money demand and quantity constraints evidence from the soviet interview project i introduction there are more than 500 studies of money demand that use time series or pooled data but less than twenty studies that use cross section data time series studies use a limited number of aggregate variables such as income and wealth cross section studies supplement income and wealth with socioeconomic and demographic variables to provide insights that cannot be detected in aggregate data most studies of money demand are for capitalist countries only a few studies exist for socialist countries there are no cross section studies of the demand for money for socialist countries due to lack of data population censuses of the former soviet union did not provide information on household money and wealth pickersgill 1970 and millar 1987 however the soviet interview project sip survey conducted in 1983 provides a large cross section data set of former soviet citizens sip is a retrospective survey of 2793 former soviet citizens who left the soviet union for the united states during the late 1970s and early 1980s the sip survey asked respondents about their last normal period of life in the soviet union for most respondents this was in the late 1970s a period of normal functioning of the administrative command system sip provides a rich database of conventional variables and includes information on rationing eiar variables and other soviet specific variables eiar variables measure shortages participation in the underground economy and access to privileges we examine the effects of eiar factors on the demand for money in addition to conventional variables to obtain a picture of money demand near the end of the administrative command era this paper makes two contributions it is the first to examine the demand for money in a centrally planned economy using cross section data which tests variables other than income and interest rates second this study empirically investigates the effects of income on the marginal utility of income under rationing by studying how quantity constrained respondents may use trade in convertible foreign currencies or barter when income increases thereby lessening money s role as the medium of exchange the ongoing transformation of the former soviet union to a market economy and political pluralism is not an easy process for policymakers the findings of this study of the behavior of households may be useful in setting monetary policies see also collier and mokhtari 1989 ofer and vinokur 1992 mokhtari and gregory 1993 and mokhtari and asgary 1993 policymakers must know the responses of households to changes in quantity constraints underground economic activity and privileges and to other factors during the transition period and beyond moreover our findings may be useful for researchers who investigate the behavioral differences in the money demand of households in two different economic systems ii past research in the administrative command economy money is held for transaction and precautionary purposes private capital markets are absent investment decisions are made by the government money serves as a medium of exchange and income should be the prime determinant of the demand for money under these conditions money should be a necessity and the income elasticity of demand for money should be positive and less than or equal to one other than income we would expect the demand for money in the soviet union to have different determinants than in capitalist countries first capital markets are absent the interest rate is not the opportunity cost of money second consumer good shortages quantity constraints should affect the transaction and the precautionary demand for money 1 households may substitute money for goods to be able to purchase goods in the future at state prices purchase goods from the underground economy at higher prices or reduce their labor supply barro and grossman 1971 1974 1976

the dynamics of urban traffic congestion and the price of parking we consider commuting in a congested urban area while an efficient time varying toll may eliminate queuing a toll may not be politically feasible we study the benefit of a substitute a parking fee at the workplace an optimal time varying parking fee is charged at zero rate when there is queuing and eliminates queuing when the rate is non zero within certain limits inability to charge some drivers for parking does not reduce the potential welfare gain drivers who cannot be charged travel when there is queuing in some cases interaction between morning and evening commutes can be exploited to remove queuing completely

commuting transport tax reform and the labour market employer paid parking and the relative efficiency of revenue recycling instruments in this paper the welfare effects of a budget neutral increase in taxes on car commuters are studied in a model that takes into account the presence of employer paid parking at the workplace it is found that the presence of employer paid parking substantially increases the welfare effect of such a tax reform independent of the use of the revenues congestion taxes not only correct congestion externalities they also reduce the inefficiency caused by employer paid parking moreover different congestion effects of alternative recycling instruments and the presence of employer paid parking jointly imply that recycling the tax revenues via higher public transport subsidies may yield much more favourable welfare effects than previously believed it can easily outperform recycling the tax revenues via lower labour taxes finally cashing out parking costs to public transport users is found to generate substantial positive welfare effects numerical analysis confirms the theory

revisiting minimum quality standards abstract this paper revisits the issue of minimum quality standards in a model of quality uncertainty different from leland s minimum quality standards are shown to conflict with the revelation principle s truthtelling requirements thus minimum quality standards in that model cannot be a component of the constrained paretian solution outcome

product differentiation and asymmetric information in agricultural and food market defining the role for government discussion this timely session addresses the very important issue of the role of governments in establishing standards and labeling requirements in the changing environment of the agricultural sector with product differentiation becoming a central feature of the domestic and global food system quality and quality assurances are important to both producers and consumers however if quality characteristics cannot be observed by consumers there is potential for market failure to avoid or minimize such failures standards and regulations are administered by the government however the effects of government policies addressing the potential for market failures are often difficult to assess the four papers in this session all address some aspects of food quality regulations and the role of government from the role of the usda agricultural marketing service ams in setting standards and inspections to the role of the federal trade commission ftc in regulating information passed on to consumers through advertising these papers suggest that the government does a pretty good job of regulating quality standards however there are several issues that have been largely ignored and can have significant impacts on the cost benefit evaluations of standards and regulations one important area that was mentioned only briefly in the paper by gardner is the potential for standards and regulations of creating market power market power can have significant effects on product innovation price variability and other factors

the direction of developing country trade empirical evidence of differences between south south and south north trade abstract declining market opportunities in northern markets led to views that greater south south trading might provide an alternative growth stimulus this paper analyses the characteristics of south south trade in manufactures and recent changes in the level of such trade to help clarify the potential of greater self reliance within the south south south trade is found to be more intensive in the use of both physical and human capital hence less rational from the static comparative advantage viewpoint than south north trade there is indirect but strong evidence that exporting countries with greatest orientation towards the south are those with greater distortions less rapid movements up the ladder of comparative advantage and weaker export performance finally it is observed that the recent boom in south south trade is largely explained by simple market size effects very rapid growth of rich oil exporters and the faster gnp growth of developing compared to developed countries the paper concludes that while south south trade of about the present magnitude one of greater developing country exports is certainly rational there is little evidence to support views that greater south south trade should be especially promoted arguments of dynamic comparative advantage may favor south south trade but so far these have been more speculative and not yet well researched empirically

sources of changes in factor intensity of trade the factor proportions hypothesis of trade theory has been the subject of a large number of empirical tests but few of them have analyzed the changes in the factor content of trade in a country over time or across countries this study analyzes the changes in factor intensity of trade in mexico japan korea taiwan and israel during the 1960s it traces back the changes in capital labor ratios in the production of exports and import substitutes to variations in the sectoral composition of trade changes in factor output ratios and changes in input output coefficients

cross country estimates of the demand for money and its components the demand for money aggregates m1 m2 and their components currency demand deposits and time deposits are estimated using a sample of 103 countries at two time periods money demand is found to be affected by age literacy industrial development and political structure as well as income and inflation this expanded demand function helps to explain the considerable changes in money demand that have occurred over long periods and the large variation in money demand found across countries the knowledge thus gained is useful for understanding differences in monetary and taxation policies across countries

age structure and inflation a wicksellian interpretation of the oecd data wicksell s cumulative inflation process is founded on the separation of investment and saving decisions the demographic age structure influences the aggregate of both these decisions and therefor

taste change in the united kingdom 1900 1955 a search is made for violations of the axiom of revealed preference in aggregate consumption data for the united kingdom no such violations are found this is taken as evidence that tastes remained constant throughout the period under study the strength of this evidence is estimated within the context of a particular model of taste change

a temporal and spatial equilibrium analysis of commuter parking abstract this paper examines the effects of parking availability on morning rush hour congestion and assesses the relative efficiency of road tolls and parking fees without pricing drivers occupy parking in order of increasing distance from the cbd a time varying toll can prevent queueing but does not affect the order in which parking spots are taken optimal location dependent parking fees may be superior they do not eliminate queueing but induce drivers to park in order of decreasing distance from the cbd thereby concentrating arrival times closer to work start times competitively set parking fees do nothing to reduce queueing and are relatively inefficient

rent seeking in international trade the great tomato war this paper presents a model of international rent seeking activities by producers in both exporting and importing nations the model is applied to the winter vegetable trade between the united states and mexico an analysis is made of the attempts to form export import coalitions reasons for these failures are given due to past failures to impede trade essentially free trade in winter vegetables between the two countries exists

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

refuting two claims about virtual water trade abstract using the heckscher ohlin trade model i refute two prominent but incorrect claims on virtual water trade these claims are that virtual water trade i levels uneven water distribution and ii reduces the potential for water conflict both claims are based on an incorrect understanding of comparative advantage in the production of water intensive goods the results show that both claims only hold under certain conditions but do not necessarily follow from the heckscher ohlin trade model

the search for a stable money demand function a survey of the post 1973 literature phe question of whether the demnand function for money is stable is one of the most important recurring issues in the theory and application of macroeconomic policy what is being sought in a stable demand function is a set of necessary conditions for money to exert a predictable influence on the economy so that the central bank s control of the money supply can be a useful instrument of economic policy as such the notion of a stable demand function appears to involve three key elements e g john t boorman 1976 p 317 and david e w laidler 1977 pp 34 35 first the demand for money relation should be highly predictable in a statistical sense as measured by the usual goodness of fit statistics precision of estimated coefficients and presumably its ability to forecast accurately out of sample second a stable demand function for money has relatively few arguments a relationship that requires knowledge about a large number of variables in order to pin it down is in effect not predictable finally the variables that appear as arguments in the function should represent significant links to spending and economic activity in the real sector in sum a stable demand function for money means that the quantity of money is predictably related to a small set of key variables linking money to the real sector of the economy the importance of a stable money demand function for monetary policy can be illustrated with the standard is lm model in which interest rates and gnp are the endogenous variables in this context a stable demand function for money translates into a well defined relationship between money interest rates and gnp

a political economy model of road pricing abstract in this paper we use a simple majority voting model to study the introduction of urban congestion tolls the model allows for different types of uncertainty and considers different uses of the toll revenues the following results are obtained first we show that individual uncertainty with respect to modal substitution costs may imply that a majority votes against road pricing ex ante although a majority would have been in favor after its introduction ex post moreover if a majority is against road pricing ex ante there will also be no majority for organizing an experiment that would take away the individual uncertainty second political uncertainty with respect to the use of the revenues corroborates the finding that ex ante more voters will be against the introduction of tolls third both types of uncertainty suggest that fewer voters are against road pricing when toll revenues are used to subsidize public transport than when they are redistributed to all voters importantly the results of this paper are consistent with a number of recent empirical observations on efforts to introduce road pricing including the systematic rejection of road pricing in referenda the more favorable attitudes towards road pricing after than before its introduction and tying the toll revenues to support public transport

impacts of minimum quality standards imposed through marketing orders or related producer organizations we analyze the impacts of minimum quality standards mqs imposed by producers acting collectively through a producer organization such as a marketing order mqs imposed in a competitive market can never enhance social welfare because in general an mqs creates two deadweight losses one due to inefficient enhancement of product quality and a second due to wastage of the low quality product any mqs that a competitive industry implements based upon a profit criterion causes all consumers in the market to be harmed however an mqs may be preferred relative to supply control as a second best instrument for transferring income to producers

factor trade and goods trade world equilibria with trade in both goods and some factors are studied when international factor endowment differences are the cause of trade a generalized heckscher ohlin theorem is presented the goods trade patterns with and without factor trade are compared factor trade and goods trade tend to be substitutes complements if traded and non traded factors are cooperative non cooperative

high tech and productivity evidence from israeli industrial firms abstract the main purpose of this study is to characterize and analyze high technology industrial firms a technology index is constructed and used to classify firms the largest concentration of hightech firms is israel is found in electronics and transport equipment industries and the lowest in textiles and clothing high tech firms appear to be more productive more export oriented pay higher wages and earn higher rates of return than low tech firms the fact that high tech firms in israel are export oriented is shown to be consistent with the international trade theories of comparative advantage and strategic rent seeking

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

new products and the factor content of international trade this paper extends the multicommodity two input version of the heckscher ohlin model to include new products on which considerable interest has been focused by the product cycle hypothesis and related analyses the extended model is then used to reexamine the implications of relative factor abundance for the capital and labor content of international commodity trade as this analysis shows the presence of new products might in principle resolve the leontief paradox under certain specific conditions

comparative advantage in manufactured goods a re appraisal japanese input coefficients are used to investigate the pattern of comparative advantage in the exportation of manufactured products in a cross country framework estimates are made for the imports of manufactured products as well as for net exports also alternative techniques of estimation are utilized and an attempt to explain the residuals in the regression equations and to indicate the predictive power of these equations is made the paper shows that patterns of comparative advantage in manufactured goods can be explained by reference to commodity characteristics and country characteristics in turn intercountry differences in the extent of trade orientation the concentration of exports and foreign direct investment explain part of the residuals of the cross country regression equations finally it has been found that the method applied permits projecting the factor intensity of trade for individual countries

winning or losing from dynamic bottleneck congestion pricing the distributional effects of road pricing with heterogeneity in values of time and schedule delay abstract this paper analyses the efficiency and distributional impacts of congestion pricing in vickrey s 1969 dynamic bottleneck model of congestion allowing for continuous distributions of values of time and schedule delay we find that congestion pricing can leave a majority of travellers better off even without returning the toll revenues to them we also find that the consumer surplus losses or gains from tolling are not strictly monotonic in the value of time because they also depend on the value of schedule delays the greatest losses are not incurred by drivers with the lowest value of time but by users with an intermediate value of schedule delays and the lowest value of time for that value of schedule delays for second best pricing with an untolled alternative the pattern of distributional effects is quite similar to that for first best pricing in contrast with results from prior static models users who are indifferent between the two alternative routes are not the ones who gain least from this type of second best pricing our results suggest that in assessing the distributional impacts of road congestion pricing it is important to take into account both the distribution of the value of time and of the value of schedule delays as well as the dynamics of departure time choice

the role of tax bases and collections costs in the determination of income tax rates seigniorage and inflation a growing theoretical literature on optimal taxation predicts that governments will set the tax rates on money holdings and on more traditional tax bases to minimize the deadweight losses of collecting government revenue under the presumption that relative collection costs and tax bases have not changed significantly over time the empirical time series seigniorage literature has focused on the theory s tax smoothing implication finding only weak support we show that changes in collections costs and tax bases played an important role in the determination of tax composition and find stronger support for tax smoothing when this is taken into account

firless firwoes how preferences can interfere with the theorems of international trade abstract an example is presented of a two country two factor four good trade model in which free trade causes factor prices to be drawn farther apart than they were in autarky the example is equivalent to a two good model with a double factor intensity reversal fir and thus demonstrates that the problems associated with firs can arise in many dimensions without them these problems include the undermining of other trade theorems as well and can be avoided only by making some assumption about demand as well as about technology for example the model becomes well behaved if preferences and technology are both cobb douglas

the commodity pattern of trade and the heckscher ohlin theorem in the presence of aggregate and commodity specific factor intensity reversals abstract theoretical analyses of the h o theorem s prediction of the commodity pattern of trade in the multicommodity two factor model tend to assume away factor intensity reversals but the empirical literature has investigated whether reversals between individual goods technologies are prevalent phenomena with the evidence then being presented as bearing upon the h o theorem since the consequence of a factor intensity reversal for the theorem is well defined in the 2 2 2 model we establish via aggregation over individual goods technologies an analogue 2 2 2 setting for the multicommodity model the implications of factor intensity reversals in commodity specific technologies for the reversal behavior of the aggregate technologies and for the h o theorem are examined commodity specific reversals such as are the focus of the empirical studies are shown to have no direct bearing upon the theorem

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

random queues and risk averse users we analyse nash equilibrium in time of use of a congested facility users are risk averse with general concave utility queues are subject to varying degrees of random sorting ranging from strict queue priority to a completely random queue we define the key no residual queue property which holds when there is no queue at the time the last user arrives at the queue and prove that this property holds in equilibrium under all queueing regimes considered the no residual queue property leads to simple results concerning the equilibrium utility of users and the timing of the queue

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

a median voter analysis of variations in the use of property taxes among local governments this paper explores the variations among local governments in the composition of tax revenues or more specifically in the relative use of property taxes using a median voter framework various hypotheses are developed concerning the factors that should influence the relative use of property taxes a cross sectional sample of central cities is employed to test the hypotheses the empirical results are consistent with the hypotheses

factor content functions and the theory of international trade this paper introduces the concepts of direct and indirect factor trade utility functions and uses them to derive marshallian and hicksian factor content functions which express the quantities of factors of production embodied in net imports as functions of the exogenous variables facing the economy the properties of these functions are discussed and they are used to derive a number of new results in particular it is shown that in certain circumstances the existence of gains from trade is sufficient for the heckscher ohlin theorem to hold in its factor content form

the long run behavior of the income velocity of money in five advanced countries 1870 1975 an institutional approach the income velocity of money in canada the united states great britain norway and sweden displays a u shaped pattern over the last one hundred years this paper presents and tests empirically an explanation for this secular pattern emphasizing the influence on velocity of institutional changes the inclusion into a simple velocity function of institutional developments such as the process of monetization the spread of commercial banking financial development and the growth of economic stability improves the explanation of long run movements in velocity provided by a regression of velocity on real permanent income per head and the interest rate

two by two international trade theory with many goods and factors this paper adopts a new approach to the problem of generalizing the properties of the two by two heckscher ohlin model asking whether we can obtain results which hold in very general models for dichotomous categories of commodities and factors using duality theory some results of this kind are derived which generalize certain properties of the heckscher ohlin model to models which allow for any number of goods and factors joint production international factor mobility and substitution between primary factors and intermediate inputs the consequences of assuming sector specific factors and equal numbers of goods and factors are also examined

the london congestion charge by the 1990s the average speed of trips across london was below that at the beginning of the twentieth century before the car was introduced and by the end of that decade public concern over levels of traffic congestion was high in early 2003 london imposed a congestion charge a daily charge for driving or parking a vehicle on public roads within central london between the hours of 7 00 a m and 6 30 p m on workdays traffic congestion has declined substantially and the program is largely popular this article describes the origins of the london congestion charge how it overcame practical and theoretical difficulties and what effects it has had the introduction of the london congestion charge is in important respects a triumph of economics it represents a high profile public and political recognition of congestion as a distorting externality and of road pricing as an appropriate policy response

marketing orders as nontariff trade barriers previous analysis shows that under autarky all groups must lose from minimum quality standards with symmetric information we find that with international trade it is possible for one country to gain by introducing minimum quality standards however it is not possible for both countries to gain from the standards this result implies that minimum quality standards are nontariff trade barriers using the walter and baldwin criteria

the welfare implications of minimum quality standards previous analysis of the social welfare implications of minimum quality standards has yielded no decisive results in this paper the specific nature of consumer and producer responses to quality standards is incorporated into the analysis both consumer and producer gains are shown to be impossible when consumers can perceive quality before purchase even if low quality produce is diverted to secondary markets standards unambiguously reduce net social benefits the paper explores the possibility that minimum quality standards are a form of rent seeking behavior