factor endowments factor proportions and the allocative efficiency of u s interregional trade the heckscher ohlin h o theory of trade has been subjected to numerous international tests based upon the empirical evidence presented in the literature it appears that the theory s explanatory power of the actual pattern of international trade is somewhat limited this may not be surprising however when one considers a host of extraneous factors such as tariffs quotas and other policy and institutional barriers to trade which distort the pattern of trade on the other hand some of the requisites of the h o theory are more nearly satisfied in interregional trade within a nation the extent of policy distortions on the overall pattern of commodity trade should be far less in interregional trade than in international trade likewise both production technologies and demand conditions assumed to be identical between nations in the h o theory should be more nearly so among regions within a nation while the theoretical basis of regional trade is of course the same as that of international trade it is primarily for these reasons that a number of researchers have more recently turned to interregional trade for the purpose of testing the h o theory the current literature on the u s regional comparative advantage includes the contributions by moroney and walker 1966 moroney 1972 1975 estle 1967 and klaasen 1973 whereas these studies focused primarily on the pattern of regional production as revealed by value added concentration ratios for the u s south the major objectives of this paper are i to design and perform factor proportion tests based upon the actual interregional pattern of trade and ii to investigate one neglected empirical aspect of the h o theory bearing upon the substitutive role that commodity trade plays for direct factor mobility in section ii we present estimates of the regional distribution of major input supplies in the united states the input classes considered are capital equipment human capital labor and renewable and nonrenewable natural resources in particular we have found that there are fairly distinct differences among u s census regions pertaining to relative aggregate input supplies defined by physical capital labor ratio human capital labor ratio renewable natural resource labor ratio and nonrenewable resource labor ratio section iii presents the methodology and major empirical findings of the factor proportions test as adapted to interregional trade section iv extends the analysis to consider an alternative hypothesis of the h o theory based on the substitutive relationship between direct factor movements and commodity trade as embedded in the original h o theory this aspect of the theory has not been explicitly dealt with in the empirical literature and we consider its practical implication concerning the allocative efficiency of trade a summary section concludes the paper

generalized samuelson conditions and welfare theorems for nonsmooth economies abstract we give intuitive samuelson conditions for a very general class of economies smoothness and monotonicity are not required we provide necessary and sufficient conditions for all pareto efficient allocations including those on the boundary we prove that if all agents have a cheaper point the supporting prices fully decentralize the allocation we also show first and second welfare theorems as corollaries to the characterization of efficient allocations

optimal regulation under fixed rules for income distribution abstract it is by now well known that if arbitrary lump sum transfers are feasible then the optimal regulation of firms involves marginal cost pricing here we consider optimal regulation in an economy in which lump sum taxation is possible but the income distribution is in some sense fixed we show that under certain conditions production efficiency and marginal cost pricing are desirable in general however this need not be the case in an economy with increasing returns it is possible that the second best utility possibility frontier is strictly dominated by the pareto frontier and none of the marginal cost pricing equilibria lie on the second best frontier

natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

does the type of political regime matter for trade and labor market policies this article uses cross country data to examine the link between a country s type of political regime and its degree of openness and labor market distortion the analysis indicates that more authoritarian regimes are associated with higher trade protection and greater labor market distortions this supports the view that political authoritarianism may be counterproductive to development in important respects

an extension of the second welfare theorem to economies with nonconvexities and public goods in this paper we report a generalization of the results of foley and guesnerie on the second welfare theorem to economies with arbitrary nonconvex production sets the nature of marginal cost prices in such economies is clarified through the use of the clarke tangent cones

tourism welfare and de industrialization in a small open economy this paper investigates the effects of an expansion of tourism on welfare output and factor prices in the host country using a general equilibrium international trade model in the absence of taxes foreign ownership and distortions an increase in foreign visitors will increase welfare only if the price of nontradables increases factor mobility and foreign ownership tend to reduce the gains from tourism while commodity taxes tend to increase them conditions under which an increase in tourism can lead to deindustrialization are also discussed copyright 1991 by the london school of economics and political science

immigrant specificity and the relationship between trade and immigration theory and evidence studies routinely document that immigrant employment concentrates in non traded goods sectors and that many immigrants have low inter sectoral mobility we consider these observed characteristics of immigrant employment with regard to the question of how immigration affects a nation s pattern of production and trade we model an economy producing three goods one is non traded domestic labor and capital are domestically mobile but internationally immobile allowing that some new immigrants will become specific to the non traded goods sector the model indicates that the effects of immigration on output and trade depend importantly on the sectoral pattern of employment of both new and existing immigrants empirical investigation in a panel data set of oecd countries supports the model s prediction that immigration raises the output of non traded goods consistent with the model we also find that immigration and trade are complements given its empirical support the model s implications for immigration policy are then discussed

agricultural productivity and structural transformation evidence from brazil we study the eects of the adoption of new agricultural technologies on structural transfor mation to guide empirical work we present a simple model where the eect of agricultural productivity on industrial development depends on the factor bias of technical change we test the predictions of the model by studying the introduction of genetically engineered soybean seeds in brazil which had heterogeneous eects on agricultural productivity across areas with dierent soil and weather characteristics we nd that technical change in soy production was strongly labor saving and lead to industrial growth as predicted by the model

factor endowments and the international location of production econometric evidence for the oecd 1970 1985 abstract this paper uses data on manufacturing output and factor endowments for 20 oecd countries from 1970 to 1985 to examine the production side of the factor proportions model under well known conditions there will be a linear rybczynski relationship between sectoral outputs and factor endowments across countries this proposition is investigated using the kalman filter and maximum likelihood techniques to estimate time varying parameter models the results indicate that capital and unskilled labor are sources of comparative advantage for most industries while skilled labor is a source of comparative disadvantage residual analysis shows that the neoclassical model has poor explanatory power

determinants of the structure of u s foreign trade 1958 1976 abstract the heckscher ohlin model with three direct factor inputs is borne out for u s net exports of manufactures in annual cross section regressions for 1958 1976 the coefficient on unskilled labor became significantly more negative over the period and there is evidence that the negative sign on physical capital may reflect the inclusion of natural resource industries further analysis based upon 1960 and 1970 census years suggests the importance as well of skill and technological variables calculations of the total factor requirements of u s trade uphold the leontief paradox for 1958 but not for 1972

structural adjustment and the construction sector abstract this paper adds a construction sector to a dynamic dependent economy model equipped with consumer tradeables and non tradeables sectors the model is used to study the response of the production structure relative prices and the trade balance to a favorable terms of trade shock under the benchmark assumptions of perfect intersectoral factor mobility a perfect international capital market and no adjustment costs for realistic relative capital intensities the model predicts a boom in the construction and consumer non tradeables sectors a contraction of the tradeables sector and no relative price changes the implications of relaxing those benchmark assumptions are discussed separately

existence of marginal cost pricing equilibria in economies with several nonconvex firms this paper considers a general equilibrium model of an economy where some firms may exhibit increasing returns to scale or more general types of nonconvexities the firms are instructed to follow the standard marginal cost pricing rule or to fulfill the first order necessary conditions for profit maximization a general existence theorem of equilibria is proved in the case of an arbitrary number of firms no assumption is made to imply the aggregate productive efficiency of equilibria a condition that must be excluded in the nonconvex case the failure of the competitive mechanism in the presence of increasing returns to scale has been recognized since marshall 1920 and the search for alternative mechanisms has resulted in the so called theory of marginal cost pricing this theory was developed by allais 1953 hotelling 1938 lange 1936 lerner 1936 pigou 1932 to remain in the thirties and forties but has a long history dating back to the discussion on public utility pricing by dupuit 1844 it states that an optimum of welfare corresponds to the sale of everything at marginal cost hotelling 1938 this statement of the second welfare theorem has since been formulated at a high level of generality starting with the work by guesnerie 1975 and more recently by bonnisseau and cornet 1988b cornet 1986 1988a b c khan and vohra 1987 1988 quinzii 1986 none of these papers however is concerned with the existence of equilibria this has been considered in the past ten years by beato 1979 1982 beato and mas colell 1985 brown and heal 1982 brown et al 1986 cornet 1982 dierker guesnerie and neuefeind 1985 mantel 1979 and more recently by bonnisseau bonnisseau cornet kamiya and vohra in the special issue of the journal of mathematical economics 1988 on general equilibrium theory and increasing returns the purpose of this paper is to provide a general existence theorem for an economy with an arbitrary number of convex and nonconvex producers which may exhibit increasing returns to scale or even more general types of nonconvexities in our model a the consumers maximize their preferences subject to their budget constraints b the convex producers maximize their profits while the nonconvex producers are instructed to follow the marginal pricing rule i e they

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

the effects of mongolia s booming mining industry on its agricultural sector a test for dutch disease dutch disease occurs when currency strengthening associated with a booming sector of an economy crowds out a lagging trade dependent sector in this study a keynesian style model is specified to deduce hypotheses about how increased foreign direct investment fdi aimed at mongolia s mining sector affects its agricultural sector a key finding is that while econometric results suggest the increased fdi strengthened mongolia s currency its adverse effect on mongolia s trade sensitive agricultural sector is not sufficiently strong to cause the sector to decline although dutch disease was not detected the posited mechanism clearly is important specifically when currency strengthening is ignored the reduced form elasticity of agricultural value added with respect to fdi is 2 7 times larger than when currency strengthening is taken into account 0 103 vs 0 038 also fdi induced currency strengthening causes the keynesian multiplier y g to drop from 2 40 to 2 00 and the fdi multiplier y fdi to drop from 3 05 to 1 89

ioffe s normal cone and the foundations of welfare economics abstract we announce an example of an economy with an infinite dimensional commodity space for which the extension of the second fundamental theorem of welfare economics is valid if marginal rates of substitution are formalized in terms of either the clarke normal cone or the ioffe normal cone but in which the former is strictly contained in the latter this is in direct contradiction to the finite dimensional situation

resource curse or not a question of appropriability this thesis presents three self contained essays focusing on empirical questions in growth and development economics each article addresses specific questions on why countries perform differently in particular i analyse the effect of democracy on economic development the relationship between natural resources and growth and the efficiency of foreign development assistance in the first essay democracy consolidation and growth i analyse the effect of democracy on economic growth in this context i argue that an important aspect to consider is how consolidated political systems are put simply i find that it is not only a question of how democratic countries are but also how long they have been democratic in other words economic performance tends to improve with the duration of uninterrupted democracy the performance of autocracies on the other hand tends to deteriorate over time however for newly established political systems there seems to be a cost of being democratic this implies that democracies only bear their fruit after some time the analysis has important policy implications to overcome initial straits international assistance focused on democratic consolidation may be important and a very good investment in fostering long run development the second essay resource curse or not a question of appropriability together with anne boschini and jesper roine is concerned with the relation between natural resources and economic development for most laymen as well as for most economists it would seem reasonable that countries richly endowed in natural resources also benefit from this wealth however a large literature has found a systematic negative effect of natural resource abundance on economic growth we suggest that this so called resource curse is not determined by resource endowments alone but rather by the interaction between the type of resources a country possesses and the quality of institutions in the country this combination of factors determines what we call the appropriability of a resource the concept of appropriability captures the likelihood of natural resources leading to rentseeking corruption or conflicts which in turn will harm economic development our results suggest that if institutions are good enough the curse may be turned into a blessing this may explain why some countries such as norway and botswana tend to benefit from their resources while others such as angola and sierra leone do not the third and final essay of this thesis foreign sectoral aid fungibility growth and poverty reduction is a contribution to the aid efficiency literature which is concerned with the question of whether aid helps or hinders economic development foreign development assistance is often targeted on specific public expenditure sectors if this aid is not used in the sector for which it was granted e g health education it is said to be fungible and donors may end up financing something completely different from what they intended e g military expenditures the major concern about sectoral fungibility is that the alternative use of aid may be less productive or less socially useful however measuring fungibility is not sufficient to determine whether foreign sectoral aid fungibility is actually harmful what is important is how the funds treated as fungible are used the essay starts by obtaining estimates of fungibility for 57 countries the results suggest that sectoral aid is indeed largely treated as fungible by recipient countries next to assess the economic and health effects of fungibility these estimates are incorporated into an empirical model of aid and growth as well as into a model of aid and infant mortality altogether i find no evidence of more fungible sectoral aid leading to worse performance

macroeconomic policy in an oil exporting economy with foreign exchange controls the sudden and sharp increases in oil prices during the past decade and the discovery and extraction of oil in the north sea have recently contributed to a renewal of interest in the macroeconomic problems of oil exporting countries in general and those of industrialized and semi industrialized oilexporting countries such as the uk and mexico in particular the economic implications of the north sea oil revenues for the british economy have been hotly debated by forsyth and kay 1980 1981 worswick 1980 barker 1981 corden 1981 and byatt et al 1982 the effects of oil and gas revenues on the economies of canada mexico the netherlands norway and the uk have also been the subject of analysis and discussion in barker and brailovsky 1981 despite their important contribution these studies fall short of formulating a comprehensive theoretical framework for the study of macroeconomic policy in oil exporting countries in general the resurgence of interest in the macroeconomics of oil exporting economies and the lack of a satisfactory theoretical framework emphasize the need for the explicit introduction of an oil sector into macroeconomic models of the open economy the more recent studies by buiter and purvis 1983 eastwood and venables 1982 corden and neary 1982 and neary and purvis 1982 have gone some way towards meeting this need but they are better suited to the study of macroeconomic policy in developed oil exporting countries such as the united kingdom where highly developed financial markets already exist 1 without exception all these studies assume that the economy under consideration operates with a floating exchange rate and that the private capital is internationally mobile they also invariably ignore the short term and the long term financial repercussions of changes in oil income that operate via the government budget constraint and the asset position of the private sector these assumptions are however inappropriate for most oil exporting countries in the middle east africa and latin america the purpose of this paper is to examine the short run and long run macroeconomic consequences of an increase in oil revenues in an oil exporting country characterized by strict foreign exchange controls on private capital flows we attempt to do this in the context of a keynesian underemployment model of the type analysed for example by turnovsky and kaspura 1974 branson 1976 and argy and salop 1979 but with domestic prices set according to a mark up rule along the lines advocated for example by fetherston and godley 1978 1981 unlike argy and salop but in line with other recent contributions to the macroeconomic theory of open economies the present paper explicitly allows for the existence of the government budget constraint and analyses the macroeconomic effects of changes in oil revenues both in the short run when

business cycles in an oil economy abstract the recent oil price fall has created concern among policy makers regarding the consequences of terms of trade shocks for resource rich countries this concern is not a minor one the world s commodity exporters combined are responsible for 15 20 of global value added we develop and estimate a two country new keynesian model in order to quantify the importance of oil price shocks for norway a large prototype petroleum exporter domestic supply chains link mainland non oil norway to the off shore oil industry while fiscal authorities accumulate income in a sovereign wealth fund oil prices and the international business cycle are jointly determined abroad these features allow us to disentangle the structural sources of oil price fluctuations and how they affect mainland norway the estimated model provides three key results first oil price movements represent an important source of macroeconomic volatility in mainland norway second while no two shocks cause the same dynamics conventional trade channels make an economically less significant difference for the transmission of global shocks to the oil exporter than to oil importers third the domestic oil industry s supply chain is an important transmission mechanism for oil price movements while the prevailing fiscal regime provides substantial protection against external shocks

policy adjustments to the oil boom and their evaluation the dutch disease in indonesia abstract this paper analyzes the effects of two policy adjustments namely exchange rate devaluation and the accumulation of budget surpluses to the oil export boom in indonesia by using a simple simulation model our results indicate that exchange rate adjustment had a significant impact on expansion of tradable sectors especially the manufacturing sector by reversing the real exchange rate while officially maintaining the balanced budget principle the government exercised delicate operations whereby the budget surpluses were covertly accumulated as government deposits such operations were executed as a necessary demand management policy to ensure that the effect of devaluation was persistent these policy adjustments were consistent from a macroeconomic management point of view and have contributed to avoiding the dutch disease that indonesia otherwise might have suffered because of its oil bonanza

illusory revenues import tariffs in resource rich and aid rich economies abstract where imports are financed predominantly by rents from resource extraction or aid the revenue generated by tariffs is illusory revenue earned by the tariff is offset by a reduction in the real value of aid and resource rents revenue is however moved between accounts in the government budget which in the case of aid may reduce the burden of donor conditionality we demonstrate this proposition for a simple central case and show that the result is not overturned by generalisations around this case we argue that trade policy formulation in such economies should recognize the illusory nature of tariff revenues

short run demand for palestinian labor palestinian residents of the west bank and gaza strip who work in israel generally earn more than palestinians employed locally but this wage premium is highly volatile beginning with the 1987 palestinian uprising changes in wage differentials by work location parallel palestinian absences from work in israel this article interprets changing location differentials in response to exogenous shocks as movements along an israeli demand curve for migrant workers estimates of a model of the west bank and gaza strip labor market are used to evaluate the effect of policies governing palestinian access to the israeli labor market

on a general existence theorem for marginal cost pricing equilibria abstract we report a generalization of recent results on the existence of marginal cost pricing equilibria mcpe in economies with an increasing returns to scale industry our result makes no ad hoc assumptions which force the equilibrium to be on the efficiency frontier of the aggregate production possibility set we also present an additional condition under which our mcpe are productively efficient in the aggregate

testing the heckscher ohlin vanek theory with a natural experiment i use the historical episode of near elimination of commuting from the west bank into israel to test three key predictions of the heckscherohlinvanek model of trade and find strong support for them on the production side i use variation between districts and find that wage changes were not correlated with the size of the shock to the labour force factor price insensitivity and that districts that received larger influx of returning commuters shifted production more towards labour intensive industries rybczynski effect on the consumption side data are consistent with identical homothetic preferences which combined with the production results supports the heckscherohlinvanek theorem on the factor content of trade

second best analysis with markets in disequilibrium public sector pricing in a keynesian regime the paper develops pricing rules for a public sector subject to a budget constraint in an economy where the private sector experiences keynesian unemployment excess supply of labour and of commodities both second best and welfare improving pricing rules are studied it is found that such rules can be defined in operational terms in general they are quite complex involve quantities which are not directly observable reservation wages and prices and require evaluation of income and employment multipliers the general equilibrium approach to second best theory thus involves standard macroeconomic concepts and techniques some discussion of methodological issues and of policy objectives inflation versus unemployment is offered in order to facilitate interpretation the corresponding results for an economy with a competitive private sector are first restated

on the inefficiency of two part tariffs the partial equilibrium literature on two part tariffs suggests that if a commodity is produced under increasing returns efficiency can be achieved through marginal cost pricing and a suitable choice of entry fees fixed charge which may vary from consumer to consumer we show that this partial equilibrium intuition cannot be extended beyond some special cases even with a consumer specific fixed charge it is possible that none of the equilibria yield pareto efficiency furthermore it may be impossible to achieve pareto efficiency through any specification of taxes which are levied solely to cover losses hotelling 1939 and lerner 1944 among others see for example the surveys by ruggles 1949 1950 argued that firms operating under increasing returns to scale should be regulated to equate their marginal cost to the price of the output and the resulting losses financed through lump sum taxes being concerned primarily with efficiency issues the proponents of the marginal cost pricing principle did not advocate any particular distribution of the lump sum taxes among the consumers after the ensuing debate see for example ruggles 1950 there seems to have been a general agreement that marginal cost pricing is necessary for efficiency while admitting this coase 1946 presented an illuminating analysis of the drawbacks of what he called the hotelling lerner solution and also proposed an alternative solution it will be useful to begin by briefly recalling coase s criticism of the hotelling lerner solution apart from the practical problem of collecting lump sum taxes he emphasized two distinct drawbacks of the hotelling lerner scheme he claimed that this solution would not necessarily guarantee efficiency in the sense that it might lead to a marginal cost pricing equilibrium in which a positive amount of the commodity was produced whereas it would be better not to produce the commodity at all this can be restated simply as the argument that in the presence of non convexities marginal conditions need not guarantee global optimality there may be several marginal cost pricing equilibria some efficient and some inefficient as such this phenomenon can hardly be ruled out coase s second objection to the hotelling lerner solution was that it could effectively alter the income distribution if for instance a lump sum tax was imposed on all the consumers but only some of them consumed the commodity produced by the firm operating under increasing returns to scale then there would effectively be a redistribution in favour of those who consumed this subsidized commodity it was natural to keep the issue of efficiency separate from that of equity and coase argued that the hotelling lerner solution

the economic returns to schooling in the west bank and gaza strip the author uses micro data from the labor force surveys conducted in the west bank and the gaza strip during 1981 91 to show that during 1981 87 wage differences between schooling groups fell by well over one half this sharp reduction is associated with large increases in the size of the educated palestinian labor force since the returns to schooling for israeli jews were stable the decline in returns to schooling for palestinians is consistent with the notion that the returns to schooling in the territories were determined largely by the forces of supply and demand in a segmented market for skilled labor copyright 1995 by american economic association

cost axiomatic regulatory pricing abstract the axioms of the shapley value and semi values of non atomic games can be taken as the starting point for axioms on the relation between costs and prices of a regulated multiproduct monopoly the price mechanisms that result from this system of axioms are called cost axiomatic prices this paper shows the applicability of such pricing to all cases of regulatory constraints that require revenue to be a given percentage of costs including cost plus regulation break even pricing or amtrak s 50 clause moreover we show that all such price mechanisms including a fairly general system of taxation or subsidization of consumers are demand compatible if cost axiomatic pricing leads to deficits or profits

commodity price volatility with endogenous natural resources abstract natural resource reserves are exogenous in models of small commodity exporters changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility trade dynamics or exchange rate volatility we consider richer supply dynamics and model exploration and depletion we show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency the crowding out of non commodity activity dutch disease and a volatile business cycle we also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies when natural resource reserves are held fixed monetary policy is an efficient tool for stabilising the effects of commodity price shocks however when exploration and depletion are accounted for using interest rates to stabilise the effects of commodity price changes becomes inefficient using taxes on the resource sector specifically an ad valorem royalty remains efficient

on marginal cost pricing with given tax subsidy rules we provide an existence proof for generalized marginal cost pricing with given tax subsidy rules the novelty is that our approach allows for economic environments where all the generalized marginal cost pricing equilibria are inefficient in the aggregate an example is recalled in order to suggest how non pathological these environments are

measurement of the factor content of foreign trade with traded intermediate goods abstract in a recent article helpman 1984 develops readily testable bilateral restrictions in a model of international trade which preserves the spirit of heckscher ohlin trade theory important in any empirical exploration of the heckscher ohlin model is the decision of whether to employ direct or direct plus indirect calculations in determining the factor content of trade this paper extends helpman s analysis to a world of freely traded intermediate goods and shows that direct factor content calculations are the theoretically appropriate measure for use in evaluating these empirical implications of the heckscher ohlin model

external disturbances domestic policy responses and debt accumulation in nigeria abstract this paper provides a case study of the link between external shocks domestic policy responses and external debt accumulation in nigeria the indonesian experience during 1970 1989 is provided as a contrast for policy comparison a significant part of the increase in external debt in the two countries corresponds to financing of capital flight after 1981 current account deficits assumed greater importance in the accumulation of external debt the growth in external debt was caused in part by adverse external conditions the results of this study show that the nigerian debt crisis was exacerbated by inappropriate policy responses indonesia avoided a crisis by applying prudent real exchange rate management and fiscal restraint

industrial policy and exchange rate scepticism the aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies the first section focuses on the thought of the so called pioneers of development economics specifically their preference for protectionism and their belated recognition that an exchange rate policy could act as a substitute to it in the second one we analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth in addition to the one revealed by the pioneers the third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short run contractionary effects of a devaluation reinforcing the skepticism in question in the fourth section we discuss the revival of development thinking in the 1980s and its discussion about east asian trajectories a literature that placed great emphasis on industrial policy finally in the fifth section we discuss the new historical facts and the new development macroeconomics models that are putting an end to exchange rate skepticism

is perfect price discrimination really efficient welfare and existence in general equilibrium we examine the welfare properties of surplus maximization by embedding a perfectly discriminating monopoly in an otherwise standard arrow debreu economy although we discover an inefficient equilibrium we validate partial equilibrium intuition by showing i that equilibria are efficient provided that the monopoly goods are costly and ii that a natural monopoly can typically use personalized two part tariffs in these equilibria however we find that pareto optima are sometimes incompatible with surplus maximization even when transfer payments are used we provide insight into the source of this difficulty and give some instructive examples of economies where a second welfare theorem holds

implementation in economies with non convex production technologies unknown to the designer this paper deals with the problem of incentive mechanism design in non convex production economies when production sets and preferences both are unknown to the designer we consider nash implementation of loss free average cost marginal cost voluntary trading and quantity taking pricing equilibrium allocations in economies involving increasing returns to scale or more general types of non convexities the mechanisms presented in the paper are well behaved they are feasible continuous and use finite dimensional message spaces moreover the mechanisms work not only for three or more agents but also for two agent economies

existence of lindahl equilibria in economies with nonconvex production sets abstract in this article we establish the existence of lindahl equilibria in an economy with public goods which may exhibit increasing returns to scale or more general types of nonconvexities in the production sector this result generalizes several previous results in the literature we give a simple proof by using an auxiliary economy with an enlarged space of goods

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

aid the real exchange rate and why policy matters the cases of morocco and tunisia abstractevery form of foreign exchange inflow including aid can potentially cause real exchange rate appreciation with adverse consequences for the production of tradables dutch disease whether it does so depends on the policy response to the inflow this paper investigates the issue for morocco and tunisia over 1980 2009 we find that aid led to a real appreciation in morocco but had no effect on tunisia s real exchange rate this confirms the importance of the macroeconomic framework in which aid is provided and the key role for infrastructure and other supply side improvements in determining the final real economy impact of aid and other inflows

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

endogenous growth with a limited fossil fuel extraction capacity campbell 1980 and following authors have discussed a limited resource extraction capacity as an augmentation of the well known hotelling model we integrate a limited extraction capacity and related investments in the endogenous growth model of tsur and zemel 2005 to study its effect on economic development the capacity constraint gives rise to three effects on the one hand higher energy costs and the reallocation of production towards capacity investments decrease production available for consumption research and or capital investments energy costs and reallocation effect on the other hand research investments may increase which boosts available production research effect depending on the capital endowment and the strength of the effects long run consumption may be boosted or depressed in particular the capacity constraint may render everlasting consumption growth non optimal in a resource rich economy furthermore we find that capacity investments may be postponed to later points in time if the capital endowment is high

marginal cost pricing under bounded marginal returns most of the available results on the existence of marginal cost pricing equilibrium are unsatisfactory in that they make a survival assumption that is stated as a condition on the production equilibria of the economy the primary objective of this paper is to provide a relatively elementary existence result that replaces such an assumption with one on the primitive data of the economy the author s main assumption is that no firm faces unbounded increasing returns in the sense that if it uses some input then the rate at which this input can be substituted into an output is finite copyright 1992 by the econometric society

the effects of a natural gas boom on employment and income in colorado texas and wyoming improvements in technology have made it profitable to tap unconventional gas reservoirs in relatively impermeable shale and sandstone deposits which are spread throughout the u s mostly in rural areas proponents of gas drilling point to the activity s local economic benefits yet no empirical studies have systematically documented the magnitude or distribution of economic gains i estimate these gains for counties in colorado texas and wyoming three states where natural gas production expanded substantially since the late 1990s i find that a large increase in the value of gas production caused modest increases in employment wage and salary income and median household income the results suggest that each million dollars in gas production created 2 35 jobs in the county of production which led to an annualized increase in employment that was 1 5 of the pre boom level for the average gas boom county comparisons show that ex ante estimates of the number of jobs created by developing the fayetteville and marcellus shale gas formations may have been too large

externalities and fundamental nonconvexities a reconciliation of approaches to general equilibrium externality modeling and implications for decentralization abstract starrett 1972 33 and boyd and conley 1997 7 approaches to externality modeling are unified by distinguishing between producible and nonproducible public commodities nonconvexities are associated with detrimental producible public commodities but not with nonproducible public commodities in boyd and conley 1997 7 disposability properties costly or costless imply that producible public commodities are either by products e g pollution or joint products e g national defense markets fail for both beneficial and detrimental by products nonconvexities imply that price based equilibria e g pigovian tax equilibrium may not be pareto efficient foley s 1967 1970 17 18 public competitive equilibrium combines price and quantity signals with a unanimity criterion and restores the equivalence between equilibrium and efficiency

cost minimization and regulation in general equilibrium an example abstract we present a general equilibrium example in which cost minimizing behavior prevents the economy from reaching the pareto optimal allocation in the example a firm with non convex technology can use two different inputs to produce a single output pareto optimality requires that the firm use the more costly input and it is therefore impossible to achieve the optimum when the firm minimizes costs

oil and women a re examination abstract in a seminal article ross 2008 reports a negative correlation between oil production and women s representation in the labour force and politics across countries this article re examines these relationships exploiting variations in oil endowments to address endogeneity concerns we confirm that oil production causes decline in women s representation additionally we show that consistent with dutch disease effects oil production decreases women s employment in the traded sector however it also leads to an increase in women s employment in the nontraded sector we explore some social consequences of oil production and show that it results in women marrying earlier and having more children

the general validity of the heckscher ohlin theorem despite a number of attempts to extend it the heckscher ohlin theorem remains woefully restricted in terms of the generality of the assumptions needed for its proof in its traditional form as a statement about the commodity composition of trade the theorem is valid only in the highly abstract environment of the two factor two good twocountry model that has been the mainstay of trade theory for half a century a weaker version of the theorem involving the factor content of trade rather than its commodity composition has been proved for any number of factors goods and countries but this generality has so far been bought only at the cost of other and perhaps equally restrictive assumptions 2 the purpose of this paper is to provide statements and proofs of the heckscher ohlin h o theorem that are more general than those currently available the approach taken is similar to that used in my 1980 article for an extension of the theory of comparative advantage in terms of correlations between autarky prices and trade in section i i lay out the assumptions on which the analysis is based these assumptions provide the outlines of a reasonably general model in which there may be any numbers of goods and factors and in which factor prices may be equalized or not trade impediments in the form of tariffs or export taxes are permitted though transportation costs are not 3 in section ii i discuss the difficulty of inferring the factor content of trade in a world of unequal factor prices and i provide several alternative definitions of that concept for use later in the paper these together with the assumptions of section i are used in section iii to prove a theorem on the value at autarky prices of the factor content of trade in section iv this theorem is used to prove a first corollary that makes a more direct statement about the pattern of trade it says that worldwide there must be a negative correlation between the factor content of trade by factor and country and the corresponding autarky factor prices it is precisely these autarky factor prices that constitute the ohlin measure of factor scarcity therefore the corollary provides a formal statement of the general idea that countries tend to export the services of those factors which they have in relative abundance and it may be regarded as a generalization of the factor content version of the h o theorem finally a generalization of the commodity version of the theorem is proved in section v the concept of a covariance is generalized university of michigan i have benefitted greatly from the comments of paul degrauwe wolfgang mayer michael mussa carl simon and robert stern as well as others who participated in seminars at the universities of michigan chicago and cincinnati and at the national bureau of economic research an anonymous referee also made valuable comments with additional goods and factor price equalization the theorem runs afoul of the indeterminacy of production and trade noted by paul samuelson 1953 and james melvin 1968 without factor price equalization trade impediments and intermediate production can cause reversals of the pattern of trade as shown in my 1979 article if additional factors and countries are also added it becomes difficult even to state the theorem let alone to prove it 2melvin stated such a theorem for the three good two factor case and jaroslav vanek 1968 proved it for the general case but only by assuming factor price equalization trent bertrand 1972 and jon harkness 1979 were able to drop the factor price equalization assumption but replaced it with restrictions on consumption of either goods or factors by country of origin it is unclear to me however that these restrictions can ever be met in a model that is otherwise plausible harkness 1978 has also used the factor content version of the theorems as the motivation for a regression equation relating commodity trade to factor intensities this bears some resemblance to my analysis below in section v see however james anderson 1981 and edward leamer and harry bowen 1981 who have criticized his result with a reply by harkness 1981 3for ease of exposition i do not allow here for transportation costs these were included in an earlier version of this paper following the technique in my 1980 article

the determination of marginal cost prices under a set of axioms the main purpose of this paper is to provide an axiomatic approach to marginal cost mc pricing and to point out its similarity with aumann shapley a s pricing the latter is a cost sharing price mechanism discussed in 3 and 6 that is derived from a set of five natural axioms in this paper we consider models in which there is one producer with a given technology who faces fixed input prices and produces a finite number of consumption goods thus we can uniquely derive the cost function that describes the minimal cost of producing a given vector of consumption goods by a price mechanism p we mean a rule or a function that associates with each cost function f and vector a of quantities a vector of prices

a test of the heckscher ohlin vanek theorem the leontief commonplace abstract this paper provides a logically complete empirical test of the hov theorem for the united states by comparing measures of factor intensities trade and factor endowments under the appropriate computations of the factor contents of trade and production u s data are shown to diverge often from their values as predicted by hov as a result it appears that paradoxical outcomes may be common in empirical applications of the theorem

general equilibrium when some firms follow special pricing rules in this paper we study the existence of a general equilibrium in an economy in which some of the firms behave competitively whereas others follow special pricing rules an even casual observation of economic reality confirms the need for the inclusion of price setting firms in the study of general equilibrium models and in fact this has been emphasized in the economic literature for some time we consider this a sufficient justification to present a general equilibrium model which allows for both types of behavior price setting as well as price taking behavior the model to be presented will account for a wide range of price setting rules we however find it appropriate to point out at the start that not all economically relevant price setting rules are covered although our model permits the drawing of useful conclusions for the general equilibrium theory of oligopolistic competition through prices it is not especially designed for that purpose in particular our results are not applicable to the general equilibrium analysis with price making monopolistic firms a subject on which there exists some literature 2 our motivation as well as our modelling options and assumptions are directed to two fields where an increased interest in the theoretical foundations recently could be noticed

international redistribution of income summary how do international policies on aid trade and factor movements affect the international distribution of income we calculate the impact by world decile of the actual level of aid flows and the effect on income of merchandise trade restrictions by high income countries we find that aid s distributional impact is equality enhancing extremely small in terms of changes in inequality measures but of some importance for the lowest decile of the distribution we also find that some of this impact is counteracted by lost potential income in the lower deciles from merchandise trade barriers imposed by high income countries

resource boom wages and unemployment theory and evidence from the norwegian petroleum experience the effects of norwegian petroleum activities on nominal wages and the rate of unemployment are analyzed in this paper the theoretical model is based on standard theory of segmented labor markets increased nominal wages in the petroleum sector will unambiguously increase the wage level and the rate of unemployment increased petroleum employment will under realistic assumptions also raise the wage level the effect on the rate of unemployment in this case is ambiguous the empirical model is embedded in reduced forms of the theoretical model and the estimated parameters are consistent with the theoretical results

on the existence of lindahl hotelling equilibria abstract we consider an economy characterized by the simultaneous presence of public goods and many increasing returns to scale firms we formalize a notion of equilibrium termed a lindahl hotelling equilibrium in which producer prices are marginal cost prices and the public goods are financed through lindahl prices sufficient conditions are provided for such an equilibrium to exist

natural disasters and labor markets abstract while it is clear that natural disasters have serious welfare consequences for affected populations less is known about how local labor markets in low income countries adjust to such large shocks combining data from the indonesia family life survey the desinventar database the u s geological survey and district level employment indicators this paper explores how a large earthquake in indonesia affected labor market outcomes in particular the evolution of wages across sectors i find that the earthquake had a positive effect on wage growth for workers who were employed in the agricultural sector at baseline i propose two mechanisms for this result a higher growth rate of the price of rice and a downward shift in the supply of workers in the agricultural sector i show that evidence mainly supports the latter labor shifted out of the agricultural sector into the construction sector raising the marginal product of labor in agriculture

oil windfalls and export diversification in oil producing countries evidence from oil booms abstract this paper examines the factors behind export diversification in oil countries specifically we investigate the impact of oil booms on export diversification through an empirical framework the paper finds that economy s export structure before the oil boom determines whether oil windfalls might affect the diversification process thus an oil boom negatively affects export diversification only if countries initially exhibit low levels of diversification in countries with a high level of diversification before the boom an oil boom has no impact on diversification these results are based on a large sample of 134 countries and are robust to various sensitivity analyses they are corroborated with data from the manufacturing sector which show that oil booms only reduce diversification in countries with a small manufacturing sector prior to the boom

existence of competitive equilibrium under financial constraints and increasing returns abstract this paper studies a factor cost in advance model with increasing returns in production in the model both partial equilibrium and general equilibrium may exist since working capital of firms limit their input demand we provide a sufficient condition for the existence of partial equilibrium of a firm operating on a non convex choice set furthermore we establish the existence and uniqueness of competitive equilibrium in the special case of logarithmic utility

existence of marginal cost pricing equilibria the nonsmooth case in this article we report a general existence theorem of a marginal cost pricing equilibrium for an economy which may exhibit increasing returns to scale or more general types of nonconvexities in the production sector our model considers an arbitrary number of firms and no smoothness assumption is made on their production sets or on the aggregate production set in this article we report a general existence theorem of marginal cost pricing equilibria for an economy which may exhibit increasing returns to scale or more general types of nonconvexities in the production sector in our model which considers a positive finite numbers 1 of commodities m of consumers and n of firms a consumers maximize their preferences subject to their budget constraints b convex producers maximize profits while nonconvex producers are instructed to follow the marginal pricing rule i e they fulfill the first order necessary condition for profit maximization in a precise mathematical sense formalized with clarke s normal cone our treatment of convex and nonconvex producers will in fact be symmetric the technological possibilities of the jth producer j 1 n

commodity currencies and the real exchange rate abstract this paper shows that a change in the terms of trade of a commodity exporting country could cause the relative price of nontraded goods to rise or fall depending on the strength of income and substitution effects

the existence of marginal cost pricing equilibria with increasing returns the competitive mechanism fails in economies with nonconvex technologies competitive equilibria do not exist in general and pareto optima are no longer equilibria the search for alternative mechanisms in economies with increasing returns was developed and resulted in the principle of marginal cost pricing modern economic theory has returned to the foundations of marginal cost pricing theory in a general equilibrium framework the existence of equilibria with marginal cost pricing in economies with increasing returns and a more general type of nonconvexities is analyzed in this paper the case of differentiable economies where all production sets are limited by smooth surfaces is developed the principles of the proof are also extended to the nondifferentiable case