the infant export industry argument when actual consumption experiences are required to learn about a commodity s qualities subsidization of infant exporters can be justified as a first best policy measure this paper develops a dynamic model of optimal foreign market cultivation and examines the type and magnitude of trade intervention that is warranted and how this intervention adjusts over time it also focuses on changing production consumption and trade patterns as well as on welfare implications for individuals and society as the subsidization process unfolds international borrowing is allowed and is shown to cushion against severe welfare losses in the early phases of export subsidization l argument en faveur de la protection d une industrie d exportation dans la phase initiale de son developpement quand on ne peut apprecier les qualites d un bien qu en le consommant effectivement on peut defendre comme politique optimale les subventions aux exportateurs dans la phase initiale de production de leur bien ce memoire developpe un modele dynamique de mise en valeur optimale des marches etrangers et examine quel type d intervention est justifiee quelle intensite de support est necessaire et a quel moment cette aide doit etre modifiee a mesure que le temps passe l auteur examine aussi les implications pour la structure de la production de la consommation et du commerce de ce type d intervention ainsi que ses effets sur le niveau de bien etre des individus et de la collectivite l emprunt international permet d amortir le choc de pertes de bien etre importantes dans les phases initiales de la subvention des exportations

information and time of usage decisions in the bottleneck model with stochastic capacity and demand abstract this paper analyzes the effects of information on participation and time of use decisions for a facility subject to queueing congestion when there are predictable and unpredictable fluctuations in capacity and demand with constant elasticity demand and schedule delay cost functions expected social surplus is greater with perfect than with imperfect information but imperfect information can reduce welfare by inducing adverse changes in individuals times of usage this finding has implications for the design of emerging technologies such as advanced traveller information systems that provide information about usage conditions

output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

export industry policy and reputational comparative advantage abstract country of origin reputations are endogenized in this paper and it is shown that otherwise identical countries can be correctly perceived as differing in their percentage of high quality producers these self fulfilling reputations determine not only the average quality of a country s exports but also the type of products in which a country specializes hence the pattern of international trade can be determined by this reputational comparative advantage an inferior country of origin reputation leads to lower national welfare therefore several trade and industrial policies that can improve country of origin reputation are examined

special and differential treatment of developing countries and export promotion policies under the wto this paper explains the export promotion measures that can be utilized by developing countries under the current world trade organization wto system and compares the wto members proposals on modification of export promotion provisions in the doha development agenda dda negotiations non reciprocity between developed countries and developing countries in favour of the latter needs to be strengthened in modifying the current wto regulations concerning export promotion due to the extremely different levels of economic development between those two groups of countries therefore from the viewpoint of distributional fairness it suggests ways of modifying the special and differential treatment sdt provisions applied to export promotion policies of developing economies in the agreement on subsidies and countervailing measures of the wto

labour markets liquidity and monetary policy regimes dans leur etude les auteurs elaborent un modele d equilibre du mecanisme de transmission de la politique monetaire qui fait ressortir les elements de friction relatifs a l acquisition d information sur le marche de la monnaie et a la recherche d emploi

the role of export subsisies when product quality is unknown abstract we explore the role of export subsidies when foreign goods are initially of unknown quality to domestic consumers absent export subsidies entry of high quality firms may be blocked by their inability to sell at prices reflecting their true quality export subsidies can break this entry barrier and increase welfare moreover even when high quality firms find it possible to signal their quality to consumers through an introductory pricing strategy a rolefor government policy can arise the signal low introductory price transfers surplus from foreign producers to domestic consumers and can be avoided with an appropriate export tax subsidy policy

effects of demand uncertainty on optimal capacity and congestion tolls for urban highways abstract this paper presents an analytical treatment of the effect of uncertain demand on optimal highway capacity and congestion tolls the optimal capacity under conditions of uncertainty is larger relative to the mean level of road use than the capacity appropriate for the certainty case the optimal toll may be either larger or smaller depending on its effect on the variance of equilibrium road use

sticky price models of the business cycle can the contract multiplier solve the persistence problem we construct a quantitative equilibrium model with firms setting prices in a staggered fashion and use it to ask whether monetary shocks can generate business cycle fluctuations these fluctuations include persistent movements in output along with the other defining features of business cycles like volatile investment and smooth consumption we assume that prices are exogenously sticky for a short time persistent output fluctuations require endogenous price stickiness in the sense that firms choose not to change prices much when they can do so we find that for a wide range of parameter values the amount of endogenous stickiness is small thus we find that in a standard quantitative model staggered price setting alone does not generate business cycle fluctuations

location costs product quality and implicit franchise contracts abstract in the literature on international trade only little attention has been given to informational asymmetries between firms and consumers with respect to product quality the few economic models that analyze the question of how asymmetric information about product quality might affect trade flows treat product quality as exogeneous in contrast our model takes product quality as an endogeneous variable i e firms can choose the quality they wish to produce in this case location costs can signal product quality under certain conditions and thereby affect international trade flows more specifically intra industry trade in vertically differentiated experience goods can be determined by information asymmetries about product quality

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

endogenous business cycles and the dynamics of output hours and consumption abstract this paper studies the business cycle fluctuations predicted by a two sector endogenous business cycle model with sector specific external increasing returns to scale it focuses on aspects of actual fluctuations that have been identified both as defining features of business cycles and as ones standard real business cycle models cannot explain for empirically realistic calibrations of the degree of returns to scale the results suggest that endogenous fluctuations do not provide the dynamic element that is missing in existing real business cycle models jel e32

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

quality choice trade policy and firm incentives quality choice is examined in a duopoly with one foreign and one domestic firm where consumers have similar preferences for quality but different preferences for brands firms make quality commitments prior to choosing price and policy intervention assumes several forms the policy conclusions depend on whether firms face set up costs in raising product quality in the absence of set up costs both domestic and foreign firms make socially optimal quality choices in the presence of set up costs the foreign firm and often the domestic firm sets quality below the socially optimal level incomplete information alters these conclusions however copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a sunspot paradox abstract this paper shows that the local stability properties of dynamic general equilibrium macroeconomic models may depend on the length of a period in the model economy this leads to the following paradoxical situation the economy may be driven by sunspots for some decision frequencies while sunspots can have no impact at other decision frequencies

optimal export policy in the presence of informational barriers to entry and imperfect competition abstract this paper examines government intervention to help exporters overcome informational barriers to entry into foreign markets foreign consumers know the quality of a local good but not that of the imported substitute an exporter who chooses high quality needs to signal this choice to foreign consumers via a high introductory price export policy affects both the signaling distortion and competition between exporter and incumbent the signaling distortion may call for an export subsidy competition for an export tax which policy is adopted in equilibrium depends on industry characteristics over time the export tax tends to rise as the signaling distortion disappears

bayesian learning in an infant industry model abstract most analyses of the infant industry argument assume that production early on benefits subsequent production in deterministic fashion this paper presents an alternative framework for evaluating the infant industry argument that focuses on imperfect information as a barrier to entry initial entrants provide information of social value by reducing uncertainty for potential followers about the suitability of local conditions in contrast to earlier work i show that factors that increase the informational barrier to entry may lower the optimal subsidy to the infant industry and that the standard test of the success of infant industry policy is not always valid 1997 elsevier science b v

consistent high frequency calibration abstract economic models are meant to provide a framework to describe real world economic activities in principle how well a model performs this task can be evaluated by how close the model s simulated activities track the observed ones a necessary first step in simulating a model is to choose values for the model s parameters in accordance with actual economic data a fundamental problem in economic modelling however is that actual economic data are sampled at time intervals that are typically longer than the decision intervals of actual economic agents one popular resolution of this problem is to constrain the length of the decision intervals of theoretical economic agents to be equal to the length of the actual data sampling intervals this widely adopted approach makes it feasible to directly calibrate theoretical models to the observed data but it can introduce substantial biases in the models empirical performance as demonstrated by recent research that has allowed the decision intervals to be shorter than the data sampling intervals this alternative high frequency modelling approach however has brought with itself a fundamental issue that direct calibration of the models parameters is no longer feasible in response researchers have employed an ad hoc rule to transform commonly chosen lower frequency parameter values which can be calibrated directly from the available data to their high frequency counterparts we show in this paper that this standard transformation rule has three major drawbacks first it produces internal inconsistencies in steady state equilibrium conditions second it is sometimes at odds with microeconomic evidence and third it can result in inaccurate log linear approximations to the models true equilibrium solutions by worsening the fit of both the transition dynamic coefficients and the point of approximation itself we present here an alternative coherent transformation rule for calibrating high frequency models that directly addresses these three shortcomings we then use our consistent transformation rule to calibrate high frequency versions of two well known economic models and show how it improves these models empirical performance

has monetary policy become more effective we investigate the implications of changes in the structure of the u s economy for monetary policy effectiveness estimating a vector autoregression over the pre and post 1980 periods we provide evidence of a reduced effect of monetary policy shocks in the latter period we estimate a structural model that replicates well the economy s response in both periods and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy s volatility we find that by responding more strongly to inflation expectations monetary policy has stabilized the economy more effectively in the post 1980 period

reputational comparative advantage and multinational enterprise 1 introduction when cultivating a new export market or attempting to expand its share of an existing market an exporter is likely to find that it has been preceded by its reputation minus a readily identifiable brand name quality reputation may solely reflect the country of origin for example when consumers are presented with a large amount of complex product information they may use the country of origin as a heuristic in forming product impressions without considering other product attributes 1 in this article i show that this heuristic decision making process can affect a firm s quality decision and can therefore become self fulfilling hence any bias that consumers have may be well founded however it is only correct because firms respond rationally to it colombia s garment industry provides an interesting example of a self fulfilling unfavorable quality reputation in international trade as described by morawetz 1981 a single colombian garment firm took a contract for 50 000 men s suits that was beyond its capability the poor quality result so tarnished the american importer s name that other high quality importers become wary of colombian sewn garments with the payoff to high quality production reduced colombian garment firms then concentrated on low quality markets and the newly found unfavorable reputation was justified in the model constructed here consumers see only a noisy signal of the product s quality at the time of purchase therefore their posterior beliefs are based on this noisy signal and the country of origin reputations as will be made clear higher quality firms benefit more from an increase in their country s reputation so that a better reputation generates an increase in the percentage of high quality firms in this way the reputation becomes self fulfilling and ex ante identical countries can be correctly perceived as differing in their percentage of high quality producers i next introduce an economy with two sectors one sector produces more complex goods where high quality is not easily verified and is more essential to the product s performance these may be technology intensive products or they may consist of the design and marketing of the goods produced in the other sector in particular high quality production costs and the consumer s value for high quality goods is greater in this sector i show that this sector becomes more profitable as the country of origin reputation increases hence if one country s equilibrium reputation is low and the other country s equilibrium reputation is high then the pattern of specialization and international trade can be determined solely by reputational comparative advantage 2 finally i show that reputational comparative advantage can overshadow a small technological comparative disadvantage in determining the pattern of international trade given this pattern of trade and specialization based on reputational comparative advantage a high reputation firm may expend resources to establish a multinational enterprise mne in the low reputation country for example many mne products require the differing specializations of both the high and low reputation countries although differing in motivation this result accords well with more traditional models of vertical mne 3 however this impetus for mne as well as its more traditional counterparts does not explain why the mne would choose foreign direct investment fdi over a less costly licensing arrangement 4 the quality uncertainty in this model along with the difference in equilibrium reputations allows us to address this question in particular appropriable reputational rents are generated by fdi when the high reputation parent firm procures and internalizes production with a low reputation host firm this fdi breaks the low reputation equilibrium of the host firm and generates reputational rents

conceptual issues in the design of trade policy for industrialization abstract this paper considers the following question starting from first principles what kind of a case can be made for an industry oriented trade policy and what would such a policy look like the answer lies in an explicit consideration of specific market failures and externalities which in the absence of corrective policies may leave industry in command of a socially suboptimal share of the economy s resources the paper considers such market failures and the role that trade policy can play in addressing them special attention is paid to a the appropriate level of protection b price versus nonprice measures c the role of targeting selectivity and uniformity d the stability of incentives over time and e the qualitative aspects of trade regimes

the role of r d subsidies when incomplete information is an entry barrier abstract this paper explores the role of r d subsidies in the presence of incomplete information we consider a market for experience goods where a firm s r d investment determines the quality of its product but where quality becomes observable to consumers only through experience with the product in this model externalities emerge in that individual firms cannot fully appropriate the benefits of their quality enhancing investment outlays we show that an r d subsidy can internalize this externality and characterize optimal infant industry intervention in this setting

trade policy with several goods and market linkages abstract in this paper we demonstrate a substantial role for trade policy in a competitive model finding that a an export subsidy may benefit the exporting country b a voluntary export restraint may benefit the importing country and c a countervailing duty may benefit the importing country even if it has no effect on the foreign price of that good these results are in sharp contrast to the conventional wisdom from two good or partial equilibrium models and are derived in a framework of several goods the pattern of substitution and complementarity across goods or market linkages determines the role for trade policy

new developments in trade theory and ldcs abstract this paper surveys the new literature on international trade relevant to the north south controversy in the first part two types of north south models are considered the unequal exchange theory of lewis and emmanuel and the models of dynamic interaction of findlay taylor and others the analysis focuses on the determinants of growth the terms of trade and relative employment in the world economy in the second part the paper reviews the empirical literature on south north and south south trade and the theories of north south technological gaps intra industry trade and external economies finally we analyze the literature on exports and economic growth and the neo classical keynesian and disequilibrium approaches to the theory of import controls

information effects in transport with stochastic capacity and uncertainty costs in this paper the impact of information provision to travelers using a model based on a stochastic equilibrium concept is analyzed a new analytical framework is proposed by including a specific term related to the costs of travel time uncertainty per se into the generalized cost function different driver information models are analyzed to assess the efficiency improving features of driver information systems compared with the optimal first best policy of road pricing the results reveal that the potential of driver information systems as an efficiency improving policy instrument are underestimated if costs of uncertainty are ignored coauthors are erik t verhoef peter nijkamp and piet rietveld copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

endogenous vs exogenously driven fluctuations in vintage capital models in this paper we present a particular case of the creative destruction model of caballero and hammour quart j econ 111 1996 805 851 in which both exogenous and endogenous fluctuation sources are present we show that job creation follows a delayed differential equation with periodic coefficients the delay is equal to the optimal age of capital goods the period of the coefficients is equal to the period of an exogenous profitability cycle we mathematically show that job creation is asymptotically periodic with the same period as the profitability cycle furthermore using an explicit numerical method we find that replacement echoes generally dominate the short run dynamics finally we find that the combination of the two fluctuations sources favors the appearance of asymmetries in job creation and job destruction patterns

economics of a bottleneck abstract drawing on vickrey amer econ rev 59 251 261 1969 and subsequent literature this paper provides a thorough economic analysis of the simplest bottleneck model of road congestion with peak load demand in the morning rush hour a fixed number of identical individuals one per car must travel from home to work between which is a bottleneck of given capacity the costs of travel include queuing time and schedule delay time early or late for work the frequency distribution of departure times adjusts so that in equilibrium all individuals have the same travel costs the paper extends the previous literature by examining a coarse toll and solving for optimal capacities the application of congestion tolls can generate efficiency gains by altering the frequency distribution of departure times previous estimates of the efficiency gains from congestion tolling are likely to be substantially downward biased because they have ignored this effect