interpreting economic time series this paper explores some of the implications for econometric practice of the principle that people s observed behavior will change when their constraints change in dynamic contexts a proper definition of people s constraints includes among them laws of motion that describe the evolution of the taxes they must pay and the prices of the goods that they buy and sell changes in agents perceptions of these laws of motion or constraints will in general produce changes in the schedules that describe the choices they make as a function of the information that they possess until very recently received dynamic econometric practice ignored this principle the practice of dynamic econometrics should be changed so that it is consistent with the principle that people s rules of choice are influenced by their constraints this is a substantial undertaking and involves major adjustments in the ways that we formulate estimate and simulate econometric models

testing the long run implications of the neoclassical growth model abstract the long run implications of the one factor neoclassical growth model are tested by investigating the cointegrating relations between the log of output consumption and investment and the real interest rate with the exceptions of austria and the united kingdom the evidence for the united states and to a lesser extent for canada japan and the federal republic of germany is favorable to the neoclassical growth model a simple extension to a multicountry setting proved however to be unsuccessful national outputs nor consumption series are driven by just one common stochastic trend

re testing prebisch singer hypothesis new evidence using fourier quantile unit root test the prebisch singer hypothesis in economics asserts that over time the relative price of primary goods relative to manufactured goods should experience a downward trend to test the hypothesis we

non monotonic effects of market concentration on prices for residential solar photovoltaics in the united states abstract emerging renewable energy markets may become more concentrated over time as the most efficient firms accumulate market share the effects of this market concentration on prices are tested using a rich dataset of residential solar photovoltaic pv systems in the united states a novel hypothesis is explored that the effects of market concentration may be non monotonic prices may decline in market concentration due to efficiency gains associated with returns to scale but increase in concentration in already concentrated markets due to increasing market power the results of an econometric model provide evidence to support the non monotonic hypothesis however the data suggest that the relationship between prices and firm scale is nuanced and that both large and small scale pv installers may wield efficiency advantages

dynamics of market structure advertising and profitability a var approach the purpose of this study is to provide an econometric characterization of the dynamic interrelationship among structure conduct and performance variables with a vector autoregressive var model particular attention will be given to the causality and response patterns of the variable involved in the light of our desire to ascertain descriptive characterizations of historical behaviour we let the data speak for itself the result suggests a weak realtionship existing between market structure and profitability

cotrending and the stationarity of the real interest rate abstract this paper introduces the concept of cotrending to trend stationary series with structural breaks we apply it to nominal interest rates and inflation in order to test the long run fisher effect

a re examination of the relationship between industry structure and economic performance the objective of this study is to develop a simultaneous equations model of profitability concentration advertising expenditures and research and development outlays the data used in the estimation are subjected to regression diagnostics in an effort to determine the importance to the estimation results of a subset of the data that can have a disproportionate influence the estimation results especially for the advertising expenditures relationship and the research and development outlays equation do change when a truncated data sample based on the omission of the outliers is used this serves partly to explain why there is some disagreement in the literature on market structure and economic performance with regard to the impact of several economic factors

testing for the absence of expected real profits from forward market speculation abstract this paper tests for the absence of expected real profits from forward market speculation it contrasts with the literature that has considered opportunities for expected nominal profit from speculation that is profits denominated in one of the currencies these studies assume money illusion on the part of market participants but this paper does not empirical results fail to find evidence of unexploited real profit opportunities

quantitative restrictions and the welfare effects of capital inflows abstract this paper explores the welfare effects of capital inflows when some imports are subject to quantitative restrictions it is shown that in a heckscher ohlin model where all imports are restricted by quotas and some fraction of the initial domestic capital stock is foreign owned a capital inflow is welfare improving regardless of the ranking of sectoral factor intensities with sector specific capital stocks and both tariff ridden and quota restricted imports the consequences of direct foreign investment in any sector are uncertain and depend upon whether the two imports are compensated substitutes or complements as well as the characteristics of production

preferential trading agreements and capital flows abstract a three country trade model is used to determine the impact of a preferential trading agreement between two countries on world prices and the international allocation of capital assuming the agreeing countries have characteristics typically associated with developing countries we derive a simple condition that predicts whether a country experiences an inflow or outflow of capital with the agreement while at least one country experiences a capital inflow the other may experience an outflow welfare implications are addressed

foreign investment in the exporting sector welfare enhancing or welfare reducing there has been a considerable amount of debate on whether structural adjustment policies suggested by the imf and the world bank to many primary product exporting nations may be selfdefeating the terms of trade deterioration due to export expansion by any one country may be small enough to be ignored however if several exporters engage in simultaneous export expansion all of them can suffer welfare losses diakosavvas and scandizzo 5 231 64 among others find that the terms of trade of primary commodities have indeed exhibited a downward trend in this century panagariya and schiff 8 address this issue in a partial equilibrium simulation model of the cocoa market they provide examples whereby productivity increases in one exporting country lead to welfare losses for other exporting countries despite the imposition of unilaterally optimal export taxes bhagwati 2 481 85 had shown that optimal trade taxation rules out the possibility of immiserizing growth bandyopadhyay 1 shows that this result does not generalize to the case where two or more exporters have market power hence productivity increases in the exporting sector can be immiserizing even in the presence of optimal export taxes rodrik 11 provides an excellent survey of these issues the concerns expressed in the elasticity pessimism literature the classic papers by prebisch 10 251 73 and singer 12 473 85 addresses these issues have been largely alleviated by the experience of the east asian countries however these concerns remain alive in the context of some primary product exports like cocoa and coffee using a two country free trade model brecher and choudhri 4 181 90 show that the singer prebisch concerns are specially relevant in the context of foreign investment in the exporting sector of primary product exporters the value of the marginal product of foreign capital has to be repatriated to the foreign nation hence a decline in the terms of trade for the host nation is sufficient to guarantee its immiserization the traditional two country models that have been employed to analyze issues in optimal trade taxation do not address the issue of interdependence among different exporting nations in a two country model there is only one exporter of a particular commodity however in reality several nations export the same commodity for instance cote d ivoire ghana and brazil are all

uncovering financial market expectations of inflation this paper seeks to uncover market expectations of inflation from the joint dynamics of nominal interest rates and observed inflation i postulate 1 the existence of a stable vector autoregression in unobserved variables and 2 efficient financial markets the estimation procedure requires no further structural assumptions the econometrician need not observe all the information used by agents in forming forecasts or all the variables that influence real interest rates i find no empirical evidence that economic recessions are correlated with inflation forecast errors however postwar recessions are associated with ex ante real interest rates that are twice the postwar average

monetary policy regimes and the reduced form for interest rates this study investigates whether the recent poor performance and inst ability of reduced form interest rate equations can be accounted for by changes in monetary policy regimes the results imply that reduced form coefficients move by statistically significant and economically meaningful amounts in response to such policy parameter shifts both in sample and out of sample predictions from the models that allow f or the endogeneity of the money stock outperform those produced by the conventional specification copyright 1987 by ohio state university press

do big countries win tariff wars yes it is widely believed that tariffs invite retaliation and that the postretaliation equilibrium l eaves all countries worse off than they would be at free trade the a uthors present a simple pure exchange model with two countries and t wo goods and show which endowment patterns are consistent with this belief they find that if one country is substantially bigger than th e other it can expect to gain from a tariff war despite retaliation the model can be extended to show that the advantage obtained by bei ng part of a large trading unit can help explain the formation of cus toms unions copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes abstract in this paper we show that commodity exporting countries may obtain a higher welfare under revenue maximizing export taxes than under welfare maximizing export taxes this result cannot be obtained in the traditional two country models

international investment and immiserizing growth abstract a country with significant foreign investment can be immiserized by growth of its labor force because this increases the payments that have to be made to foreign investors we show that this occurs when the elasticity of supply of foreign capital and the elasticity of substitution between labor and capital in the host country are low we relate this phenomenon to bhagwati s general analysis of immiserizing growth and identify several new sources of immiserization that can arise from the interaction of the bhagwati johnson mechanisms and international investment

the federal reserve s new operating procedures a post mortem abstract although money stock targeting has been the strategic focus of federal reserve policy since the mid 1970 s operating policy the tactics whereby the longer run strategy is implemented over short term intervals has been changed by the federal reserve at least twice over this period a particularly dramatic change in operating policy was announced by the federal reserve in october 1979 this paper provides empirical evidence that settles questions about the nature of this change and suggests that the new operating procedures may have contributed to the heightened interest rate volatility experienced over the 1979 to 1982 period

domestic foreign interest rate differentials near unit roots and symmetric threshold models this paper investigates the near unit root behavior of interest rate differentials across countries using a symmetric band tar model that allows for a heteroscedastic error process we find that the time series properties of monthly short term interest differentials over the period 1974 2005 between the united states and canada france germany japan and the united kingdom can be characterized by a symmetric band tar process which can explain its near unit root behavior reported in the extant literature results significantly reject a linear model in favor of the alternative hypothesis of a two regime symmetric threshold model that exhibits significantly greater persistence within the threshold bands than when outside the threshold bands

r d market structure and profits a value based approach this paper considers a complex relation among r d market structure and a market value based measure of profits perhaps of greatest interest a positive effect of r d on profits emerges as does a negative r d concentration interaction effect both appear robust and support an intangible capital and rivalrous view of r d despite substantial interest in the question little direct evidence on research and development r d market structure and profits relations has appeared in the literature an important exception to this rule is grabowski and mueller hereafter g m 1978 who reported a strong effect of r d on adjusted profit rate data in addition to an equally strong negative r dmarket concentration interaction effect g m interpret their findings as support for an intangible capital and rivalrous view of r d alternatively they are also consistent with the hypothesis that firms in highly concentrated markets pursue r d less efficiently or take on riskier projects in any event g m s findings seem inconsistent with a view of r d as a barrier to entry see kamien and schwartz 1975 this study extends previous research in at least four respects first we adopt a market valued based measure of profits in order to avoid any bias inherent in accounting profit data due to an expense as incurred rather than capitalization and amortization treatment of r d advertising and similar expenditures second we evaluate simultaneous influences among profits r d advertising and concentration suggested but not tested previously third estimation results are derived using leamer s search technique which illustrates the sensitivity of estimates to alternate model specifications and fourth we consider an n 390 firm fortune 500 sample which is substantially larger than in previous studies including firms responsible for nearly 90 of private sector r d during 1977 estimation results should therefore be broadly indicative of the economic consequences of r d

trends cycles and asymmetries in the terms of trade of primary commodities from developed and less developed countries abstract the paper examines the prebisch hypothesis that primary product prices relative to the price of manufacturers fall during cyclical downturns by more than they rise during cyclical upturns and that this is an independent explanation of the secular tendency of the net barter terms of trade to move against primary commodities an important distinction is made between primary products exported by less developed countries and those exported by developed countries the greater cyclicality of primary product prices and the long run deterioration in their terms of trade since 1954 are confirmed but there is little support for the prebisch thesis that primary product prices relative to manufacturers are move sensitive on the downswing than the upswing

advertising concentration and profitability in manufacturing advertising concentration and profitability in manufacturing i introduction economists have devoted much effort to empirically testing the hypothesized relationships between industrial concentration profits and advertising twenty years ago lester telser concluded that there is little empirical support for an inverse association between advertising and competition 1964 later other economists studying the relationship between advertising and concentration discovered a positive correlation between the four firm concentration ratio a measure of industry concentration and advertising intensity 1 strickland and weiss 1976 went further to show that there is a causal relationship between these elements increases in concentration cause advertising to intensify and conversely a rise in advertising intensity causes an increase in the level of concentration in recent years the empirical literature on advertising concentration and profitability has atrophied because of dissatisfaction with its theoretical basis as a new approach i adopt the theory of advertising developed by stigler and becker 1977 and extend it to incorporate the relationships among advertising concentration and profitability i then test its most important implications using data from the 1977 census of manufactures and the detailed input output structure of the u s economy 2 section ii examines the relationship between concentration and advertising intensity conventional theory known as the inverted u hypothesis asserts that advertising is expected to increase with concentration at first but to decrease at very high levels of concentration because collusion to avoid advertising costs becomes easier extending the stigler and becker theory i hypothesize that when concentration increases even if the large firms do not collude and continue to act independently they will eventually decrease their advertising intensity at high levels of concentration provided that the demand curve for the industry s products is relatively inelastic if the industry s demand curve is relatively elastic advertising intensity increases monotonically with concentration at all levels of concentration this hypothesis is supported by the 1977 data taken from the census and the input output structure of the u s economy section iii focuses on the relationship between advertising and profitability according to conventional theories advertising intensity promotes product differentiation leading to higher barriers to entry and higher profit margins in the past researchers e g strickland and weiss 1976 realized that contrary to the implications of barriers to entry theory the coefficient of advertising in a profit margin equation was longer for a sample of industries producing producer goods than for industries producing consumer goods they viewed this result as an anomaly inconsistent with both their theoretical reasoning and with other important empirical results already published i obtain a similar result which i am able to link to a theoretical structure thus contributing to the refutation of the barriers to entry hypothesis i begin by extending the stigler and becker theory to treat advertising and research and development r d as two complementary intangible capital goods the sample is divided into two groups producers of homogeneous goods who spend relatively more on r d and producers of heterogeneous goods who spend relatively more on advertising since we are unable to measure r d costs at the appropriate industry level it is not included among the regression variables if r d and advertising intensity are correlated we should expect the coefficient of advertising in the profitability equation in the homogeneous goods subsample to exceed the coefficient of advertising in the profitability equation in the heterogeneous goods subsample in this case the omission of the r d variable provides an implication for testing the new hypothesis

industrial determinants of anti dumping in brazil protection competition and performance an analysis with binary dependent variable and panel data abstract this article investigates how sectorial characteristics determine the probability of industries receiving an anti dumping ad duty delving into the economic literature on the political economy of protection market competition and trade reform in brazil by focusing on when the ad was granted the article concentrates on the objective economic motivations for an industry to claim protection and which are instrumental to the decision of the trade defense authority the empirical strategy involves a panel of 93 industrial sectors from 1996 to 2007 to create four groups of explanatory variables collective action competition economic performance factors of production trade coefficients reflecting their structural characteristics market competition economic performance and political mobilization the econometric specifications apply binary dependent variable models logit with cluster robust and population averaged error correction the results show that structure of trade imports volume and tariffs economic performance productivity and investments and factor content labor and natural resources influence the probability of the ad political economy characteristics captured by interactive terms are also influential in determining the measure

testing for trends in the terms of trade between primary commodities and manufactured goods abstract this paper joins the statistical debate on the terms of trade between primary commodities and manufactured goods by contributing to the methodological discussion and presenting new evidence using data series covering almost the whole of the 20th century using statistical tests that take into account breaks in the series it is found that over the 20th century the relative prices of primary commodities dropped to nearly one third of their level at the beginning of the century in two installments when random shocks led to structural breaks and not in a gradual way as implied by either a deterministic or stochastic trend possible reasons for the structural breaks and their policy implications are discussed

a note on foreign investment the savings function and immiserization of national welfare abstract with the help of a simple two country version of the solow steady state model the present note shows that even without the presence of any visible market distortion free mobility of capital is not necessarily beneficial for the capital importing country under a set of very plausible and empirically relevant assumptions about savings behavior this note shows that while perfect mobility will lead to higher long run capital stock income and consumption for the capital exporting country it leads to exactly the opposite outcome for the capital importing country it brings about lower per capita capital stock income and consumption for the capital importing country

a simple account of the behavior of long term interest rates recent empirical research on the term structure of interest rates has shown that the long term interest rate is well described by a distributed lag on short term interest rates but does not conform to the expectations theory of the term structure it has been suggested that the long rate overreacts to the short rate this paper presents aunified taxonomy of risk premia or deviations from the expectations theory this enables the hypothesis of overreaction to be formally stated it is shown that if anything the long rate has underreacted to the short rate however the independent movement of the long rate is primarily responsible for the failure of the expectations theory

immiserizing investment from abroad the singer prebisch thesis reconsidered the present paper lends new analytical support to the controversial singer prebisch thesis according to this well known thesis less developed countries ldcs suffer a welfare loss from secular decline in their international terms of trade for primary product exports the standard theoretical criticism of the thesis makes two basic arguments both relating to the impact of economic expansion 2 first there is no well established presumption that the terms of trade for primary products will indeed deteriorate in a growing world economy second if domestic economic expansion does happen to worsen the terms of trade for ldcs economic welfare of these countries still need not deteriorate except under bhagwati s 1958 well known conditions for immiserizing growth thus the traditional critique sees the singer prebisch thesis as an unconvincing allegation about the relationship between growth and welfare via the terms of trade the following discussion suggests an alternative more favorable interpretation of the thesis this reinterpretation focuses upon the process of foreign investment4 rather than economic growth as the essential reason for adverse changes in the terms of trade and level of welfare for ldcs exporting primary products such a focus appears to be fully consistent with the analysis of singer 19501 5 whose main

the generalized theory of transfers and welfare bilateral transfers in a multilateral world paul samuelson s 1952 1954 classic papers on the transfer problem addressed two separate analytical issues the positive effect of a transfer on the terms of trade and the welfare effect of the transfer on the donor and the recipient since then a considerable body of literature has grown up on the positive analysis while samuelson 1954 himself had extended the 2 x 2 x 2 free trade analysis to allow for tariffs and transport costs subsequent writers have analyzed other extensions of the model for example to allow for nontraded goods as with leisure in samuelson 1971 or general nontraded goods in john chipman 1974 and ronald jones 1970 1975 remarkably however the welfare analysis of transfers has not paralleled these developments since wassily leontief 1936 produced an example of immiserizing transfer from abroad and samuelson 1947 argued that the example required market instability the proposition that has monopolized attention has been that a transfer in the conventional 2 x 2 x 2 model in its free trade version cannot immiserize the recipient or enrich the donor as long as world markets are stable in the walras sense interestingly samuelson 1954 who did extend the positive analysis to include tariffs did not go on to ask whether immiserization of the transfer recipient and hence symmetrically enrichment of the donor in a two country model could now arise consistent with market stability recently the welfare analysis of transfers has been extended in two different directions both apparently unconnected and both yielding the conclusion that transfers from abroad can be immiserizing and that the donor may improve its welfare despite market stability one route to this conclusion has been the introduction of a third economic agent or country that is outside of the transfer process in the appendix of his 1960 paper analyzing the interaction between trade policy and income distribution harry johnson discussed the possibility of welfareparadoxical redistribution between two factor income classes capital and labor in an open economy thereby providing what can be interpreted as a treatment of the threeagent transfer problem for the case in which donor and recipient are both completely specialized in the ownership of a single different factor an independent analysis of the three agent transfer problem using a restrictive model with given endowments of goods and fixed coefficients in consumption was also undertaken in an important paper by david gale 1974 2 brecher and bhagwati bhagwati department of economics columbia university new york ny 10027 brecher department of economics carleton university ottawa on kis 5b6 hatta department of political economy the johns hopkins university baltimore md 21218 we thank the national science foundation grant no 524718 for partial financial support of the research underlying this paper the paper was written when brecher and hatta were visiting columbia university 1981 82 gratefully acknowledged are helpful comments and suggestions from john chipman avinash dixit jacques dreze robert feenstra jacob frenkel ronald jones murray kemp andreu mas colell michael mussa john riley lars svensson and robert willig from anonymous referees and from seminar participants at berkeley harvard minnesota rochester chicago and the university of california los angeles after the present paper was submitted for publication and following its presentation at rochester our attention was drawn to this appendix which was noticed by a student of ronald jones subsequently we learned from makoto yano that motoshige itoh had pointed out an important related paper by ryuotaro komiya and t shizuki 1967 whose condition 11 for the johnson case anticipated our equation 12 below we are grateful for having both of these references brought to our attention 2 gale constructs an example in which the donor is enriched along with the recipient furthermore this immediately implies that a reverse transfer will immis

competition for aid and trade policy this paper considers the optimal allocation of a given amount of foreign aid between two recipient countries it is shown that given consumer preferences a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own welfare in allocating aid if on the other hand the donor country allocates aid in order to maximize the sum of the welfare of the two recipient countries the result is just the opposite finally we analyze the situation where the recipient countries compete with each other for the given amount of aid it is shown that this competition tends to lower the level of optimal tariffs in the recipient countries

optimal policies and marketing board objectives abstract in this paper we examine optimal tax subsidy policies with export marketing boards that compete as oligopolists in world markets by taking a targeting approach to identifying optimal policies we are able to show how optimal policies vary with the objectives of board the nature of competition in world markets as well as assumptions about market segmentation and regulation in none of the cases examined does a marketing board without tax subsidy policy replicate the social optimum moreover we show that the policies necessary to attain the social optimum are quite different with the institutional variation considered arbitrage and regulation is the only case considered in which the optimal export policy is definitely a tax and in which the marketing board s objective does not affect policy

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

a reexamination of trends in primary commodity prices this paper conducts a reexamination of the prebisch singer hypothesis by employing the unit root test proposed by lee and strazicich 2003 and lee and strazicich 2004 that allow for up to two structural breaks given the higher power of these tests compared to the zivot and andrews 1992 and lumsdaine and papell 1997 tests rejection of the null can be considered as genuine evidence of stationarity the main findings of this paper are that eleven out of twenty four commodity prices are found to be difference stationary implying that shocks to these commodities tend to be permanent in nature the remaining thirteen prices are found to exhibit trend stationary behavior with either one or two structural breaks most of the commodities that do not exhibit difference stationary behavior seem to contain no significant trends there are fewer cases in relation to past studies of commodities that display negative trends thereby weakening the case for the prebisch singer hypothesis

likelihood ratio based tests for markov regime switching markov regime switching models are widely considered in economics and nance although there have been persistent interests see e g hansen 1992 garcia 1998 and cho and white 2007 the asymptotic distributions of likelihood ratio based tests have remained unknown this paper considers such tests and establishes their asymptotic distributions in the context of nonlinear models allowing for multiple switching parameters the analysis simultaneously addresses three di culties i some nuisance parameters are unidenti ed under the null hypothesis ii the null hypothesis yields a local optimum and iii the conditional regime probabilities follow stochastic processes that can only be represented recursively addressing these issues permits substantial power gains in empirically relevant situations besides obtaining the tests asymptotic distributions this paper also obtains four sets of results that can be of independent interest 1 a characterization of conditional regime probabilities and their high order derivatives with respect to the model s parameters 2 a high order approximation to the log likelihood ratio permitting multiple switching parameters 3 a re nement to the asymptotic distribution and 4 a uni ed algorithm for simulating the critical values for models that are linear under the null hypothesis the elements needed for the algorithm can all be computed analytically the above results also shed light on why some bootstrap procedures can be inconsistent and why standard information criteria such as the bayesian information criterion bic can be sensitive to the hypothesis and the model s structure when applied to the us quarterly real gdp growth rates the methods suggest fairly strong evidence favoring the regime switching speci cation consistently over a range of sample periods

the regional consequences of international trade with interregional capital mobility abstract this paper examines the resource allocation and welfare effects of international trade when a nation is composed of distinct regions and capital is mobile interregionally the introduction of capital mobility significantly alters the regional consequences of free trade it is shown for example that it is possible that the source of the nation s export expansion is the region that is at a technological disadvantage in the production of the export good also that region whose comparative advantage coincides with that of the nation as a whole may see its welfare decrease with free trade

free trade and global warming a trade theory view of the kyoto protocol this paper demonstrates how three important results in environmental economics true under mild conditions in closed economies are false or need serious amendment in a world with international trade in goods since the three results we highlight have framed much of the ongoing discussion and research on the kyoto protocol our viewpoint from trade theory suggests a re examination may be in order specifically we demonstrate that in an open trading world but not in a closed economy setting 1 unilateral emission reductions by the rich north can create self interested emission reductions by the unconstrained poor south 2 simple rules for allocating emission reductions across countries such as uniform reductions may well be efficient even if international trade in emission permits is not allowed and 3 when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions

role of agriculture in economic development revisited abstract while both malthus and ricardo viewed agriculture as impediments to economic progress mill and marshall argued that the effects of diminishing returns to land could be offset mill emphasized that the progress of civilization such as roads that reduced the cost of bringing products to market and policy improvements such as abolition of the corn laws provided substitutes for farm inputs marshall argued that population growth could for a long time through growth of organization and knowledge offset the effects of diminishing returns had the insights of colin clark dominated the policies of developing countries rather than the implications drawn from the dual sector models and the pessimistic views of prebisch agriculture s contribution to economic development would have been enhanced the efforts to tax agriculture to support import substitution policies reduced rather than increased economic growth agriculture has important contributions to make to economic development but must receive even handed treatment if the possible contributions are to be realized a major failure of all governments has been the unwillingness to recognize that agriculture is a declining industry and to adopt policies that would assist farm people to adjust to the decline in demand for farm labor

financial crisis and the great depression a regime switching approach i explore the timing of and effects of the u s financial crisis of the 1930s in a regime switching framework estimated conditional probabilities over the state of the financial sector suggest that a prolonged period of crisis begins not with the 1929 stock market crash but with the first banking panic of october 1930 these probabilities also suggest that the crisis persists until the introduction of federal deposit insurance in early 1934 consistent with the view that this financial crisis had real effects these conditional probabilities contain additional explanatory power for output fluctuations this is in addition to that provided by the money stock

high and volatile real interest rates where does the fed fit in the federal reserve s new procedures for the conduct of monetary policy introduced on october 6 1979 have been the subject not only of considerable academic and political interest but also of intense debate b friedman 1982 roley 1982 walsh 1982 1984 mascaro and meltzer 1983 among others the fed s new operating procedures generally are perceived to have resulted in abnormally high and volatile real interest rates and thus to have contributed to if not been totally responsible for the deepest recession in postwar history in this paper we address the following question was the advent of the increased volatility and level of the real rate of interest concurrent with the fed s october 1979 change in operating procedures that is was the real rate of interest high and more volatile immediately after the october 1979 change in policy procedures in which case we might infer a connection between the fed s change in policy procedures and the increased volatility and level of the real rate or did the real rate become high and more volatile some time following the policy change which might lead us to conclude that the increased volatility and the increased level of the real rate was connected to some other event s occurring after the october 1979 policy change

international capital transfers and the choice of production technique a simple two country model abstract a two country two factor two good world with incomplete specialization is explored in the context of international capital transfers where the techniques of production of the same good differ across sectors of the world economy it is shown that the terms of trade for the south will worsen with a capital transfer to the south under a wide range of assumptions about the nature of the technology used in the north owned sector of the south the implied redistribution of world income as well as the implications of a change in the production technique of the foreign owned sector of the south are then examined

structure conduct and performance a simultaneous equations investigation for the brazilian manufacturing industry the article investigated structure conduct performance scp relationships in the context of the brazilian manufacturing industry in 1996 for that purpose it considered a system with four equations pertaining concentration advertising r d and profitability that was estimated with simultaneous equation models in addition to the usual explanatory variables proxying barriers to entry and demand conditions the article considered organizational practices and incentive schemes variables the evidence indicated an important role for variables related to barriers to entry in affecting market structure an important and nonlinear effect of concentration on advertising a relevant impact of firm size on the propensity to exert r d effort and finally a significant positive impact of concentration on profitability and were similar to the previous evidence for developed countries additionally no important roles were detected for organizational practices and incentive schemes on the scp relationships

loan commitments and monetary policy abstract in this paper we examine the impact of loan commitment agreements on the way in which monetary policy affects the economy we estimate a vector autoregressive var model and find evidence of a smaller impact of monetary policy on loans made under commitment agreements than on loans not made under commitment our conclusion is that loan commitments effectively protect borrowers from quantity credit rationing and thus force monetary policy to work mainly through interest rate channels

the adjustment of expectations to a change in regime a study of the founding of the federal reserve the founding of the federal reserve system in 1914 led to a substantial change in the behavior of nominal interest rates the authors examine the timing of this change and the speed with which it was effected they then use data on the term structure of interest rates to determine how expectations responded their results indicate that the change in policy regime was rapid and that individuals quickly understood the new environment they were facing copyright 1987 by american economic association

optimal policies with strategic distortions abstract this paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive a targeting principle to identify optimal policies under imperfect competition is derived using the concept of a strategic distortion this allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature we show that optimal tax subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation

a global model of oecd aggregate supply and demand using vector autoregressive techniques this paper presents a vector autoregressive model of the aggregate oecd economy using a theoretical model of global aggregate supply and demand relationships between industrial production cpi money supply and energy prices are examined using f tests variance decompositions and impulse response functions the empirical results are consistent with theory energy prices influence output and the price level in the short run while money influences the price level in the long run despite data problems this approach appears to be a reasonable compromise between simple arima models and the very detailed link type models

recent trends in the terms of trade of jamaica 1955 86 the prebisch singer hypothesis of a long term deterioration in the commodity terms of trade of developing countries has evoked tremendous controversy in the literature most of the empirical work on the terms of trade is devoted to all developing countries this paper is country specific modern time series techniques have been used to test the perbisch singer hypothesis the empirical results for jamaica support the declining terms of trade hypothesis unit root tests indicate that jamaica s terms of trade is trend stationary finally the empirical evidence suggests that the decline in the terms of trade accounted for an annual loss of approximately 1 5 percent in jamaica s gdp

multilateral transfers export taxation and asymmetry abstract it has been established that under free trade transfers that are proportional to the trade volumes of recipient nations cannot immiserize them we investigate this result in the context of a three country model of export taxation by recipient nations proportional transfers can be immiserizing in the presence of fixed export taxes under nash welfare maximizing export taxes proportional transfers cannot immiserize the recipients consequences of asymmetry in size and in nash equilibrium tax rates are also explored the findings are relevant for developing nations who use export taxes and also receive foreign aid

on the tying of aid to tariff reform this paper considers the welfare effects of foreign aid that is tied to changes in the recipient s tariff by constructing a three country model with tariffs and by allowing for changes both in the amount of aid and in the tariff rates we are able to consider the welfare implications of two different rules of aid conditionality i a rule which leaves the donor s welfare unchanged and ii a rule which leaves the recipient government s total revenue unchanged it is shown that the tying of aid to a tariff reform can inter alia be used to ensure pareto improvement

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

the long run determinants of north south terms of trade and some recent empirical evidence abstract this paper reviews some recent evidence of the long run decline in the terms of trade of primary commodities versus manufactures in the context of north south trade this evidence is evaluated in the light of competing explanations of the sources of the observed long run trends in the context of a model of north south trade which includes a general resource labor and capital in the north and specific factors in a dual economy model of the south changes in factor supply sectoral and factoral bias in technical change biased demand conditions changes in the pattern of protection and institutional elements all play a role in determining the evolution of commodity and factor prices the lewis hypothesis of sectoral bias in the pattern of technical change towards temperate agriculture in the north and against tropical agriculture in the south is then reexamined in the light of the recent empirical evidence on terms of trade movements and some sketchy evidence presented on the patterns of bias in technical change in the north and the south the evidence is not consistent with an absolute technical change bias towards temperate agriculture in the north rather the rate of technical change in temperate agriculture is now comparable to that experienced in manufactures so that engel curve effects now assert the major downward pressure on the long run terms of trade between temperate agriculture commodities and manufactures overriding the effects of diminishing returns to natural resources as northern population expands the empirical evidence onbiased technical change in the south is much more sketchy and the evidence on various components of north south terms of trade is more varied

foreign ownership non traded goods and the effects of terms of trade changes on national welfare abstract this paper extends the theory of international trade in the presence of foreign ownership to incorporate non traded goods it is shown that with non traded goods national and aggregate welfare might move in opposite directions in response to a terms of trade deterioration even when national and aggregate trade specialization patterns coincide

causes of world trade growth in agricultural and food products 1951 2000 a demand function approach the objective of the present study is to analyse the causes of the growth of international agricultural and food trade in volume terms from 1951 to 2000 the results suggest that income growth has been the principal reason for this expansion while exchange rate stability and the real price of agricultural products played only a minor role multilateral trade liberalization and trade costs given their long term stability are not elements that could have stimulated their growth finally the intensive liberalization of trade which took place in various economic regions especially in europe became a key factor in promoting agricultural trade among the countries participating in regional trade agreements the study results also indicate that the determinants of trade growth for these goods were different to those for other goods and other periods

common features in economics and finance an overview of recent developments this introductory article offers an overview of some developments in the common features literature since the publication of the seminal article by engle and kozicki in the journal of business economic statistics in 1993 with the aim of highlighting the unifying theme of the contributions in this volume

the terms of trade between the united kingdom and british india 1858 1947 abstract the commodity terms of trade of the united kingdom with british india for 1858 1947 are calculated unit value indexes for a sample containing over three quarters of uk india trade indicate a slight improvement for the united kingdom from 1858 to 1917 this improvement was likely attributable to falling transport costs for british imports and was therefore not associated with a decline in india s terms of trade with britain for 1917 47 there was substantial uk terms of trade improvement a rise not due solely to declining transport costs and which ceteris paribus thus implied that india s terms of trade with the united kingdom deteriorated the 1917 47 uk improvement brought the amount of increase for the whole 1858 1947 period to an annual average of almost 1

the dynamic behavior of business loans and the prime rate a comment abstract in a recent paper published in this journal kling uses a vector autoregressive model to study the market for bank loans in the united states the paper s analytical method consisting of reduced form estimation orthogonal transformation of the residuals and innovation analysis suffers however from certain methodological difficulties that put its results and suggested interpretations into question the purpose of this note is to enlighten the nature of these problems through a simple example and to show that the evidence presented by the author is not sufficient to resolve them

the trend behavior of alternative income inequality measures in the united states from 1947 1990 and the structural break this article tests the hypothesis that the time series process of income inequality has experienced a structural break the timing of the structural break is treated as an unknown parameter to be estimated from the data because it is not possible to associate a single episodic policy event with the break year and to avoid bias in favor of a unit root hypothesis if the break was near the selected year for several measures of income inequality a segmented trend model is more appropriate to account for the fundamentals affecting the behavior of income inequality as opposed to a stochastic trend model

rational expectations econometric analysis of changes in regime an investigation of the term structure of interest rates abstract this paper is of interest both for its methodological contribution of new tools for analyzing rational expectations models and for its substantive conclusions concerning the term structure of interest rates during the monetary experiment of october 1979 the paper studies systems subject to changes in regime interpreted here as occasional discrete shifts in the parameters governing the time series behavior of exogenous economic variables the specification is shown to be quite tractable both theoretically and empirically the technique is used to analyze yields on three month treasury bills and ten year treasury bonds during 1962 to 1987 a constant parameter linear model for short term rates is shown to be inconsistent both with the univariate time series properties of short rates and with the observed bivariate relation between long and short rates under the expectations hypothesis of the term structure an alternative nonlinear model that admits the possibility of changes in regime affords a much better description of the univariate process for short rates moreover the cross equation restrictions implied by the expectations hypothesis of the term structure are consistent with the nonlinear specification indeed the residuals of the restricted relation have a standard error of only 0 8 basis points this is a third less than that of a completely unrestricted linear regression of long rates on short rates and compares with an unconditional standard deviation of long rates of 142 basis points i conclude that once the recognition by bond traders of changes in regime is taken into account the expectations hypothesis of the term structure of interest rates holds up fairly well for these data

money real interest rates and output a reinterpretation of postwar u s data this paper reexamines both monthly and quarterly u s postwar data to investigate if the observed comovements between money real interestrates prices and output are compatible with the money real interest output link suggested by existing monetary theories of output which include both keynesian and equilibrium models the major empirical findings are these 1 in both monthly and quarterly data we cannot reject the hypothesis that the ex ante real rate is exogenous or granger causally prior in the context of a four variable system which contains money prices nominal interest rates and industrial production 2 in quarterly data there is significantly more information con tained in either the levels of expected inflation or the innovationof this variable for predicting future output given current and lagged output than in any other variable examined money actualinflation nominal interest rates or ex ante real rates the effect of an inflation innovation on future output is unambiguously negative the first result casts strong doubt on the empirical importance of existing monetary theories of output which imply that money should have a causal role on the ex ante real rates the second result would appear incompatible with most demand driven models of output in light of these results we propose an alternative structural model which can account for the major dynamic interactions among the variables this model has two central features i output is unaffected by money supply and ii the money supply process is motivated by short run price stability this abstract was borrowed from another version of this item

profit margins and business cycles in the brazilian industry a panel data study the paper investigates the relationship between profit margins and business cycle in the brazilian industry during the 1992 1998 period taking as reference a dynamic panel data model founded around a conjectural variation framework the empirical results indicate procyclical behaviour of profit margins for the aggregate business cycle but is less clear in the case of sector specific business cycle variables among the most robust results one can highlight the roles of lagged profitability and import intensity and the negligible role of union density schmalensee in 1985 american economic review 75 pp 341 51 outlined three theoretical interpretations associated with the empirical model classical revisionist and managerial econometric tests on the related restrictions do not allow one to exclusively legitimate any of the three interpretations

a defense of traditional hypotheses about the term structure of interest rates expectations theories of asset returns may be interpreted either as stating that risk premia are zero or that they are constant through time under the former interpretation different versions of the expectations theory of the term structure are inconsistent with one another but i show that this does not necessarily carry over to the constant risk premium interpretation of the theory i present a general equilibrium example in which different types of risk premium are constant through time and dependent only on maturity furthermore i argue that differences among expectations theories are secondorder effects of bond yield variability i develop an approximate linearized framework for analysis of the term structure in which these differences disappear and i test its accuracy in practice using data from the crsp government bond tapes in a well known article in this journal cox ingersoll and ross cir 4 reexamine and find wanting certain hypotheses about the term structure of interest rates a striking feature of cir s re examination is that it is entirely theoretical cir show that different versions of the pure expectations theory of the term structure which traditionally were regarded as equivalent are in fact inconsistent with one another when interest rates are random furthermore in a fairly general continuous time arbitrage pricing framework when interest rates are random all versions of the theory except one are incompatible with equilibrium at first sight cir s results appear to be devastating to traditional empirical work on the term structure they suggest that researchers must specify arbitrage pricing models with a small number of state variables before proceeding to empirical work such models must restrict not only the deterministic components

explaining the failures of the term spread models of the rational expectations hypothesis of the term structure contrary to the predictions of the rational expectations hypothesis of the term structure of interest rates empirical evidence suggests that the term spread between long and short rates fails to forecast future movements of long term rates although its forecasts of future short term rates are in the correct direction in this paper the authors show that this puzzling behavior of the term spread alone can be explained by a time varying term premium that is correlated with the term spread once this is accounted for neither expression of the expectations hypothesis is against the predictions of the theory copyright 1997 by ohio state university press

the role of commodity prices in economic recovery the economic model which in my view is most likely to highlight the central problems facing the world economy is the one which looks upon the economic activities of the world as consisting of two large complementary sectors one is the primary sector which supplies food raw materials and energy all of which depend upon man s powers to exploit for his own use the natural resources of the planet the other main sector is the so called secondary sector which consists of the production of finished goods out of the products of the primary sector in a simple approxlmatlon we could refer to these two sectors as agriculture and industry but not all primary products are agricultural there are all the minerals and forms of energy such as coal and oil which are the result of mining what is common to all of them is that they are landbased activities in the production of which natural resources or simply land to use the classical expression play an important role industry on the other hand is dependent of the flows of supplies of primary products for the conversion of which it requires increasing amounts of labor and capital however the availability of labor and capital for industrial purposes cannot really be regarded as an effective limitation in itself except for short periods the conversion capacity of the numerous industries of the world can be treated as given at any one moment as the heritage of the past but over longer periods it can be increased almost indefinitely since on a global scale there are no practical limits to the increased employment of labor whilst the accumulation of capital through additional investment is but a facet of the increase in industrial production and a more or less automatic consequence of the increase in demand for manufactured goods the classical economists adam smith and his followers were undoubtedly on the right track when they made their predictions on the assumption that while the law of increasing returns applies in industry because the productivity of labor depends on the division of labor and the latter in turn depends on the size of the market the law of diminishing returns applies in agriculture because the most favorable opportunities are exploited first and any further enlargement of production implies exploiting the less favorable or less adaptable resources of nature hence their underlying pessimism based on the existence of ultimate limits to primary production which must bring all economic growth sooner or later to an end yet nowhere were the predictions of economists so completely falsified as in the prophecy of malthus and ricardo that with the growth of world population more and more of the world s labor and capital resources would be required to be devoted to agriculture leaving less available for industry and services on the contrary the last two hundred years witnessed despite the enormous population explosion a spectacular diminution of the share of economic resources devoted to agriculture and mining there can be no guarantee that this favorable trend will continue that it was so completely unforeseen was due to the failure to recognize that land saving or natural resource saving technological progress was so much more important quantitatively than the labor saving technical progress in the manufacturing industries this account gives a partial view however since the world production of primary commodities has not grown as fast as would have been required to raise the living standards of the world population at the same rate as those of the industrially developed countries which comprise only one

optimal export taxes in a multicountry framework abstract this paper extends the optimum export tax analysis to multicountry partial pe and general equilibrium ge frameworks using a computable general equilibrium cge model of the global cocoa market analyzing myopic optimum nash optimum and nash revenue maximizing taxes we show that optimum and revenue maximizing taxes obtained in the ge framework differ from their pe counterparts as they are determined not only by the elasticity of the residual demand curve facing the country but by domestic supply conditions as well second not only are nash revenue maximizing taxes higher than nash optimum taxes in the ge but paradoxically the society attains a higher level of welfare under nash revenue maximizing taxes than under nash optimum taxes finally we show that the frequent use of lerner symmetry lerner a p 1936 the symmetry between import and export taxes economica 11 306 313 in the policy oriented analysis of optimum export taxes is not warranted

structure conduct and performance a simultaneous equations approach a simultaneous equations framework is used to study the relationship between structure conduct and performance in us manufacturing in the 1980s and 1990s the paper expands on earlier structure conduct performance studies by using a lag structure to signify that structure conduct and performance do not affect one another contemporaneously findings support some aspects of the traditional structure conduct performance model but challenge others first the data suggest that industry structure does not depend on current industry performance second little evidence is found that industry conduct proxied by advertising is affected by industry structure third results show that industry performance does not depend on industry conduct though it is sensitive to industry structure the main findings are that 1 concentration does not depend on firm profitability though profitability depends on concentration 2 advertising follows a process that is independent of the factors considered here and 3 ad

a theory of involuntary unrequited international transfers the theory of involuntary international transfers war indemnities has been constructed on the assumption that the donor and recipient are completely indifferent to each other s well being the assumption is hard to justify since usually the transfers closely follow periods during which the countries have been dropping bombs on each other in the present paper we rework the theory on the more plausible assumption that the well being of each country is negatively influenced by the well being of the other country it is shown that contrary to the conventional theory the donor might benefit at the expense of the recipient even when local walrasian stability is imposed

growth welfare and optimal trade taxes a fallacy of composition abstract optimal export taxation rules out the possibility of immiserizing growth in a two country world thus productivity increases in the exporting sector must be welfare improving this paper shows that in a multicountry world such reasoning commits a fallacy of composition simultaneous growth of exporting nations can lead to welfare losses in the presence of unilaterally optimal export taxes also optimal export taxes can decline in response to such growth this result further strengthens the possibility of perverse welfare movements thus standard policy recommendations of increasing productivity in the exporting sector may lead to unintended and self defeating outcomes

optimal prediction of cyclical downturns abstract in the conventional way of visualizing economic time series the prediction problem does not dichotomize into predicting turning points and predicting conditional means yet the prediction of turning points has always been considered a separate issue in business cycle literature the paper first discusses these issues and then describes a model where the prediction of turning points does separate from the prediction of conditional means using the model an optimal way of predicting turning points is derived and applied to u s data the paper uses time series methodology and the theory of optimal stopping times

trends in the terms of trade of primary commodities 1900 1982 the controversy and its origins primary commodity markets have offered an opportunity for much economic debate on a number of key issues first secularly declining terms of trade of primary commodities are used to explain the widening gap between developing ldcs and developed countries dcs second they are regarded as a contributing factor to the creation of a structural condition of unequal exchange between a dominating industrial center and a dominated agrarian periphery and third they are thought to be a source of instability often causing financial vulnerability to foreign exchange equilibria and fragility to international market institutions

is there a unit root in the inflation rate evidence from sequential break and panel data models summary using sequential trend break and panel data models we investigate the unit root hypothesis for the inflation rates of thirteen oecd countries with individual country tests we find evidence of stationarity in only four of the thirteen countries the results are more striking with the panel data model we can strongly reject the unit root hypothesis both for a panel of all thirteen countries and for a number of smaller panels consisting of as few as three countries the non rejection of the unit root hypothesis for inflation is very fragile to even a small amount of cross section variation 1997 john wiley sons ltd

international capital mobility and commercial policy in an economic region abstract if two small countries are linked by capital movements then at low tariff levels any increase in capital flows induced by the commercial policy of either country will harm that country and benefit the other country while at low levels of international investment a tariff increase always harms the country levying the tariff nevertheless an increase in one country s tariff could benefit both countries by alleviating regional distortions in factor allocation if the countries liberalize factor movements within a customs union then conflicts must arise in choosing the level of the common external tariff

immiserizing transfers from abroad abstract this paper shows that an international transfer payment may paradoxically immiserize the recipient country or increase the donor country s welfare even when world markets are stable despite the traditional view that such a paradox theoretically requires market instability to demonstrate this paradoxical possibility the paper extends the conventional trade theoretic analysis to admit exogenous distortions created by tax cum subsidies in domestic production or endogenous distortions due to additionality requirements imposed by the donor on the recipient this analysis of immiserizing transfers from abroad immediately suggests significant implications for important policy issues including the evaluation of real benefits from foreign aid

the dynamic behavior of business loans and the prime rate abstract the purpose of this research is to determine the relevant variables channels of influence and dynamics characterizing the business loan market to achieve this goal the statistical approach of vector autoregressive time series analysis popularized by sims 1980 1981 and litterman 1979 is applied to a group of variables suggested by the portfolio and liability allocation problems of a representative bank and a representative business firm the variance and historical decomposition analyses suggest that innovations in the level of business inventories and commercial bank financial assets are the most important casual variables in the business loan market

stochastic processes for interest rates and equilibrium bond prices default free bonds represent in essence money sold forward the investor gives dollars say to the government now in exchange for a contract which promises to pay with probability one a given number of dollars at maturity and possibly a stream of intermediate coupon payments prior to maturity only recently have financial economists begun to examine the pricing of those bonds in a portfolio context in that framework nominal liquidity premiums or risk premiums on long term default free bonds are attributable to uncertainty about taste technological and price level changes which may occur prior to maturity of the bonds and prior to each coupon payment if any to the extent that the investor is unable to diversify away that uncertainty there is a systematic risk attached to the marginal utility which he or she can derive from the use in consumption or investment of the dollar payoffs on the bonds in some term structure models the instantaneous or short term rate of interest denoted here as a function of time t by r t in nominal terms and r t in real terms can be taken as a sufficient statistic1 for the source of systematic uncertainty about the marginal utility of the proceeds to be derived from defaultfree bonds maturing beyond the next instant e g merton 1974 vasicek 1977 cox ingersoll and ross 1977 specific assumptions about tastes technology and utility functions lead to specific equilibrium stochastic processes for the instantaneous short term riskless rate and longer term bond prices which are modelled as functionally dependent upon maturity and that short term riskless rate if a closed form solution exists for the long term bond price as a function of maturity and the short term interest rate it will be conditional inter alia on the parameters of the stochastic process for that short term rate marsh 1981 proposed that the closed form solutions could be tested in terms of the restrictions implied cross sectionally on the parameters of the time series process for the returns or prices of longer term bonds each with a given term to maturity for an analogy outside the term structure literature think of the closed form solution given by black and scholes 1972 for the price of an option on a nondividend paying stock with lognormal price dynamics given the model the cross section of time series for the changes in prices for each of the several options written on the same stock are not unrestricted their dispersion is functionally linked to the same volatility parameter for the stock price thus the option model including

simultaneous equations models of the structure performance paradigm abstract this paper is concerned with determining the dimension of the simultaneous equations model surrounding the basic profits concentration relationship a very general model is considered and then simplified using a simple test for exogeneity and it is concluded that the model is nonlinear in concentration and that simultaneous interaction occurs between profits and foreign competition variables

endogeneity in the concentration price relationship causes consequences and curses the ordinary least squares estimator of the effect of concentration on price is biased for two reasons first performance feeds back into structure causing a simultaneous equations bias second as a function of outputs or revenues measured concentration is correlated with determinants of price that are at best measured with error so measured concentration is correlated with the error term with panel data fixed effects procedures can be combined with instrumental variables to eliminate bias from both sources in concentration price regressions for the airline industry the bias can be substantial and negative copyright 1993 by blackwell publishing ltd

terms of trade shocks and economic performance 1870 1940 prebisch and singer revisited debate over trends in the terms of trade between primary commodities and manufactures their causes and their impact has dominated the literature for more than a century classical economists claimed that the terms of trade of primary commodities should improve since land and natural resources are always in inelastic supply following the great depression a new view emerged what came to be known as the prebisch singer thesis was instead that the terms of trade for primary products had deteriorated up to the 1950s the subsequent literature has almost exclusively and obsessively asked whether a deterioration has actually taken place over the 130 years following 1870 nowhere in this literature has the impact of these terms of trade shocks on long run growth been assessed although it is certainly full of lively speculation and debate this paper fills part of this empirical gap by constructing a country specific panel data base 1870 1940 by documenting terms of trade trends by country and region and finally by estimating the impact of the price shocks on long run economic performance we find the impact to have been asymmetric between center and periphery this abstract was borrowed from another version of this item