trade openness tax reform and tax revenue in developing countries this article investigates empirically whether the effect of tax reform involving the progressive replacement of trade tax revenue with domestic tax revenue in developing countries tax revenue performance measured by tax revenue to gdp ratio depends on the degree of trade openness of these countries the analysis has used an unbalanced panel data set of 95 developing countries over the period 1981 2015 and the two system gmm approach results suggest that tax reform is positively and significantly associated with tax revenue performance in developing countries with the magnitude of this positive effect increasing as countries experience a higher development level additionally and more importantly countries that further open up their economies to international trade enjoy a higher positive effect of tax reform on tax revenue than countries that experience a lower degree of trade openness therefore these findings should help dissipate the concerns of policymakers in developing countries that greater openness to international trade would further erode their tax revenue including by lowering their international trade tax revenue in fact the implementation of an appropriate tax reform in the context of greater trade openness would generate higher tax revenue while concurrently allowing countries to reap the well known benefits of international trade

economic roots of political conflict the case of sri lanka the escalation of political conflicts in many developing countries and their impact on economic development have been topical issues in recent development literature the overwhelming emphasis on ethnic conflicts in the literature has however precluded analysts from looking at political conflicts beyond their ethnic dimension in the wider context of the development process in particular because of the preoccupation with ethnic roots as the prime source of these conflicts reverse causation running from economic policy to political conflict has been virtually ignored in the debate the purpose of this paper is to fill this gap through an in depth case study of the twin political conflict in sri lanka the tamil separatist war in the north and the sinhala youth uprising in the south with emphasis on its economic roots the findings suggest that fundamental contradictions in the national development policy in the restrictive trade regime of sri lanka were at the heart of the country s twin political conflict

trade taxes and debt repayment in sri lanka the purpose of this article is to estimate the cost of taxing the export import or domestic sectors of sri lanka for the purpose of reducing the national debt a simple gnp model is used to estimate the elasticities that characterise the three aggregate sectors and are used to simulate the effects of taxing for debt servicing the results show that a tax on the import sector generates the largest net savings on trade balance and that the savings from not importing can be substantial however for the period 1977 87 a 10 0 per cent tax on the import sector caused a decline in the growth of the economy by 3 0 per cent the burden of the tax falls heavily on the domestic sector in terms of lost production and increased unemployment

an empirical analysis of life cycle fertility and female labor supply this paper examines us household fertility and female labor supply over the life cycle using data from the panel study of income dynamics the authors investigate how maternal time inputs and market expenditures on offspring as well as the benefits they yield their parents vary with ages of offspring and influence female labor supply and contraceptive behavior the econometric framework combines a female labor supply model and a contraceptive choice index function it also accounts for the fact that conceptions are not perfectly controllable events using longitudinal data on married couples the authors estimate these equations and test alternative specifications of the technologies governing child care the findings suggest that while parents cannot perfectly control conceptions variations in child care costs do affect life cycle spacing of births furthermore the results demonstrate the gains of modeling the linkages between female labor supply and fertility behavior at the household level authors modified

adjustment trade policy and investment slumps evidence from africa abstract this paper presents a model of investment in six african economies over the 1970s and 80s paying particular attention to the impact of the policy reforms which have accompanied structural adjustment programmes a priori the impact of trade reform on investment can be positive or negative in practise there is some evidence that it might be negative

a factor analytic probit model for representing the market structure in panel data internal market structure analysis infers both brand attributes and consumer preferences for those attributes from preference or choice data the authors exploit a new method for estimating probit models from panel data to infer market structures that can be displayed in few dimensions even though the model can represent every possible vector of purchase probabilities

comparing the post earnings announcement drift for surprises calculated from analyst and time series forecasts post earnings announcement drift is the tendency for a stock s cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks following an earnings announcement we show that the drift is significantly larger when defining the earnings surprise using analysts forecasts and actual earnings from i b e s than when using a time series model based on compustat earnings data neither compustat s policy of restating earnings nor the inclusion of special items in reported earnings contribute significantly to the disparity in drift magnitudes rather our results suggest that this disparity is attributable to differences between analyst forecasts and those of time series models or at least to factors correlated with these differences further we document that analyst forecasts lead to return patterns around future earnings announcements that differ from those observed when using time series models suggesting that the two types of surprises may capture somewhat different forms of mispricing

do switching costs make markets less competitive abstract the conventional wisdom in economic theory holds that switching costs make markets less competitive this article challenges this claim the authors formulate an empirically realistic model of dynamic price competition that allows for differentiated products and imperfect lock in they calibrate this model with data from frequently purchased packaged goods markets these data are ideal in the sense that they have the necessary variation to identify switching costs separately from consumer heterogeneity equally important consumers exhibit inertia in their brand choices a form of psychological switching cost this makes the results applicable to the broad range of products that are distinctly identified i e branded rather than just to products for which there is a product adoption cost or explicit switching fee in the simulations prices are as much as 18 lower with than without switching costs more important equilibrium prices do not increase even in the presence of switching costs that

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

job exit behavior of older men a dynamic programming model of job exit behavior and retirement is constructed and estimated using the method of simulated moments the model and estimation method allow for both unobserved individual effects and unobserved job specific match effects the model is estimated using two different assumptions about individual discount factors first a static model with the discount factor equal to zero is estimated then a dynamic model with the discount factor equal to 95 is estimated in both models it is found that bad health age and lack of education increase the probability of retirement the dynamic model performs better than the static model and has different implications for retirement behavior the job specific effects are an important source of unobserved heterogeneity copyright 1991 by the econometric society

the asymmetric information model of state dependence marketing researchers and practitioners are interested in consumer loyalty because of its managerial consequences previous empirical studies find that consumers are loyal not only to a brand but also to a firm umbrella brand that is even when firms offer new products consumers tend to continue to purchase from the same firm this repeat purchase behavior might result from state dependence or from heterogeneity the meaning of state dependence is that the current choice behaviorally depends on the previous one the traditional model of state dependence assumes that the previous choice affects the current utility this study suggests another source of state dependence the previous choice affects the current information set specifically the model assumes that the consumer a knows the attributes of the new product offered by the firm from which he she purchased in the previous period b is uncertain about the attributes of the new products offered by the other firms c can obtain full information about the attributes of all the products through a costly search and d if the consumer decides not to search he she purchases the new product offered by the firm from which he she purchases in the previous period it is shown that state dependence can result either from the effect of previous choices on the current utility or from its effect on the current information set this theoretical result raises the following question what kind of data does a researcher need in order to distinguish between the two sources of state dependence this study shows that the two sources can be distinguished with a standard panel data set in other words although the new source of state dependence is based on the search activity of consumers there is an identifying factor that enables a researcher to detect such activity even without direct data on search the empirical distinction is possible because the behavioral implications of the two sources of state dependence are different they differ in the effect of product attributes on the repeat purchase probability the following example partially illustrates this result there are two firms a and b the consumer purchased a product from firm a in period t 1 the only product attribute is x and the utility is a linear function of x one aspect of our findings is that in the traditional model of state dependence a change in both x a and x b that leaves the difference between them x a x b unchanged neutral change hereinafter has no effect on the repeat purchase probability however such a change does affect the repeat purchase probability in the asymmetric information model of state dependence this is only one aspect of the finding the implications of the models differ in a more general fashion the intuition of this result is the following a neutral change has no effect on the repeat purchase probability in the traditional model of state dependence because it does not affect the difference between the utilities from both alternatives in the asymmetric model of state dependence the consumer s decision process consists of two stages first he decides whether to search for information about the other alternative or not then if he searches for information he chooses the alternative that maximizes his utility in the second stage a neutral change has no effect on choices since such a change does not affect the difference between the utilities from the two alternatives in the first stage the consumer knows x a but does not know x b it turns out that in this stage a neutral change does affect the search decision when for example both x s decrease and the utility is a positive function of x the probability of search increases and thus the repeat purchase probability decreases the proposed source of state dependence is examined using structural estimation and panel data on television viewing choices in the united states controlling for both observed and unobserved heterogeneity it is found that the suggested source is more important in creating repeat purchase than the traditional one for most of the population 71 this indicates that what was considered by previous studies to result from the dependence of consumer utility on their previous choices is at least partially due to the effect of the previous choices on consumers information set the distinction between the two sources of repeat purchase is important because ignoring the informational explanation may lead to incorrect theoretical and empirical conclusions for example price discounts to induce trial are more important for consumers whose utility depends on previous choices while advertising is more effective for those whose information set depends on previous choices

earnings skewness and analyst forecast bias abstract we argue that if analysts objective is to provide the most accurate forecast by minimizing the mean absolute forecast error then the optimal forecast is the median instead of the mean earnings forecast bias is observed when the median is different from the mean in a skewed earnings distribution thus part of the observed analyst forecast bias could be a result of analysts efforts to improve forecast accuracy when the earnings distribution is skewed we find that earnings skewness is significantly related to analyst forecast bias we also provide evidence that the market adjusts for part of the skewness induced bias

the choice theory approach to market research this paper surveys economic choice theory stressing developments that permit use of data from psychometric and conjoint experiments to produce market demand forecasts alternatives to the widely used multinomial logit model are summarized and a new method for estimating multinomial probits is described an integration of choice models with attitudinal scaling and perceptual mapping within a latent variable system is described estimation of such systems under either random effects or fixed effects descriptions of heterogeneity across individuals is discussed issues in the use of choice models to describe responses from conjoint experiments are presented new regression diagnostic tests for the consistency of multinomial logit representations are discussed

information uncertainty and the post earnings announcement drift in europe investigating the effect of earnings announcement abnormal return and of abnormal trading volume on future returns for a large sample of european companies with both annual and interim announcements over 1997 2010 the author found that the two measures of market surprise are positively related to future abnormal returns especially when information uncertainty is high these two effects also appear to be complementary in that each retains some incremental predictive power for future returns

a proportional random utility approach to qualitative response models a new functional form of the response probability for a qualitative response model is proposed the new model is flexible enough to avoid the constraint of independence from irrelevant alternatives which is perceived as a weakness of the multinomial logit model in some applications it is computationally simpler than the multinomial probit model and is promising for analyzing problems with a moderate number of alternatives

the political economy of stabilization commitment capacity and public response abstract political pressures are generally recognized as important in determining success or failure of economic stabilization and adjustment programs but there has been little comparative analysis of the politics of stabilization this study examines the factors affecting i political leaders commitment to stabilization measures often called political will ii governmental ability to implement stabilization measures and iii the responses of key interest groups and the public at large to those measures the study also discusses political implications of the design of programs and the attempted speed of stabilization and sketches the tactics available to governments to manage political risk including partial compensation persuasion diversion or obfuscation and containment of protest the discussion is based on case studies of stabilization efforts in five fairly poor small highly trade dependent countries ghana in the late 1960s and early 1970s and zambia kenya sri lanka and jamaica in the late 1970s and early 1980s a subsidiary theme within the broader discussion is the ways in which the political economy of stabilization may differ in such countries as compared to larger semi industrialized economies

cambodia rapid growth in an open post conflict economy this study provides an analytical review of world trade organization trade policy review cambodia the first such report undertaken for the country the report highlights cambodia s rapid economic growth after one of the world s worst cases of genocide in the second half of the twentieth century this growth has been underpinned by open trade and investment policies in the context of dynamic neighbourhood growth effects the trade regime is mainly tariff based with modest intersectoral variations in rates cambodia has limited trade policy space it is a signatory to the 10 nation asean free trade agreement soon to become the asean economic community moreover given its long and porous borders with the much larger dynamic economies of thailand and vietnam any major cross border price differences will quickly result in informal trade with these economies and nearby china most of the country s trade policy challenges are to do with behind the border issues a legacy of its generation of civil war and conflict these include weak bureaucratic capacity high levels of corruption poor infrastructure and limited human capital

trade policymaking in a resource rich landlocked country the wto review of mongolia the aim of this paper is to provide a comprehensive assessment of the trade policy review of mongolia tprm 2014 the tprm 2014 demonstrates that the mongolian economy is relatively open and it has very low formal trade barriers although there remain significant behind the borders barriers including poor governance and infrastructure being a landlocked country any major cross border price differences quickly results in informal trade with neighbouring china limiting mongolia s ability to pursue independent commercial policy mongolia s growth is not broad based and largely driven by the mining boom making its economy highly vulnerable to external shocks while this is not unique to mongolia and has been seen in many natural resource abundant countries experience suggests that countries with sound institutions and macroeconomic policies have overcome the so called resource curse

a random coefficients logit brand choice model applied to panel data a random coefficients logit model that allows for unobserved heterogeneity in brand preferences and in the responses to marketing variables is empirically investigated using household level panel data the unknown underlying distribution of unobserved heterogeneity is approximated by a discrete distribution the results reveal that there is significant unobserved heterogeneity across households and that ignoring its effects results in a downward bias in the parameter estimates of the marketing variables it is therefore important to account for heterogeneity in both preferences and responses in the absence of any a priori knowledge about the nature of heterogeneity across households

retail competition and the dynamics of demand for tied goods we present a demand system for tied goods incorporating dynamics arising from the tied nature of the products and the stockpiling induced by storability and durability we accommodate competition across tied good systems and competing downstream retail formats by endogenizing the retail format at which consumers choose to stockpile inventory this facilitates measurement of long run retail substitution effects and yields estimates of complementarities within and substitution across competing systems of tied goods we present an empirical application to an archetypal tied goods category razors and blades we discuss the implications of measured effects for manufacturer pricing when selling the tied products through an oligopolistic downstream retail channel and assess the extent to which retail substitution reduces channel conflict

investigating heterogeneity in brand preferences in logit models for panel data in analyzing panel data the issue of heterogeneity across households is an important consideration if heterogeneity is present but is ignored in the analysis it will result in biased and inconsi

conservatism and cross sectional variation in the post earnings announcement drift accounting conservatism allows me to identify a previously undocumented source of predictable cross sectional variation in standardized unexpected earnings autocorrelations viz the sign of the most recent earnings realization and present evidence that the market ignores this variation loss effect it is possible to earn returns higher than from the bernard and thomas 1990 strategy by incorporating this feature additionally the paper shows that the loss effect is different from the cross quarter effect shown by rangan and sloan 1998 and it is possible to combine the two effects to earn returns higher than either strategy alone thus the paper corroborates the bernard and thomas finding that stock prices fail to reflect the extent to which quarterly earnings series differ from a seasonal random walk and extends it by showing that the market systematically underestimates time series properties resulting from accounting conservatism

trade policy in burundi reform without political stability this paper evaluates burundi s progress with trade policy reform by comparing earlier analyses of burundi s trade policies undertaken in the 1980s with that of the wto s recent trade policy review since the mid 1980s burundi has been trying to reform its trade and macroeconomic policies against the background of continuous socio political tensions and periodic outbreaks of violent tribal conflict a then and now comparison allows us to assess both the extent of the trade reforms and of the economic return to those reforms it is evident that there has been a significant rationalisation and simplification of trade policy burundi has eliminated most quantitative import restrictions and reduced the average level and range of its tariffs the scope for allocative distortions undesirable redistributive effects and for impediments to investment and growth has been substantially reduced however a return to reform in terms of export growth or diversification and of overall economic growth is not discernible yet this is unsurprising given the scale of the economic disruption sustained socio political stability among other things will be required to induce the investment in human and physical capital needed for a positive return to trade policy reform

the effect of piracy on the market penetration of subscription software software piracy is not necessarily harmful to a software firm seeking to launch a new product when strategically managed through the use of price and protection measures piracy establishes the initial adopters of the software who in turn influence other users to buy the product we examine the role of piracy in affecting the adoption of subscription software products we present an individual level model in an adaptive population setting intended to determine the price protection mix that maximizes the discounted profit stream over the life of the software an extension for nonsubscription software is also discussed

removing heterogeneity bias from logit model estimation this paper introduces a new estimation procedure for the logit model that is an extension of a conditional estimation procedure developed by chamberlain chamberlain g 1978 on the use of panel data working paper harvard university 1 52 chamberlain g 1980 analysis of covariance with qualitative data rev econom stud 47 225 238 the method eliminates heterogeneity bias which is present in the estimates produced by traditional estimation techniques it improves the goodness of fit and explanatory power of these models while incorporating purchase event feedback

fiscal composition and aid effectiveness a political economy model summary in the long run tax effort we argue determines the effectiveness of aid and this relationship operates simultaneously with the negative link in the opposite direction observed by brautigam and knack 2004 and others tax effort and the ability of the state to diversify its taxation structure we find are significantly linked to growth and poverty indicators the key message for policy is that a broadening of the tax structure in low income countries is crucial in order to enable those countries to escape from the weak state low tax trap and to make aid effective

inertia and variety seeking in a model of brand purchase timing previous research on state dependence indicates that a brand s purchase probabilities vary over time and depend on the levels of inertia and variety seeking and on the identity of the previously purchased brand brand choice probabilities obtained from models such as the logit and the probit are however fixed over time conditional on the previous brand purchased and on the levels of marketing variables consequently state dependence has largely been studied as a time invariant phenomenon in brand choice models with the levels of inertia and variety seeking assumed to be constant over time to account for the time varying nature of state dependence would require a model in which brand switching probabilities depend upon interpurchase times one modeling framework that can account for this dependence is based on the hazard function approach the proposed approach works as follows all other factors being equal an inertial household purchasing a brand on a particular occasion is most likely to repurchase that brand on the next occasion if the household switches it will be to a brand located perceptually close in attribute space to the previously purchased brand in other words an inertial household has the highest switching hazard for the same origin and destination brands with a progressively lower hazard rate for brands perceptually located farther and farther away from the origin brand the amount by which the hazard is lowered depends upon the perceptual distance and the inertia level of the household on the other hand if the household is variety seeking the most likely brand purchased would be a brand located farthest away from the previously purchased brand in attribute space in other words the hazard rate of repurchase is the lowest with the rate increasing with the distance of the destination brand from the origin brand and the level of that household s variety seeking tendency the effects of inertia and variety seeking are therefore incorporated at the attribute level into a brand purchase timing model in doing so we attempt to provide greater insight into the nature of state dependence in models of purchase timing our model and estimation procedure will enable us to distinguish between households that are inertial and those that are variety prone in addition to accounting for state dependence the model also accounts for the effects of unobserved heterogeneity among households in their brand preferences and in their sensitivities to marketing activities a majority of studies in marketing using the hazard function approach to investigate purchase timing have not accounted for heterogeneity in marketing mix effects the study integrates recent methods that incorporate the effects of inertia and variety seeking in brand choice models with a semi markov model of purchase timing and brand switching the proposed model enables us to 1 infer market structure via a perceptual map for the sample households and 2 investigate implications for the introduction of a line extension we provide empirical applications of the proposed method using three different household level scanner panel data sets we find that differing levels of inertia and variety seeking characterize the three data sets the findings are consistent with prior beliefs regarding these categories in addition our results indicate that the nature of interbrand purchase timing behavior depends upon the extent of inertia or variety seeking in the data we are also able to characterize the structure of the three product markets studied this provides implications for interbrand rivalry in the market further we demonstrate how the model and results can be used to predict the location of a line extension in the perceptual space of households finally we obtain implications for the timing of brand promotions

category pricing with state dependent utility there is substantial literature documenting the presence of state dependent utility with packaged goods data typically a form of brand loyalty is detected whereby there is a higher probability of purchasing the same brand as has been purchased in the recent past the economic significance of the measured loyalty remains an open question we consider the category pricing problem and demonstrate that the presence of loyalty materially affects optimal pricing the prices of higher quality products decline relative to those of lower quality when loyalty is introduced into the model given the well known problems with the confounding of state dependence and consumer heterogeneity loyalty must be measured in a model which allows for an unknown and possibly highly nonnormal distribution of heterogeneity we implement a highly flexible model of heterogeneity using multivariate mixtures of normals in a hierarchical choice model we use an euler equations approach to the solution of the dynamic pricing problem which allows us to consider a very large number of consumer types

modeling multiple sources of state dependence in random utility models a distributed lag approach we propose a utility theoretic brand choice model that accounts for four different sources of state dependence 1 effects of lagged choices structural state dependence 2 effects of serially correlated error terms in the random utility function habit persistence type 1 3 effects of serial correlations between utility maximizing alternatives on successive purchase occasions of a household habit persistence type 2 and 4 effects of lagged marketing variables carryover effects our proposed model also allows habit persistence to be a function of lagged marketing variables while accommodating the effects of unobserved heterogeneity in household choice parameters this model is more flexible than existing state dependence models in marketing and labor econometrics using scanner panel data we find structural state dependence to be the most important source of state dependence marketing mix elasticities are systematically understated if state dependence effects are incompletely accounted for the seetharaman and chintagunta 1998 model is shown to recover spurious variety seeking effects while overstating habit persistence effects ignoring habit persistence type 1 leads to an underestimation while ignoring habit persistence type 2 leads to an overestimation of structural state dependence effects we find lagged promotions to have carryover effects on habit persistence ignoring one or more sources of state dependence underestimates the total incremental impact of a sales promotion we draw implications for manufacturer pricing

tax revenue performance and vulnerability in developing countries this paper addresses vulnerability of revenue to external shocks using export composition to capture economic structure and differentiating countries according to income levels resource endowments and political regimes this gives a richer characterization than previous studies lower income countries are vulnerable to shocks especially in terms of trade associated with the greatest revenue loss democratic regimes seem to be less vulnerable to revenue losses due to shocks than non democracies whereas revenue in resource rich is more vulnerable to shocks except natural disasters than non resource rich countries we find a negative relationship between manufacturing exports and revenue in lower income countries

the link between increased trade openness and the terms of trade an empirical investigation abstract despite the fairly widespread move towards more open trade policies in developing countries relatively little attention has been paid to the effect of these policies on the terms of trade using a large sample of countries this paper tries to assess empirically the validity of the small country assumption which underlies the washington consensus on development strategies our evidence suggests that there is a sizable group of countries ldcs and non ldcs for which the assumption of exogenous traded goods prices can be rejected one implication is that terms of trade considerations should be included in the assessment of trade liberalization policies these effects might rise considerably when several countries liberalize simultaneously

testing for choice dynamics in panel data this article applies different approaches to distinguish state dependence from unobserved heterogeneity and serial correlation and hence test for state dependence in consumer brand choices first we apply a simple method proposed by chamberlain which involves lagged exogenous variables only second we also estimate a lagged dependent variable specification proposed by wooldridge third we use the estimation approach suggested by wooldridge to estimate a model with both lagged dependent and exogenous variables to distinguish between the two different sources of choice dynamics state dependence and lagged effects of the exogenous variables our analysis reveals that the best approach is to use models with both lagged dependent and exogenous variables our findings include strong evidence for state dependence in five out of the six product categories studied in this article

trade policy issues in a small african economy the trade policy review of the gambia 2004 the gambia displays many of the classic characteristics of a small open economy with the vulnerabilities that implies the sum of its imports and exports are around 100 per cent of gdp with a limited number of export commodities and a wide variety of imports including some key staple foods the trade policy review of the gambia 2004 provides a very helpful review and assessment of current trade patterns and policies the latter rely predominantly on import and export taxes while quite substantial trade reform measures have been implemented recently these have led to only a very small reduction in the average tariff rate and trade policy displays a substantial anti export bias other important issues highlighted by the trade policy review include serious capacity constraints relating to trade policy and a failure to discuss connections between trade policy and growth and poverty reduction again common characteristics of many small economies

autocorrelation structure of forecast errors from time series models alternative assessments of the causes of post earnings announcement drift abstract this paper demonstrates that the evidence supporting the hypothesis that post earnings announcement drift pead is caused by investors failure to incorporate the implications of current earnings for future earnings is also consistent with researchers over differencing an already stationary time series specifically we show the evidence is driven by a subset of firms where over differencing of quarterly earnings in estimating earnings surprises is most likely to have occurred given the persistence of the pead over time our alternative explanation suggests that the prior research investigating the causes for the pead overestimates investors naivete

dynamic labor force participation decisions of males in the presence of layoffs and uncertain job offers this paper presents a utility maximization model of workers who make decisions to work or not over a lifetime the objective is to maximize the presented discounted value of utility arising from the participation decisions in addition to duration dependence introduced through time variant job offer and layoff probabilities state dependence enters the model by the existence of a different risk while working namely the dismissal risk than the one while not working namely the possibility of no job offers a dynamic programming algorithm is solved and estimated within a maximum likelihood routine with data from the national longitudinal surveys youth cohort

parameter bias from unobserved effects in the multinomial logit model of consumer choice abstract over the past two decades validation of choice models has focused on predictive validity rather than parameter bias in real world validation of choice models true parameter values are unknown so examination of parameter bias is not possible in contrast the main focus of this study is parameter bias in simulated scanner panel choice data with known parameter values study of parameter bias enables the assessment of a fundamental issue not addressed in the choice modeling literature the extent to which the logit choice model is capable of distinguishing unobserved effects that give rise to persistence in observed choices e g heterogeneity and state dependence although econometric theory provides some information about the causes of bias the extent of such bias in typical scanner data applications remains unclear the authors present an extensive simulation study that provides information on the extent of bias resulting from the misspecification of four unobserved effects that receive fr

trade and payments regime and the balance of payments in ghana abstract by 1982 the ghanaian economy was in the doldrums facing a severe foreign exchange constraint this state of the economy was attributed partly to the trade and exchange rate policies which had created distorsions and disincentives against exporting in particular and production in general since 1983 ghana has for the second time embarked on a trade and payments liberalization program this study examines the effect of the changing trade and payments regime on the balance of payments of ghana it provides some answers as to why the first liberalization episode was not sustained it also contrasts the experience of controlled and liberalized trade regime episodes the paper concludes by providing some lessons from the ghanaian experience

identifying the hand of past distinguishing state dependence from heterogeneity a basic problem in social science is to ascertain the importance of initial endowments on subsequent outcomes of a dynamic process interest in this topic centers on two distinct issues a do initial endowments have a temporally persistent effect on outcomes i e is there heterogeneity b are the effects of initial endowments attenuated or accentuated by subsequent experiences of the process being studied or by related processes i e is there state dependence these two questions show up in a variety of contexts 1 the importance of family background on a person s subsequent education and earnings is a hotly debated topic do market or nonmarket mechanisms reinforce or diminish initial endowments 2 the incidence of criminal activity is concentrated among a small population of repeated offenders are certain persons prone to criminality or does crime breed crime 3 are persons who experience unemployment more likely to experience future unemployment due to loss of work experience or market stigma 4 does early entry into an industry confer an advantage of incumbency or does it merely proxy the basic managerial and innovative ability of early entrants many formal models of state dependent processes or processes with persistent effects of initial conditions have been formulated invariance of steady states to initial endowments was viewed as a desirable feature of an economic model in the 1960 s and 1970 s path dependent synergism and nonergodicity are fashionable features of models today is the choice between models with long run dependence on initial conditions and those without solely a matter of intellectual esthetics can data discriminate between these two classes of models how many economically extraneous statistical regularity conditions have to be imposed in order to distinguish between these models how many and what kind of maintained assumptions are required in order to let the data speak on these important questions in this paper i focus on one nonergodic model that receives much attention in the literature the model of duration dependence and heterogeneity discussed by herbert silcock 1954 and also examined by tony lancaster 1979 chris elbers and geert ridder 1982 myself and burton singer 1984 and myself and bo honore 1989

exchange rates trade liberalization and aid the sri lankan experience abstract in 1977 the sri lankan government embarked on an extensive program of liberalization an important element of which was devaluation to ensure a competitive real exchange rate the 1980s were however marked by an increasing divergence between the real and nominal exchange rates the depreciation of the latter not being matched by similar movements of the former this paper presents an econometric model of real exchange rate behavior in sri lanka among other things it is shown that increased aid inflows have made a significant contribution to the failure of the real exchange rate to match the depreciation in the nominal rate

trade policy adjustment in ldcs a short run view the article deals with the role of tariff protection and exchange rate policies in ldcs after a terms of trade shock has occurred and a new equilibrium is to be attained constraints concerning the domestic foreign and public sectors are specified it is shown that the optimal response to the shock depends on the domestic features of the economy as well as on its trade openness in particular protectionist attitudes may well be justified and anti trade policies may be helpful to ease adjustment

liberalization and the terms of trade in turkey a causal analysis there has been extensive trade liberalization in developing countries in recent decades several liberalization episodes have been completed in turkey in this paper we evaluate the relationship between trade liberalization in turkey and the terms of trade has liberalization preceded changes in the terms of trade or vice versa using causality analysis we investigate several hypotheses and conclude that in this case trade liberalization follows a terms of trade change a finding which is consistent with the trade shocks hypothesis

assessing indirect tax reform in a tourism dependent developing country summary the paper investigates the effects of reform of the current structure of indirect taxes in mauritius a relatively tourism dependent economy it uses a computable general equilibrium model to explore the relative efficiency of changing sales tax rates on tourism and nontourism related sectors and allowing for equity considerations the efficiency of tax reforms are also distinguished for cases where tourist arrivals are exogenously set and where they endogenously adjust to changes in relative prices the simulation results show that the tourism sectors are currently undertaxed additionally taxing tourism sectors is found to be the most socially efficient means of raising tax revenue

does leadership matter in the economic reform process liberalization and governance in sri lanka 1989 1993 abstract governance assumptions of the east asian miracle may not be a sufficient or a necessary condition for effective economic reform or for solid growth to emerge in other asian economies this paper argues that in sri lanka where the state is not strong where it is not well coordinated and is neither cohesive nor disciplined in organizational terms strong political leadership proved critical in the second wave of reform from 1989 1993 even if it was essentially illiberal in the process of implementation technical and political imperatives are seen to be interrelated and parts of a single reform package

structural adjustment as a policy process the case of tanzania abstract analyses of structural adjustment in developing countries have increasingly come to emphasize the importance of grounding reforms in the political realities of the countries concerned while this approach is a step forward from the more economistic and prescriptive analyses that prevailed in the first part of the 1980s we believe that the dynamics of structural adjustment is only fully captured by an approach that treats the policy context as an explicit and independent variable on the basis of a case study of tanzania this article uses a policy process approach in which the notions of ambiguity and conflict in policy situations help us better understand the opportunities and constraints for action on structural adjustment issues

bounded rationality in pricing under state dependent demand do firms look ahead and if so how far the authors propose an empirical procedure to investigate the pricing behavior of manufacturers and retailers in the presence of state dependent demand rather than assuming that firms are perfectl

foreign trade and economic development sri lanka s experience abstract in the nearly 40 years since independence sri lanka has gone through three major trade policy phases in the first following independence the economy was relatively open in the second which commenced in 1960 a trade regime biased against exports was initiated this continued until 1977 when a strong liberalization effort was made thus sri lanka provides an interesting story of an individual country s experience relating choice of a trade regime to resource allocation and growth a number of important lessons can be drawn from this experience

modeling heterogeneity and state dependence in consumer choice behavior in frequently purchased consumer goods markets consumer brand choices exhibit substantial persistence across purchase occasions in this article i estimate a choice model that admits of both heterogeneity in preferences and true state dependence as sources of this persistence using nielsen scanner data on ketchup i find evidence for true state dependence in the choice process even after controlling for a rich heterogeneity structure simulation of the model indicates that the long term effect of a promotion induced purchase on future purchase probabilities is positive but small

a framework for investigating habits the hand of the past and heterogeneity in dynamic brand choice in this paper we develop a general class of dynamic brand choice models called lightning bolt lb models which are consistent with the theory of random utility maximization of consumer choice behavior the underlying random utility process is markov and the inter temporal evolution of the utility maximizing brand choice process is also markov the models permit parsimonious parameterizations of the random utility process in brand choices with the resulting switching probabilities being functionally related to explanatory variables the model allows for structural state dependence feedback habit persistence inertia and unobserved heterogeneity the theoretical development shows that several well known stochastic brand choice models can be deduced from random utility maximization theory from a managerial perspective the usefulness of the proposed model stems from its ability to separate out the effects of habits state dependence and heterogeneity strong state dependence effects imply incentives for inducing trial of a brand e g product sampling in contrast with state dependence a strong habit persistence effect may be indicative of buyer behavior where inducement of trial of a different brand may not be sufficient to maintain a sustained defection of the consumer from the habitually purchased brand to the trial brand failure to distinguish between these two effects has important implications for example a model that only accounts for state dependence effects would in the presence of only habit persistence incorrectly attribute it to state dependence based on this the manager could decide to embark on an expensive sampling program that might prove ineffective due to the absence of state dependence it is also important to distinguish between the effects of unobserved heterogeneity and state dependence in the absence of true state dependence failing to account for unobservable variations across households such as differences in price sensitivities results in the temporally persistent unobservable elements showing up as state dependence in the model hence a manager may incorrectly opt for sampling as the appropriate marketing action whereas a couponing or price promotion strategy should have been preferred we estimate the model parameters using the ac nielsen household scanner panel data set on catsup purchases further we investigate empirical techniques for overcoming the initial conditions problem that affects many dynamic models of brand choice through simulation analysis using the estimated parameters we show that the calculated profitability of a promotion must take into account the multi period impact due to state dependence further we demonstrate how ignoring heterogeneity can result in spurious state dependence thereby making marketing tactics such as product sampling appear far more attractive than they actually are specifically the model that accounts only for habit persistence and state dependence effects predicts a share increase of 2 4 points through sampling for one of the brands in the empirical analysis once the effects of unobserved heterogeneity are accounted for however this number drops precipitously to 0 3 while even this low number might fulfill the objectives of the brand manager it ensures that expectations are not eight times that number it is important to note that this paper is a first attempt at analyzing the three fundamental dimensions of dynamic brand choice behavior our formulation represents a reduced form approach as opposed to a structural approach other limitations of the model include our focus on time invariant choice sets extensions of the model to situations where choice sets vary over time are possible but are difficult another limitation is the dependence on multivariate extreme value distributions an alternative would be to use multivariate normal distributions i e a probit like structure which has certain useful properties a comparison of the two approaches would be useful empirical extensions of the model to allow for higher order processes and nested logit type model structures could also be fruitful explicitly incorporating variety seeking behavior in the model would further enrich the theoretical framework proposed in this paper

assessing the effect of marketing investments in a business marketing context recent research has empirically characterized the buyer seller relationship as dynamically evolving from one discrete state to another conventional wisdom would suggest that a customer in a higher relationship state that has a higher transaction value would also have greater lifetime value to the firm however recent evidence suggests that higher relationship states can be ephemeral hence the link between transaction value and lifetime value is not obvious in this study we seek to understand within a specific empirical context i the relationship between a customer s transaction value and that customer s lifetime value and ii the relationship between the lifetime value of a customer and the optimal level of marketing activity that needs to be directed at that customer to this end we develop a trivariate tobit hidden markov model that allows for a transitions among relationship states b possible synergies between the various products that the supplier firm offers c endogeneity in marketing activity d heterogeneity in model parameters and e the presence of the no purchase option our results reinforce recent findings by schweidel et al schweidel d a e t bradlow p s fader 2011 portfolio dynamics for customers of a multiservice provider management sci 573 471 486 that higher relationship states can be short lived importantly for the supplier firm a customer in the highest relationship state in a given period does not yield the highest lifetime value to the firm hence the relationship between transaction value i e relationship state and lifetime value can be nonmonotonic at the same time we also find a nonmonotonic relationship between the optimal expenditures that should be directed at a customer and that customer s lifetime value i e the optimal level of marketing contacts is not the highest for customers with the highest lifetime value furthermore we find that the optimal marketing expenditures for myopic agents are 14 33 lower than the corresponding values for forward looking agents therefore not accounting for the long term effects of marketing contacts would lead to suboptimal marketing budgets moreover a comparison with the current marketing expenditures suggests that the current practice is closer to the myopic policy than to the forward looking one

the specification and estimation of dynamic stochastic discrete choice models a survey our main goal is to quantify the returns to a career in the united states congress we specify a dynamic model of career decisions of a member of congress and estimate this model using a newly collected dataset given estimates of the structural model we

fiscal dependence on trade taxes and economic development additional results and a reconciliation of the empirical evidence using brazilian data spanning the period 1910 75 new evidence is presented on the hypothesis that a country s fiscal dependence on trade taxes is inversely related to her level of economic development at least once the latter passes a certain threshold unlike previous studies this study uses methods which highlight the dynamic and temporal nature of the underlying relationships the results indicate strong support for the hypothesis and also suggest that the conflicting time serious evidence can be reconciled

arbitrage risk and post earnings announcement drift this study examines whether the magnitude of post earnings announcement drift is related to the risk faced by arbitrageurs who may view the anomaly as a trading opportunity consistent with this hypothesis the magnitude of the drift is strongly related to the arbitrage risk measure developed by wurgler and zhuravskaya 2002 the effect of arbitrage risk is statistically and economically significant in a range of specifications the results support the view of post earnings announcement drift as an underreaction to earnings information

fiscal dependence on trade taxes and the level of economic development a comment 1993 fiscal dependence on trade taxes and the level of economic development a comment applied economics vol 25 no 11 pp 1393 1397

an alternative explanation for lower repeat rates after promotion purchases several authors have observed that average repeat rates are lower after a promotion purchase one interpretation of this result is that a media coupon or cents off promotion undermines the consumer

the multiperiod information content of accounting earnings confirmations and contradictions of previous earnings reports in this study we propose and test the hypothesis that investors reevaluate earnings announcements in the light of postannouncement information 1 our argument for multiperiod price reactions to earnings news is motivated by the literature linking price responses to earnings persistence 2 when earnings are announced we assume that investors are unable to determine with certainty the persistence of an earnings

accounting for heterogeneity and nonstationarity in a cross sectional model of consumer purchase behavior when calibrating a brand choice model cross sectionally a measure of brand loyalty is often introduced into the utility function to account for differences in utility across households and over time one of the most widely used measures of brand loyalty proposed by guadagni and little 1983 is an exponential smoothing model of past choice behavior by the household in this study we argue that the exponential smoothing model of brand loyalty cannot properly distinguish between sources of variation in utility due to heterogeneity across households and sources of variation due to nonstationarity within household over time we introduce a new measure of brand loyalty derived from a nonstationary dirichlet multinomial choice model in which heterogeneity and nonstationarity are handled distinctly

the relation between earnings and cash flows abstract a model of earnings cash flows and accruals is developed assuming a random walk sales process variable and fixed costs and that the only accruals are accounts receivable and payable and inventory the model implies earnings better predict future operating cash flows than current operating cash flows and the difference varies with the operating cash cycle also the model is used to predict serial and cross correlations of each firm s series the implications and predictions are tested on a 1337 firm sample over 1963 1992 both earnings and cash flow forecast implications and correlation predictions are generally consistent with the data

sri lanka s trade policy reverting to dirigisme the paper surveys recent development in sri lankan trade policy with an emphasis on emerging protectionist tendencies using sri lanka s trade policy review 2010 by the world trade organisation as a reference point the sri lankan experience for over the three decades following the liberalisation reforms stated in 1977 has clearly demonstrated that an outward oriented policy regime can yield a superior development outcome compared to a closed economy regime even under severe strains of a protracted ethnic conflict and macroeconomic instability viewed against this backdrop recent developments in the sri lankan policy scene do not seem to augur well for the future of the sri lankan economy

the design of fiscal reforms in revenue constrained developing countries while generalisation is perilous there are many especially small developing countries for which sales taxes and turnover taxes are fairly negligible as revenue sources and for which import duties and export taxes particularly the former are leading revenue sources for evidence from the early i980s see tanzi i987 and greenaway and milner i990 this observation is unsurprising when account is taken of the administrative constraints to which many developing countries are subject sales taxes can be difficult to collect not to mention a complex tax like vat income tax is largely infeasible and often has to take a simple form such as a payroll tax confined in practice to public and large company employment some taxes which would be assumed to be eminently feasible in industrial economies may not generate as much revenue as might be supposed in a developing country for instance tax disks which the law may require heavy goods vehicles to carry may generate a flow of bribes to police and other officials if these are wise enough to set the bribe at a modest level making it cheaper to pay bribes than to buy a disk a cynic might say that the bribes are an unofficial source of revenue if their existence enables the state to get away with paying its officials absurdly low salaries one would have to hope if that argument is accepted that the officials do something socially useful apart from stopping heavy goods vehicles such considerations make it interesting to consider the design of public finance for a country severely constrained in its choice of what musgrave called tax handles that is types of tax instrument which it may practically employ the existing literature for which newbery and stern i987 provides an excellent review throws some light on this issue but the problem is seldom treated explicitly an exception would be dreze and stern i985 whose highly abstract and general treatment of cost benefit analysis theory can be seen to incorporate principles of public finance which fully cover the restricted policy choices which i have in mind because the approach of these authors is so general however it is not easy to extract conclusions for tax design in specific cases this is no criticism of the paper of course as the argument is addressed to cost benefit analysis generally speaking theory has developed in the direction of sophisticated and complex tax systems the next section discusses why this is so from the point of view of theory yet ideal tax systems would be difficult to implement in many developing countries as i shall treat tariffs as a highly feasible revenue

consumer learning brand loyalty and competition in several markets consumers can gain further information regarding how well a product fits their preferences only by experiencing it after purchase this could then generate loyalty for the products tried first this paper considers a model in which consumers learn in the first period about the product they buy and then make choices in the second period about the competing products given what they learned in the first period the paper finds that if the distribution of valuations for each product is negatively positively skewed a firm benefits is hurt in the future from having a greater market share today the brand loyalty characteristic with negative skewness two effects are identified on one hand marginal forward looking consumers are less price sensitive than myopic consumers and this is a force toward higher prices on the other hand forward looking firms realize that they gain in the future from having a higher market share in the current period and compete more aggressively in prices for similar discount factors for consumers and firms the latter effect dominates the paper also characterizes the importance of consumer learning effects on the market outcome

liberalising foreign trade through rose tinted glasses the foreign trade sector has a crucial role to play in economic development trade has variously been described as the engine or handmaiden of growth this key role has stimulated a great deal of interest in the links between trade and growth with the links between trade orientation and exports and exports and growth receiving particularly close attention alongside this time series work there have been a number of multi country studies of trade policy in developing countries those of krueger i 98 i and balassa i 982 are perhaps the best known most of this work has been directed at two questions first what does the structure of protection look like in a given developing country second are there clear links between the structure of protection trade orientation and economic performance it is widely believed in developing countries that the major lending agencies the world bank in particular perceive a clear link between trade orientation and economic performance and that this explains why around three quarters ofall conditions which attach to structural adjustment loans sals feature reform of trade policy the editors of liberalising foreign trade demetrious papageorgiou michael michaely and armeane choksi all of whom are on the world bank staff clearly believe this to be the case judging from their opening statement the benefits of open trading have by now been sufficiently demonstrated and described by economic historians and analysts in this study we take them for granted and turn our minds from the whether to the how vol i p vii in other words it is the timing phasing and sequencing involved in the design and implementation of a trade liberalisation policy that forms the subject matter of the present study vol 7 p i liberalising foreign trade is a world bank organised study which describes and evaluates 36 liberalisation episodes in i 9 countries during the period i950 i982 the study is ambitious in scale28 authors 3 editors 7 volumes and almost 3 ooo pages of text it is the most comprehensive cross country analysis of liberalisation episodes undertaken from a policy perspective a study of this scale is potentially of considerable interest given the liberalisations

neural antecedents of a random utility model abstract for over a decade economists have sought to identify neural antecedents for economic theories more recently neuroeconomic work has sought to predict consumer choice using brain activations witnessed in non choice visual appraisals this paper combines these two emerging strains of inquiry using functional magnetic resonance imaging fmri data observed when consumers view a quality differentiated food product labeled with different attributes we seek to determine the predictive validity of the random utility model rum often used in economic studies of consumer choice our fmri data consist of changes in blood flow to the ventromedial prefrontal cortex a brain region previously associated with value formation observed when people saw low price and high labels and labels indicating high or low quality we couple the fmri data with data on 28 non hypothetical choices made by each participant which pitted higher priced higher quality good vs a lower priced lower quality good we find little evidence of a systematic difference in activation in brain areas thought to be associated with value formation when viewing high vs low levels of attributes prices and quality however differences in neural blood flow across participants related to quality but not price is significantly related to subsequent consumer choice both in and out of sample providing some qualified neuroeconomic support for the attribute based rum

after the decision implementing policy reforms in developing countries abstract implicit in many reform proposals is a model of the policy process that is roughly linear a proposed reform gets on the agenda for government action a decision is made on the proposal and the new policy or institutional arangement is implemented either successfully or unsuccessfully this article presents an alternative interactive model of implementation that focuses on the conflict and reactions that are evoked by efforts to bring about changed policy or institutional contexts for development and the resources that policy makers and managers are likely to require to sustain a reform in the face of such reactions central to the analysis is the assertion that characteristics of the reform being implemented will largely determine the kind of conflict it engenders where such reaction is likely to become manifest and what resources are needed for sustainability the analysis suggests a framework for the strategic management of reform initiatives

fiscal dependence on trade taxes and trade policy reform the article focuses on fiscal implications of structural adjustment loans sals from an a priori standpoint and by reference to the experience of five countries three of these countries have had revenue enhancement after trade policy reforms and the other two cases experienced revenue depletion the central point which emerges from the study is that it is not clear that trade liberalisation leads to fiscal enhancement or fiscal depletion both a priori the orising and country analyses demonstrate that a range of outcomes is possible depending upon initial conditions and the components of any reform package

price uncertainty and consumer search a structural model of consideration set formation we offer an econometric framework that models consumer s consideration set formation as an outcome of her costly information search behavior because frequently purchased products are characterized by frequent price promotions of varying depths of discounts a consumer faces significant uncertainty about the prices of the brands the consumers engage in a fixed sample search strategy that results in their discovering the posted prices of a subset of the available brands this subset is referred to as the consumer s consideration set the proposed model is estimated using the scanner data set for liquid detergents our key empirical results are i consumers zincur significant search costs to discover the posted prices of the brands ii whereas in store displays and feature ads do not influence consumers quality perceptions of the brands they significantly reduce search costs for observing the prices of the brands iii per capita income of consumer s household significantly increases her search costs and iv the consumers price sensitivity is seriously underestimated if we were to assume that consumers get to know all the posted prices at zero cost the proposed model is also estimated for the ketchup category to enable us to do cross category comparisons of consumers price search behavior

price competition in markets with consumer variety seeking we investigate price competition between firms in markets characterized by consumer variety seeking while previous research has addressed the effect of consumer inertia on prices there exists no research on the effects of variety seeking on price competition our study fills this gap in the literature using a two period duopoly framework as in klemperer s analysis of inertial markets we show that the noncooperative pricing equilibrium in a market with consumer variety seeking may be the same as the collusive outcome in an otherwise identical market without variety seeking specifically our variety seeking model implies tacit collusion between firms in both periods unlike the inertia model of klemperer that implies tacit collusion between firms only in the second period but implies fierce price competition in the first period when consumers are assumed to have rational expectations about future prices the implied first period prices increase further which is consistent with what klemperer finds in an inertial market to summarize while our variety seeking analyses support two key results pertaining to second period prices and rational expectations previously derived for inertial markets by klemperer they depart from one key result pertaining to first period prices

a dynamic model of rational addiction evaluating cigarette taxes addiction creates an intertemporal link between a consumer s past and present decisions altering their responsiveness to price changes relative to nonaddictive products we construct a dynamic model of rational addiction and endogenous consumption to investigate how consumers respond to policy interventions that aim to reduce purchases of cigarettes we find that on average the category elasticity is about 35 higher when the model correctly accounts for addiction however some policies spur substitution from more expensive single packs to less expensive cartons of cigarettes resulting in higher overall consumption for some consumers

leading the left to the right populist coalitions and economic reform abstract democratic political parties with a history of commitment to statist economic policies face internal stresses when they come to power and preside over programs of wholesale economic liberalization how do such parties and coalitions avoid splintering and manage to maintain electoral support examining the recent experiences of argentina and mexico edward gibson suggests that one can understand these achievements by treating each party as a combination of two separate components performing distinct functions a metropolitan policy component and a peripheral or rural electoral component his framework travels well beyond latin america and helps illuminate the different politics underlying three recent waves of economic liberalization in sri lanka

a life s work on trade and development this paper reflects on the career contributions of professor chris milner to the literature on international trade and economic development as such it not only provides an overview of a life s work but also sets the context for the nine papers which follow all of these were specially written for this special issue of the world economy and all relate to different areas that professor milner worked in

tax revenue instability with particular reference to sub saharan africa this article examines the temporal instability of tax revenues across a sample of developed and less developed countries it is shown that instability is especially high in ldcs and is highest in open economies with low per capita income high output variance and inflationary problems even allowing for these factors revenue instability appears to be particularly high in sub saharan africa revenue instability can be expected via the government budget constraint to be associated with expenditure instability and or instability in the sources of deficit finance cross section evidence for ldcs confirms that countries with high tax revenue instability tend also to have high expenditure instability time series evidence for six african countries however suggests that revenues and expenditures do not move together in a uniform manner and the direction of causality is generally ambiguous there is some evidence however that foreign borrowing is used more to finance expenditure increases than to counteract