technological specialization and the decline of diversified firms we document a strong decline in corporate diversification activity since the late 1970s and we develop a dynamic model that explains this pattern both qualitatively and quantitatively the key feature of the model is that synergies endogenously decline with technological specialization leading to fewer diversified firms in equilibrium the model further predicts that segments inside a conglomerate should become more related over time which is consistent with the data finally the calibrated model also matches other empirical magnitudes well output growth rate market to book ratios diversification discount frequency and returns of diversifying mergers and frequency of refocusing activity

trading arrangements and industrial development how do different trading arrangements influence the industrialization process of developing countries can preferential trading arrangements ptas be superior to multilateral liberalization or at least an alternative when multilateral liberalization proceeds slowly if so what form should the ptas take are developing countries better advised to seek ptas with industrial countries or among themselves traditional analysis of these issues has been based on the idea of trade creation and trade diversion the problem with this analysis is that it starts from assuming a pattern of comparative advantage of newly industrialized countries the experience of these countries suggests the need for an analysis in which the pattern of comparative advantage is not set in stone but is potentially flexible and in which less developed countries can develop and converge in both income and economic structure to industrial economies the authors outline an alternative approach for analyzing the role of trade in promoting industrial development there are few fundamental differences between countries that generate immutable patterns of comparative advantage instead the pattern of trade and development in the world economy is determined mainly by history cumulative causation has created concentrations of industrial activity in particular locations industrial countries and left other areas more dependent on primary activities economic development can be thought of as the spread of these concentrations from country to country different trading arrangements may have a major impact on this development process by changing the attractiveness of countries as a base for manufacturing production they can potentially trigger or postpone industrial development this approach explains why firms are reluctant to move to economies that have lower wages and labor costs and shows how trade liberalization can change the incentives to become established in developing countries it provides a mechanism through which import liberalization can have a powerful effect in promoting industrialization and it suggests that import liberalization may create or amplify differences between liberalizing countries with the possible political tensions this may create while these features are consistent with the world economy they fall short of providing convincing empirical support for the approach using the approach the authors derive number of conclusions about the effects of trade liberalization first that unilaterally liberalizing imports of manufactures can promote development of the local manufacturing industry the mechanism is forward linkages from imported intermediates but this may be interpreted as part of a wider package of linkages coming from these imports second the gains from liberalization through pta membership are likely to exceed those obtained from unilateral action south south ptas will be sensitive to the market size of member states and north south ptas seem to offer better prospects for participating southern economies if not for north and excluded countries third the effects of particular schemes such as the division of benefits between southern economies will depend on the characteristics of the countries and cross country differences in these characteristics

unauthorized immigration and fiscal competition abstract reflecting upon recent enforcement policy activism of us states and countries within the eu towards unauthorized workers we examine the overlap of centralized federal and decentralized state or regional enforcement of immigration policies in a spatial context among other results we find that if interstate mobility is costless internal enforcement is overprovided and border enforcement and local goods are underprovided when regions take more responsibility in deciding policies this leads to higher levels of unauthorized immigration under decentralization interregional migration costs moderate such over underprovision moreover income distributive motives in the host country may shape the design of immigration policies in specific ways the basic model is extended in several ways first we study how the policies change when regions can exclude unauthorized immigrants from the consuming of regionally provided goods or services second we assume that the potential number of unauthorized immigrants is endogenous and finally we examine the effect of considering an alternative spatial configuration that includes border and interior regions

the economic impact of social ties evidence from german reunification we use the fall of the berlin wall in 1989 to show that personal relationships which individuals maintain for noneconomic reasons can be an important determinant of regional economic growth we show that west german households who had social ties to east germany in 1989 experienced a persistent rise in their personal incomes after the fall of the berlin wall moreover the presence of these households significantly affects economic performance at the regional level it increases the returns to entrepreneurial activity the share of households who become entrepreneurs and the likelihood that firms based within a given west german region invest in east germany as a result west german regions that for idiosyncratic reasons have a high concentration of households with social ties to the east exhibit substantially higher growth in income per capita in the early 1990s a one standard deviation rise in the share of households with social ties to east germany in 1989 is associated with a 4 7 percentage point rise in income per capita over six years we interpret our findings as evidence of a causal link between social ties and regional economic

trade foreign direct investment and economic growth in asian economies despite the increasing role of foreign direct investment fdi in economic development very limited research has been carried out on the causal links between trade fdi and economic growth in asian economies this study examines empirically the inter play between exports imports fdi and economic growth for nine asian economies by conducting multivariate causality tests in the vector error correction model vecm framework the results reveal two way causal connections between trade inward fdi inward merger and acquisitions m as and growth for most of the sample economies there is a unidirectional causal link running from outward m as to growth and trade these findings suggest that export expansion import liberalization fdi inflows and inward m as are integral elements of the growth process in asian economies

fiscal versus traditional market variables in canadian migration this paper evaluates the hypothesis that the influence of traditional market variables on migration in canada has diminished over time this is attributed to a crowding out process whereby growth of social security type programs has cushioned the effects of say unemployment and thus motivation to migrate for jobs and fiscal policies have exerted unintended effects implications are that market forces that would work naturally to induce migration from low to high income regions and thus equalize earned incomes have been short circuited and that traditional tools of manpower policy for influencing migration such as job creation skill enhancement or wages are less effective currently than they might have been in the past

the economics of two sided markets at a local best buy a child places a new sony playstation 3 on the cashier s counter while the parents dig out their visa card the gaming system and the payment card may appear to have little connection other than this purchase however these two items share an important characteristic that is generating a series of economic insights and has important implications for strategic decision making and economic policymaking both video game systems and payment cards are examples of two sided markets broadly speaking a two sided market is one in which 1 two sets of agents interact through an intermediary or platform and 2 the decisions of each set of agents affects the outcomes of the other set of agents typically through an externality in the case of a video game system the intermediary is the console producer sony in the scenario above while the two sets of agents are consumers and video game developers neither consumers nor game developers will be interested in the playstation if the other party is not similarly a successful payment card requires both consumer usage and merchant acceptance where both consumers and merchants value each others participation many more products fit into this paradigm such as search engines newspapers and almost any advertisersupported media examples in which consumers often negatively value rather than positively value the participation of the other side as well as most software or title based operating systems and consumer electronics malls which seek retailers and consumers convention organizers which seek buyers and sellers dating services which seek men and women and the journal of economic perspectives which seeks content and readership all experience the economics of two sided markets the multi sided nature of many internet and high technology markets as well as

why do manufacturers issue coupons an empirical analysis of breakfast cereals we explore the relationship between shelf prices and manufacturers coupons for 25 readyto eat breakfast cereals we find that shelf prices are lower during periods when coupons are available this result is inconsistent with static monopoly price discrimination under a broad range of assumptions we present evidence that is inconsistent with both dynamic theories of price discrimination and explanations of couponing based on the vertical relationship between manufacturers and retailers we find support for models of price discrimination in oligopoly settings as well as suggestions that firmwide incentives may induce managers to use coupons and price cuts simultaneously finally lagged coupons have a positive effect on current sales suggesting that coupons are used to induce repurchase

vertical contracts in the video rental industry a large body of theoretical work has explored the channels through which vertical contracts can induce efficiency improvements however it is also important to study vertical contracts empirically in order to gain insight into the relative size of different types of efficiency gains in this paper i empirically analyse a contractual innovation in the vertically separated video rental industry prior to 1998 video stores obtained inventory from movie distributors using simple linear pricing contracts in 1998 revenuesharing contracts were widely adopted i investigate the effect of the introduction of revenue sharing contracts on firms profits and consumer welfare i analyse a new panel data set of home video retailers that includes information on individual retailers contract and inventory choices as well as rentals and contract terms for 246 movie titles and 6137 retailers in the u s during each week of 1998 and 1999 and the first half of 2000 a structural econometric model of firms behaviour is developed that describes the nature of firms contract choices estimates from this model indicate that both upstream and downstream profits increase by 10 under the revenue sharing contract for popular titles for less popular titles the effects can be even larger i also estimate that consumers benefit when revenue sharing contracts are adopted

the demand for monitoring technologies the case of trucking this paper examines the demand for on board computers in trucking distinguishing between their incentive and resource allocation improving capabilities i find that monitoring s incentive benefits are high when perquisite taking is attractive to drivers driver effort is important and verifying drivers actions to insurers is valuable these results are consistent with agency theory and suggest that networking applications will raise the productivity and pay of difficult toevaluate workers i also find that monitoring s benefits are disproportionately resource allocation related when managerial decisions are least constrained this suggests that networking applications monitoring capabilities raise the returns to delegation when resource allocation decisions are routine and lower them when they are not

smuggling illegal versus legal goods across the u s mexico border a structural equations model approach author affiliation andreas buehn faculty of business and economics technische universitaet dresden chair for economics esp monetary economics 01062 dresden germany e mail andreas buehn tu dresden de corresponding author stefan eichler faculty of business and economics technische universitaet dresden chair for economics esp monetary economics 01062 dresden germany e mail stefan eichler tu dresden de acknowledgment we thank gordon hanson for providing the data on mexican wages and u s border enforcement we are also grateful to alexander karmann sunshine moore the editor and two anonymous referees for their many useful comments and suggestions on this article we also benefited from comments of participants of the lunchtime seminar at technische universitaet dresden all remaining errors are the authors responsibility 1 introductionin this article we study smuggling across the u s mexico border from 1975 to 2004 we contribute to the literature in the following ways first we treat smuggling as an unobservable variable using a multiple indicators multiple causes mimic model we capture the latent nature of smuggling and identify its determinants and long run trends 1 secondly we argue that the analysis of smuggling has been incomplete so far existing studies merely analyze the causes of trade misinvoicing illegal trade or smuggling of legal goods which represent only a fraction of total illegal trade to improve the understanding of illegal trade we distinguish between smuggling illegal goods versus smuggling legal goods the types of smuggling differ with respect to the goods being smuggled the agents involved in smuggling the smuggling incentive and the intensity of law enforcement trade misinvoicing occurs when entrepreneurs misreport the value of legal exports or imports to evade tariffs and taxes and is commonly considered a peccadillo smugglers usually bribe officials or are fined a fee smuggling illegal freight such as illicit drugs and illegal immigrants however often involves dangerous criminals who commit serious offenses and who if caught face severe punishment as a result their incentive to smuggle is related to the intensity of law enforcement rather than tax or tariff evasion studying the u s mexican case is appropriate as most illegal drugs and immigrants enter the united states via the mexican border the large income disparity between the two nations may explain the high u s demand for illegal goods which relatively poor mexicans are willing to meet despite the risks involved we examine whether the clinton and bush administrations succeeded in reducing smuggling across the border through intensified border enforcement using a simple microeconomic framework we determine which microeconomic incentives affect the two types of smuggling the hypotheses are then tested in a mimic model that studies the impact of observed causes the microeconomic incentives to smuggle on the latent phenomenon smuggling as indicated by observable macroeconomic variables applying the benchmarking procedure promoted by dell anno and schneider 2006 and dell anno 2007 we calculate a time series for each type of smuggling we find that smuggling in illegal goods from mexico to the united states decreases when mexican labor market conditions improve and u s border enforcement is intensified the mexican recessions in 1982 1983 and 1995 led to large temporary increases in smuggling to 113 billion and 87 billion respectively smuggling in illegal goods decreased overall however from 116 billion in 1984 to 27 billion in 2004 this reduction can be attributed to stricter u s border enforcement and better mexican job prospects smuggling legal goods is driven by real exchange rates and tariff and tax evasion export misinvoicing fluctuated between underinvoicing values of 0

internet advertising and the generalized second price auction selling billions of dollars worth of keywords we investigate the generalized second price gsp auction a new mechanism used by search engines to sell online advertising although gsp looks similar to the vickrey clarke groves vcg mechanism its properties are very different unlike the vcg mechanism gsp generally does not have an equilibrium in dominant strategies and truth telling is not an equilibrium of gsp to analyze the properties of gsp we describe the generalized english auction that corresponds to gsp and show that it has a unique equilibrium this is an ex post equilibrium with the same payoffs to all players as the dominant strategy equilibrium of vcg

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

the value of switching costs we study a dynamic model with an incumbent monopolist and entry in every subsequent period we first show that if all consumers have the same switching cost then the intertemporal profits of the incumbent are the same as if there was only one period we then study the consequences of heterogeneity of switching costs we prove that even low switching cost customers have value for the incumbent when there are more of them its profits increase as their presence hinders entrants who find it more costly to attract high switching cost customers

online ad auctions i describe how search engines sell ad space using an auction i analyze advertiser behavior in this context using elementary price theory and derive a simple way to estimate the producer surplus generated by online search advertising it appears that the estimated value of online advertising tends to be between 2 and 2 3 times advertising expenditures jel d44 auctions d21 firm behavior

implications of immigration policies for the u s farm sector and workforce i background in 1942 the united states and mexico signed the bracero program a formal agreement to draw seasonal labor to work in u s agriculture which provided employment opportunities to poor rural mexicans 1 however this program was abolished in 1964 ending the legal seasonal labor supply to u s agriculture in the southwestern states concurrently the united states passed the immigration act of 1965 establishing a quota of 120 000 legal immigrants per year the abandonment of the bracero program the new legal immigrants quota limits and economic inequality between the united states and mexico paved the way for steady entry of illegal laborers and led to eventual insurmountable illegal immigration population in the united states because illegal immigration was not a serious problem in the 1960s and 1970s legislation addressed only the number of legal immigrants allowed to enter the united states but in the 1980s illegal immigration began to emerge as a national problem and extensive debates entrenched around issues such as preventing the entry of unauthorized workers providing public services to illegal immigrants and even legalizing these workers consequently the u s congress attempted to address the immigration problems by enacting the 1986 immigration reform and control act irca the goals of irca were to eliminate the stock of undocumented workers through amnesty 2 and domestic enforcement of employer sanctions and curb the influx of illegal immigrants by increasing the border surveillance amnesty failed to eliminate the stock of illegal immigrants because only about half of the illegal immigrants filed for citizenship and it created future expectation of amnesty and more illegal unauthorized entry furthermore domestic sanctions on employers of undocumented workers and deportation of these workers were scantly enforced to stop the influx of immigrants irca focused heavily on tightening border control the irca also legislated the h 2a program which allowed agricultural employers to bring in guest workers during seasonal operations ers 2007 however farmers complained that the cumbersome paperwork of h 2a and bureaucratic delay were not conducive to procure seasonal laborers at the time of peak farm operations such as vegetable and fruit picking 3 in spite of irca s amnesty provision and strengthened control measures illegal immigration continued to rise about 12 million unauthorized immigrants resided in the united states in 2007 martin 2007 which is reaffirmed by many popular press reports leading to an extended congressional debate that began at the start of this decade to solve the illegal immigration problem several bills were proposed by the house of representatives the senate and the white house addressing issues related to increased domestic and border enforcements 4 paths to citizenship and guest worker programs montgomery 2006 these bills were not passed because of major disagreements among lawmakers over providing citizenship and guest worker programs as a result of the failed legislations and the september 11 attack the government primarily focused on border security accordingly funding for border enforcement has steadily increased 5 and resources were diverted from domestic to border enforcement however boucher and taylor 2007 documented that increased funding to secure the border did not deter undocumented workers from crossing the border because determined immigrants eventually find a way to enter the country by repeated attempts following september 11 2001 the u s immigration and customs enforcement ice further decreased the number of human hours devoted to worksite inspection because monitoring critical infrastructure took priority gao 2005 for example from 1999 to 2003 the number of human hours for domestic enforcement decreased from 480 000 to 18 000 6 7 but by late 2005 the u

computer mediated transactions every now and then a set of technologies becomes available that sets off a period of combinatorial innovation think of standardized mechanical parts in the 1800s the gasoline engine in the early 1900s electronics in the 1920s integrated circuits in the 1970s and the internet in the last decade or so the component parts of these technologies can be combined and recombined by innovators to create new devices and applications since these innovators are working in parallel with similar components it is common to see simultaneous invention there are many well known examples such as the electric light the airplane the automobile and the telephone many scholars have described such periods of innovation using terms such as recombinant growth general purpose technologies cumulative synthesis and clusters of innovation the internet and the web are wonderful examples of combinatorial innovation in the last 15 years we have seen a huge proliferation of web applications all built from a basic set of component technologies the internet itself was a rather unlikely innovation i like to describe it as a lab experiment that got loose since the internet arose from the research community rather than the private sector it had no obvious business model other public computer networks such as aol compuserve and minitel generally used a subscription models but were centrally controlled and offered little scope for innovation at the user level the internet won out over these alternatives precisely because it offered a flexible set of component technologies which encouraged combinatorial innovation

trade technology and wages general equilibrium mechanics this paper highlights analytical reasons why we believe trade and technology are linked to wage movements in general and how we should organize our examination of the recent episode of wage and employment erosion in the oecd countries we start with a graphic tour through the mechanics of general equilibrium theory on trade and wages this provides a set of implied relationships between wages and factor intensity trends that together provide a casual test of the consistency of posited relationships with actual trends numeric analysis and a review of the general equilibrium empirical literature follow the theoretical overview this abstract was borrowed from another version of this item

exports of manufactures by developing countries emerging patterns of trade and location developing countries are rapidly increasing their shares of manufactured trade not just in labour intensive products but also in capital and skill intensive ones their shares are rising particularly rapidly in the high technology area however manufactured exports remain highly concentrated in the developing world with a few countries dominating all forms of export within the successful exporting countries there are significant differences in the technology content of exports these trends are difficult to explain with received trade theory even taking human capital into account or with reference to broad economic policies it is useful to bring in learning along with scale economies increasing returns and agglomeration as determinants of comparative advantage these factors imply market failures and so a role for policy in developing genuine comparative advantages this article suggests that emerging trade and location patterns in the developing work are explained by market imperfections and government policies to overcome them

bilateral real exchange rates and migration abstractmigrants who move across borders are to a large extent motivated by the prospect of earning higher incomes at destination which can be partly transferred back to their countries of origin via remittances this suggests that the real exchange rate can influence the incentives to migrate as it determines the purchasing power of expected income in terms of the currency of the origin country this article investigates empirically how bilateral real exchange rate fluctuations influence international migration flows to do so we build a dataset of 30 oecd destination countries and 165 origin countries over the period 1980 2011 and estimate an equation derived from a micro founded random utility maximization model that allows for unobserved heterogeneity between migrants and non migrants our results show that migration flows are highly responsive to bilateral real exchange rates a 10 real appreciation of the currency of the destination country is associated with an 18 2 19 4 increase in migratio

multilateral resistance to migration the rate of migration observed between two countries does not depend solely on their relative attractiveness but also on the one of alternative destinations following the trade literature we term the influence exerted by other destinations on bilateral flows as multilateral resistance to migration and we show how it can be accounted for when estimating the determinants of migration rates in the context of a general individual random utility maximization model we propose the use of the common correlated effects estimator pesaran 2006 and apply it to high frequency data on the spanish immigration boom between 1997 and 2009 compared to more restrictive estimation strategies developed in the literature the bias goes in the expected direction we find a smaller effect of gdp per capita and a larger effect of migration policies on bilateral rates

revenue sharing and vertical control in the video rental industry revenue sharing contracts in which retailers pay a royalty on sales to their suppliers are now widely used in the video rental industry we show that revenue sharing is valuable in vertically separated industries in which demand is either stochastic unpredictable or variable e g systematically declining downstream inventory is chosen before demand is realized and downstream firms engage in intrabrand competition unlike two part tariffs revenue sharing achieves the first best outcome by softening retail price competition without distorting retailers inventory decisions our theories are also consistent with trends in prices and availability following retailers adoption of revenue sharing contracts

repossession and the democratization of credit we exploit a 2004 credit reform in brazil that simplified the sale of repossessed cars used as collateral for auto loans we show that the reform expanded credit to riskier self employed borrowers who purchased newer more expensive cars the legal change has led to larger loans with lower spreads and longer maturities although the credit reform improved riskier borrowers access to credit it also led to increased incidences of delinquency and default our results shed light on the consequences of a credit reform and highlight the crucial role that collateral and repossession play in the liberalization and democratization of credit

chicken and egg competition among intermediation service providers we analyze a model of imperfect price competition between intermediation service providers we insist on features that are relevant for informational intermediation via the internet the presence of indirect network externalities the possibility of using the nonexclusive services of several intermediaries and the widespread practice of price discrimination based on users identity and on usage efficient market structures emerge in equilibrium as well as some specific form of inefficient structures intermediaries have incentives to propose non exclusive services as this moderates competition and allows them to exert market power we analyze in detail the pricing and business strategies followed by intermediation services providers copyright 2003 by the rand corporation

enforcement and compliance with labor regulations in argentina the author analyzes the effect of government enforcement on compliance with labor regulations in argentina a country where only half of the workforce receives all the benefits to which they are legally entitled constructing panel data for the period 1995 2002 across provinces and using the number of labor inspectors per capita as a proxy for enforcement he estimates the effect of enforcement on compliance with six employment and social security regulations minimum wage maximum hours paid vacation time annual extra monthly wage workers compensation insurance and health insurance because of potential simultaneity between enforcement and compliance the author explores instrumenting enforcement by electoral years two stage least squares estimates suggest enforcement increases compliance

switching costs in two sided markets in many markets there are switching costs and network effects yet the literature gen erally deals with these two concepts separately this paper bridges the gap by analyzing their interaction effects or indirect bargain in a dynamic two sided market i show that in a symmetric equilibrium the classic result that the first period price is u shape in switching costs does not emerge but instead switching costs always intensify first period price competition moreover an increase in switching costs on one side decreases the first period price on the other side thus policies that ignore these effects may underestimate the welfare enhancing effects of switching costs

illegal immigration border enforcement and relative wages evidence from apprehensions at the u s mexico border we examine illegal immigration in the united states from mexico over the period 1976 1995 one challenge is that we do not observe the number of individuals that attempt to enter the united states illegally we only observe the number of individuals apprehended attempting to cross the u s mexico border illegally based on a simple migration model we postulate the existence of an apprehensions function which expresses apprehensions at the border as a function of illegal attempts to cross the border and u s border enforcement effort we find that a 10 decrease in the mexican real wage leads to a 7 5 to 8 8 increase in apprehensions at the border excerpt

immigration remittances and business cycles we use data on border enforcement and macroeconomic indicators from the united states and mexico to estimate a two country business cycle model of labor migration and remittances the model matches the cyclical dynamics of labor migration to the united states and documents how remittances to mexico serve an insurance role to smooth consumption across the border during expansions in the destination economy immigration increases with the expected stream of future wage gains but it is dampened by a sunk migration cost that reflects the intensity of border enforcement during recessions established migrants are deterred from returning to their country of origin which places an additional downward pressure on the wage of native unskilled workers thus migration barriers reduce the ability of the stock of immigrant labor to adjust during the cycle enhancing the volatility of unskilled wages and remittances we quantify the welfare implications of various immigration policies for the destination economy

migration trade and foreign direct investment in mexico part of the rationale for the north american free trade agreement nafta was that it will increase trade and foreign direct investment fdi flows creating jobs and reducing migration to the united states u s since poor data on illegal migration to the united states make direct measurement difficult data on migration within mexico where census data permit careful analysis are used instead to evaluate the mechanism behind predictions on migration to the united states specifications are provided for migration within mexico incorporating measures of cost of living amenities and networks contrary to much of the literature labor market variables enter very significantly and as predicted once possible credit constraint effects are controlled for greater exposure to fdi and trade deters outmigration with the effects working partly through the labor market finally some tentative inferences are presented about the impact of increased fdi on mexico u s migration on average a doubling of fdi inflows leads to a 1 5 to 2 percent drop in migration

network effects and the dynamics of migration and inequality theory and evidence from mexico international migration is costly and initially only the middle class of the wealth distribution may have both the means and incentives to migrate which can increase inequality in the sending community however the migration networks formed lower the costs for future migrants which can in turn lower inequality this paper shows both theoretically and empirically that wealth has a nonlinear effect on migration and then examines the empirical evidence for an inverse u shaped relationship between emigration and inequality in rural sending communities in mexico after instrumenting we find that the overall impact of migration is to reduce inequality across communities with relatively high levels of past migration we also find some suggestive evidence for an inverse u shaped relationship among communities with a wider range of migration experiences

patient cost sharing in low income populations economie theory suggests that a natural tool to control medical costs is increased consumer cost sharing for medical care while such cost sharing reduces full insurance wherein patients are indifferent between falling sick or remaining healthy a greater reliance on coinsurance and copayments can in theory stem patient and provider incentives to engage

public versus private insurance system with and without transaction costs optimal segmentation policy of an informed monopolist computer mediated transactions allow insurance companies to customize their contracts while transaction costs limit this tendency toward customization to capture this phenomenon we develop a com

dollarization and the mexican labor market this paper examines how dollarization affects wages and employment in the mexican labor market dollarization is modeled as a fixed real exchange rate and also as a potentially increased inflow of capital from abroad the effects of dollarization depend upon whether adopting a fixed exchange reduces the rate of return on emigration and helps to attract foreign capital the paper investigates how mexican emigration to the united states responds to changes in bilateral economic conditions the evidence indicates that the flow of illegal immigrants from mexico into the united states is sensitive to economic conditions and is more volatile when the mexican monetary authorities have fixed the exchange rate in the past in contrast the legal immigrant flow is not sensitive to changes in relative economic conditions

the dynamo and the computer an historical perspective on the modern productivity paradox the dynamo and the computer an historical perspective on the modern productivity paradox author s paul a david source the american economic review vol 80 no 2 papers and proceedings of the hundred and second annual meeting of the american economic association may 1990 pp 355 361 published by american economic association stable url http www jstor org stable 2006600 accessed 08 12 2010 01 40

winners and losers from regional integration agreements how are the benefits and costs of a customs union divided between member countries outcomes depend on the comparative advantage of members relative to each other and relative to the rest of the world countries with a comparative advantage between that of their partners and the rest of the world do better than countries with an extreme comparative advantage consequently integration between low income countries tends to lead to divergence of member country incomes while agreements between high income countries cause convergence results suggest that developing countries are likely to be better served by north south than by south south agreements

coordination failures and government policy a model with applications to east asia and eastern europe abstract poor countries must specialize in standardized labor intensive commodities middle income countries may have a richer menu of options if their labor force is reasonably well educated and skilled the multiplicity of equilibria is due to a coordination problem inherent in activities that require specialized inputs if no intermediate inputs are presently produced there may be little incentive for any single firm to do so on its own the economy may get stuck in a low wage low tech equilibrium an investment subsidy or a minimum wage policy can enhance welfare by moving the economy to a superior equilibrium

the wage impact of undocumented workers evidence from administrative data using administrative individual level longitudinal data from the state of georgia this article finds that rising shares of undocumented workers results in higher earnings for documented workers but by a small amount a one percentage point increase in the share of undocumented workers in a documented worker s county industry results in an average wage boost of 0 44 within the firm a one percentage point increase in the percent of undocumented workers employed by the firm boosts wages by 0 09 0 11 0 12 and 0 04 in low medium and high skill firms respectively potential explanations for a positive wage impact are discussed

sequential entry with brand loyalty caused by consumer learning by using we examine first mover advantages in a new product market with sequential entry effort is necessary to learn how to use new products and consumers are assumed to differ in their ability to expend such effort we consider the intertemporal pricing strategy of the first entrant who anticipates the late entry of a rival firm the first entrant s optimal strategy is to set a low introductory price this builds up a customer base which remains loyal despite the later entry of a lower priced rival and weakens price competition between the two firms thus brand loyalty makes entry into the market easier

local multipliers and human capital in the united states and sweden we show that every time a local economy generates a new job by attracting a new business in the traded sector a significant number of additional jobs are created in the non traded sector this multiplier effect is particularly large for jobs with high levels of human capital and for high technology industries these findings are important for local development policies as they suggest that to increase local employment levels municipalities should target high technology employers with high levels of human capital

interdependence of industries coordination failure and strategic promotion of an industry abstract this paper analyzes coordination failure that arises from interdependence of industries assuming one of these industries is characterized by oligopolistic competition marshallian externalities are logically explained the conditions that create external economies are identified and policy implications for strategic promotion are discussed

cumulative effects of labor market distortions in a developing country abstract this paper considers a small open economy with an input output industrial structure that creates vertical linkages and multiple equilibria an imperfect labor market is introduced by assuming unionized labor it is shown that a deregulation of the labor market may trigger a large discontinuous expansion of industrial output as reduced wage costs start a circular cumulative process in which expansions of the up and downstream industries promote each other centralization of collective bargaining may however also be conducive to industrialization

ethnic capital and intergenerational mobility this paper analyzes the extent to which ethnic skill differentials are transmitted across generations i assume that ethnicity acts as an externality in the human capital accumulation process the skills of the next generation depend on parental inputs and on the quality of the ethnic environment in which parents make their investments or ethnic capital the empirical evidence reveals that the skills of today s generation depend not only on the skills of their parents but also on the average skills of the ethnic group in the parent s generation

how can we explain the persistence of the great recession a balanced stability approach the great recession gr brings about a stalemate in macroeconomics on the one hand while describing the immediate effects of the gr standard models fail to account for its persistence on the other heterodox approaches do not regain consensus as they fail to devise an alternative method for capturing the deep causes of the gr that account for its persistence in a systematic way this paper fills this gap by proposing a new framework called balanced stability approach unlike standard macro which takes stability for granted it provides a balanced assessment of stability considering both threats and opportunities for phenomena such as the so called new economy ne on a par on these grounds the paper draws the conclusion that the persistence of the gr is due to a low level of aggregate demand rooted in the structural changes generated by the ne

liquidity constrained migrants liquidity constraints represent a major obstacle for potential migrants trying to meet the high cost of undocumented international migration some cover it by borrowing from a smuggling organization with a commitment to repay the loan by working in the destination country as bonded laborers this paper compares alternative ways of financing migration and shows that debt bondage is optimal only if the international wage differential is sufficiently large in relation to migration costs tougher border controls as well as internal enforcement measures can be expected to reduce the incidence of debt bonded relative to self financed migration although they may not necessarily lower the overall inflow of illegal aliens

passenger shipping cartels and their effect on trans atlantic migration abstract we investigate the impact of passenger shipping cartels on trans atlantic migration during the early twentieth century we assemble from primary sources a detailed database of passenger flows and cartel operations and show that cartel operation reduced migratory flows by approximately 20 to 25 further we show that there was no strong intertemporal substitution in migration to north america at least in the short run and therefore that the effects of cartel operation were not undone by later migration lastly we find that cartel operation had no appreciable effect on the variability of migration flows providing evidence against the notion that unfettered competition was destabilizing to turn of the century transportation markets

two sided markets a progress report the paper provides a road map to the burgeoning literature on two sided markets and presents new results it identifies two sided markets with markets in which the structure and not only the level of prices charged by platforms matters the failure of the coase theorem is necessary but not sufficient for two sidedness the paper builds a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end users

international trade and labor migration a theory of the relationship between international trade and labor mobility is developed that takes into account five characteristics of such migration including its temporary nature differences between migrant and native labor the acceptance of unpredictable conditions of employment by migrant labor the ready availability of further labor resources and international capital mobility particular attention is paid to the role of international labor migration in helping to insulate native populations from the rigors of industrial fluctuations and in helping to preserve import competing industries that would have succumbed without the availability of cheap imported labor

capital mobility and underdevelopment traps abstract in a two country model with threshold effects we study the robustness of underdevelopment traps to capital mobility it is shown that capital mobility can make a country cross the threshold and bifurcate toward sustained growth subject to household expectations another result is however that a multiplicity of growth patterns such as long run divergence and convergence clubs can co exist with perfect capital mobility hence with an identical rate of return across countries in this model efficient development policies are a combination of first liberalization as capital mobility makes growth possible and second government intervention coordinating expectations into self fulfilling growth beliefs

land property rights and international migration evidence from mexico abstract in this paper i ask whether there is a relationship between land property rights and international migration in order to identify the impact of property rights i consider a country wide land certification program that took place in mexico in the 1990s my identification strategy exploits the staggered implementation and the households eligibility for the program i find that the program increased the eligible households likelihood of having one or more members abroad by 12 in terms of the number of migrants my coefficient estimates explain 26 of the 1994 1997 increase in migrants from ejido areas and 13 15 of the increase from all of mexico consistent with our theoretical model the impact is strongest for households without a land will this implies that land inheritance issues drive at least part of the effect

a south south survival strategy the potential for trade among developing countries trade between developing countries or south south trade has been growing rapidly in recent years following significant reductions in tariff barriers however significant barriers remain and there is currently reluctance among many developing countries to undertake further reductions instead preferring to focus on opening up access to developed country markets or to maintain the status quo given that multilateral liberalisation may results in the erosion of preferential access enjoyed by some developing countries this emphasis on northern markets represents a missed opportunity for developing countries to assess this we compare the potential effects of the removal of barriers on south south trade with the gains from developed country liberalisation and from regional free trade areas within africa asia and latin america a general equilibrium model gtap containing information on preferential bilateral tariffs is used to estimate the impacts the results indicate that the opening up of northern markets would provide annual welfare gains benefits to developing countries of 24 billion however the removal of south south barriers has the potential to generate gains 60 larger by contrast the potential gains from further regional agreements on a continental basis are limited in africa and asia although scope remains in latin america the results imply that giving greater emphasis to removing barriers between as well as within continents could prove a successful southern survival strategy and more

bank skin in the game and loan contract design evidence from covenant lite loans in a model of dual agency problems where borrower lender and bank nonbank incentives may conflict we predict a hockey stick relation between bank skin in the game and covenant tightness as bank participation declines covenant tightness increases until reaching a low threshold at which point the relation sharply reverses and covenant protection is removed with a commensurate increase in spread we find support for the hockey stick relation with bank s stake in covenant lite loans averaging 8 0 median we also find that covenant lite loans are more likely when borrower moral hazard is less severe and when bank relationship rents are high

a model of market power in customer markets we develop a model for studying dynamic competition in environments with frictions that lead to partial lock in of customers to products the dynamic aspects associated with customer retention and acquisition introduce pricing incentives that do not exist in more traditional static product markets the proposed model while highly stylized maintains certain symmetry properties that allow us to obtain equilibrium existence and uniqueness we then study the comparative statics of the model and derive a closed form relationship between average equilibrium markups and the herfindahl index we illustrate how the model can be used by analyzing mergers in such a dynamic environment

the short and long run determinants of less educated immigrant flows into u s states we use a gravity model of migration and alternative estimation strategies to analyze how income differentials affect the flow of immigrants into u s states using annual data from the american community survey we add to existing literature by decomposing income differentials into short and long term components and by focusing on newly arrived less educated immigrants between 2000 and 2009 our sample is unique in that the vast majority of our observations take zero values models that include observations with zero flow values find that recent male immigrants respond to differences in short term gdp fluctuations between origin countries and u s states and perhaps to long term trend gdp differences as well more specifically gdp fluctuations pull less educated male immigrants into certain u s states whereas gdp trends push less educated male immigrants out of their countries of origin effects for less educated women are less robust as gdp coefficients tend to be much smaller than for men

dollar illiquidity and central bank swap arrangements during the global financial crisis abstract while the global financial crisis was centered in the united states it led to a surprising appreciation in the dollar suggesting global dollar illiquidity in response the federal reserve partnered with other central banks to inject dollars into the international financial system empirical studies of the success of these efforts have yielded mixed results in part because their timing is likely to be endogenous in this paper we examine the cross sectional impact of these interventions theory consistent with dollar appreciation in the crisis suggests that their impact should be greater for countries that have greater exposure to the united states through trade and financial channels less transparent holdings of dollar assets and greater illiquidity difficulties we examine these predictions for observed cross sectional changes in cds spreads using a new proxy for innovations in perceived changes in sovereign risk based upon google search data we find robust evidence that auctions of dollar assets by foreign central banks disproportionately benefited countries that were more exposed to the united states through either trade linkages or asset exposure we obtain weaker results for differences in asset transparency or illiquidity however several of the important announcements concerning the international swap programs disproportionately benefited countries exhibiting greater asset opaqueness

trade policy cumulative causation and industrial development abstract this paper considers the effects of trade policy in industries which are imperfectly competitive and in which there is an input output structure creating vertical linkages between firms two models are presented one based on cournot oligopoly and the other on dixit stiglitz product differentiation in both models it may be the case that trade liberalisation triggers a dramatic expansion of output and possibly also a reduction in imports this arises as import liberalisation lowers costs in downstream industries expanding their output and triggering a big push of industrialisation

input chains and industrialization it is often maintained that many countries have achieved high levels of aggregate income through industrialization and that the main aspect of industrialization is the widespread adoption of increasing returns to scale industrial technologies a prominent exposition of this view can be found in murphy et al 1989 who also present a theoretical examination of industrialization when industrial technologies its can only be adopted in final goods production an important by product of their analysis is that this narrow view of industrialization cannot explain an increase in aggregate income greater than the productivity increase at the firm level this theoretical upper bound makes it difficult to attribute high levels of aggregate income to industrialization as empirical evidence suggests that increasing returns at the firm level are relatively small 1 murphy et al s theoretical work also confirms fleming s 1955 argument that the narrow view of industrialization alone cannot explain why a small improvement in its may trigger full scale industrialization and a large increase in aggregate income nor can it explain why countries with access to similar technologies may have very different levels of industrialization and aggregate income two other well documented aspects of industrialization are that its are adopted throughout

towards an evaluation of regional integration in latin america in the 1990s the decade of the 1990s has witnessed a wave of regional integration initiatives in latin america more than 14 agreements free trade areas or customs unions since 1990 with a handful more in varying degrees of negotiation see table 1 however this was not just a latin american phenomenon as regionalism has more than ever become a global trend mistry 1996 indeed now japan south korea and hong kong are the only world trade organization wto members which are not signatories to at least one preferential trade agreement wto 1995 regional integration is not new to latin america economic integration played an important role in the region s early post war economic history the 1960s and 1970s saw a number of very ambitious initiatives inspired by the successful western european experience ffrench davis munoz and palma 1994 indeed at its peak in the late 1960s and early 1970s the topic of integration was hard to avoid in the discussion of latin american development however disillusionment with integration processes had clearly set in by the late 1970s and the discussion of regional integration was all but silenced by the external crisis of the early 1980s this abstract was borrowed from another version of this item

same as it ever was europe s national borders and the market for corporate control abstract national borders continue to be strong barriers for mergers and acquisitions in europe using regional data we construct a gravity model and find that the restraining impact of national borders decreased by more than 17 percent between 1991 and 2007 however no significant change has occurred since the mid 1990s i e four years before the introduction of the euro in comparison we run a corresponding analysis in the united states using the 10 federal regions as country equivalents the resulting quasi border effect in the united states is weaker than that in the european union yet its decline by 43 percent is much stronger in the same period we conclude that european integration policy has had little effect on fostering m a cross border transactions

two kinds of consumer switching costs in this article i introduce a distinction between two kinds of consumer switching costs transaction costs and learning costs while transaction costs are incurred by a consumer at every switch between suppliers learning costs are incurred only at a switch to a supplier that is new to him in a multiperiod duopoly model i examine the effects of changing the proportion of each kind of consumer switching costs while holding total switching costs constant i show that an increase in transaction costs relative to learning costs increases the price offered to loyal consumers this then has the further effect of decreasing the introductory price in the market it also leads to a decrease in welfare

international migration self selection and the distribution of wages evidence from mexico and the united states we use the 1990 and 2000 mexican and u s population censuses to test borjas s negative selection hypothesis that the less skilled are those most likely to migrate from countries with high skill premia earnings inequality to countries with low skill premia earnings inequality we find that mexican immigrants in the united states are more educated than nonmigrants in mexico and were mexican immigrants to be paid according to current skill prices in mexico they would be concentrated in the middle of mexico s wage distribution these results are inconsistent with the negative selection hypothesis and instead suggest that there is intermediate selection of immigrants from mexico

what drives u s immigration policy evidence from congressional roll call votes abstract immigration is today one of the most hotly debated policy issues in the united states despite marked divergence of opinion even within political parties several important reforms have been introduced in the post 1965 era the purpose of this paper is to carry out a systematic analysis of the drivers of the voting behavior of us representatives on immigration policy in the period 1970 2006 and in particular to assess the role of economic factors at the district level our findings suggest that representatives from more skilled labor abundant districts are more likely to support an open immigration policy towards the unskilled whereas the opposite is true for representatives from more unskilled labor abundant districts this evidence is robust to the introduction of an array of additional economic and non economic characteristics of the districts and suggests that a simple factor analysis model can go a long way in explaining voting on immigration policy