and simple individualized price message spaces for firms reports following milgrom 2010 we show that in the simple message space i the matchmaker s profit is always zero and an acceptable assignment is achieved in every nash equilibrium and ii the sets of stable assignments and strong nash equilibria are equivalent by contrast in the general message space the matchmaker may make a positive profit in a nash equilibrium this shows that restricting message space not only reduces the information requirement but also improves resource allocation

equilibrium allocations of walrasian preference games following hurwicz 1972 we think of an allocation mechanism as a set of rules governing the behavior of economic agents given the economic environment initial allocations consumer preferences and the technology the behavior prescribed by the allocation mechanism determines future allocations thus we may think of an allocation mechanism as a mapping from a set of economic environments to a set of allocations a question which often comes up in discussions of allocation mechanisms is whether or not there are incentives for the economic agents to follow the prescribed rules is the mechanism incentive compatible this question has received considerable attention in the public finance literature where the concern has been primarily with whether or not consumers will reveal their true prefrences as prescribed by mechanisms designed for the allocation of public goods see for example samuelson 1969 hurwicz 1972 presented a game theoretic structure for the analysis of incentive compatibility the economic agents are the players and their reported characteristics preferences endowments or technologies are the strategy variables when the strategies are played a reported environment is characterized and the allocation mechanism under consideration determines the resulting allocation this allocation as evaluated by the true consumer preferences is the payoff to the strategies played hurwicz calls the mechanism individually incentive compatible if the vector of true characteristics is a nash equilibrium strategy vector for this game hurwicz 1972 first used this structure to investigate the incentive compatibility of the walrasian mechanism he considered pure exchange economies with finitely many consumers in which initial endowments were taken to be known by all and thus not subject to misreporting thus preferences were the only characteristics reported strategically he found that

implementation of stable solutions to marriage problems abstract this note analyzes the possibility of implementing stable outcomes for marriage markets our first result shows a contradiction between the use of stable mechanisms and the hypothesis of agents behavior considered in the nash equilibrium concept we analyze the possibility of implementing two sets of stable allocations by employing two types of mechanisms the first mechanism is a now or never choice process that permits us to implement in undominated nash equilibria the set of all the stable allocations the second choice process is the classic algorithm in matching theory the gale shapley mechanism a reversal property is observed in such a mechanism when agents act strategically the use of a mechanism which selects the best solution for one side of the market in the absence of strategic behavior yields the best stable solution for the agents on the other side under dominance solvability journal of economic literatureclassification numbers c72 d78 j41

energy affordability and the benefits system in italy abstract in this paper we discuss a number of ways to define and measure the affordability of energy consumption and we examine the emergence of energy poverty in italy in the period from 1998 to 2011 the paper examines the eligibility criteria for claiming the benefits available to support energy consumption for vulnerable families and it identifies the potential beneficiaries the study assesses the appropriateness of the eligibility criteria by comparing the population targeted by the policy with the population actually facing affordability problems a simulation exercise using the hypothetical scenario most likely to result in energy benefits being made available shows that regardless of the affordability index adopted the provision of state energy benefits has little impact on fuel poverty

the manipulability of resource allocation mechanisms the vulnerability to manipulate behaviour of resource allocation mechanisms is evaluated by determining the nash equilibria of associated manipulation games under manipulation all monotonic correspondences are essentially equivalent to the walrasian correspondence for most non monotonic correspondences of interest the initial position appears at equilibrium to be efficient

a mechanism implementing the stable rule in marriage problems abstract we consider a stable mechanism where each agent announces his her own preferences and a stable matching is selected for the announced preference profile we show that the mechanism implements the stable rule that selects all of the stable matchings in a strong equilibrium in other words when we select any stable matching to an announced preference profile in fact the matching is stable for the true preference profile in environments where agents behaviors are described by a strong nash equilibrium

us regional income convergence a spatial econometric perspective rey s j and montouri b d 1999 us regional income convergence a spatial econometric perspective reg studies 33 143 156 this study reconsiders the question of us regional economic income convergence from a spatial econometric perspective recently developed methods of exploratory spatial data analysis provide new insights on the geographical dynamics of us regional income growth patterns over the 1929 94 period strong patterns of both global and local spatial autocorrelation are found throughout the study period and the magnitude of global spatial autocorrelation is also found to exhibit strong temporal co movement with regional income dispersion a spatial econometric analysis of the familiar baumol specification reveals strong evidence of misspecification due to ignored spatial error dependence because of this dependence shocks originating in one state can spillover into surrounding states potentially complicating the transitional dynamics of the convergence process rey s j et montouri

energy diversity and development in economic systems an empirical analysis abstract as economic systems develop over time they tend to become more complex with more structure and greater throughputs assuming favorable conditions energy use increases as more economic sectors develop and more channels for flow are opened economic diversity as measured by the number of economic sectors using energy and the equatability of flows between them generally increases as diversity increases the efficiency of generating outputs with a given amount of energy also increases development capacity the product of system energy throughput and diversity of flows is a measure of the potential system output and is calculated for selected countries capacity changes over time are shown to relate to changes in economic output in selected countries two distinct development strategies become evident one which promotes energy use and one which emphasizes diversity and the sustainability of each is examined while most countries utilize a mix of the two developing countries generally rely more on increasing energy use to increase output while developed countries tend to become more diverse as a means of increasing outputs sustainability is enhanced by strategies which promote diversity and resource use efficiency in economic systems

methodological individualism and social knowledge it is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals our behavior in judging economic research in peer review of papers and research and in promotions includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals not of other social categories i want to argue today that a close examination of even the most standard economic analysis shows that social categories are in fact used in economic analysis all the time and that they appear to be absolute necessities of the analysis not just figures of speech that can be eliminated if need be i further argue that the importance of technical information in the economy is an especially