managerial control of international firms and patterns of direct investment abstract formal analyses of international firms have concentrated on advantages from large operations due to for example economies of scope however the standard framework implicitly assumes the existence of managerial costs for running international operations the paper develops a model that explicitly incoporates both economies of scope and costs of managerial control of large and international operations it highlights the potential importance of international firms organizational structure suggesting a qualitative difference between situations where international firms have different stages of production located in different countries and situations where firms in addition have the same stage located in different countries

impacts of exchange rate volatility and international oil price shock on china s regional economy a dynamic cge analysis abstract a multi regional dynamic computable general equilibrium model is constructed in this paper to explore the macroeconomic effects of international oil price shocks and rmb exchange rate changes on china the results show that 1 in terms of regional development differences the decrease in international oil prices and depreciation of rmb are both conducive to economic growth although the impact of rmb devaluation is more obvious increases in international oil prices will further widen the output gap between the rich and the poor regions whereas oil price decreases and rmb devaluation will narrow the regional development differences 2 in terms of employment the depreciation of the exchange rate and the decline in international oil prices will help increase the employment rate in most regions but oil price hikes will be most beneficial for improving oil industry employment in the northeast 3 the impact of oil price volatility is asymmetric compared with rising oil prices falling oil prices have significantly greater effects on gdp industrial output employment and other aspects furthermore the impacts of exchange rate fluctuations and oil price changes on the regional economy exhibit a time lag

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

endogenous market structures in international trade natura facit saltum abstract almost all of the large literature on international trade with imperfect competition assumes exogenous market structures the purpose of this paper is to develop a simple model that generates alternative market structures as nash equilibria for different parameterizations of the basic model equilibrium market structure is a function of the underlying technology familiar configurations such as a duopoly competing in exports or a single multinational producing in both markets arise as special cases small tax policy changes can produce large welfare effects as the equilibrium market structure shifts implying discontinuous jumps in prices quantities and profits

the effects of petroleum product price regulation on macroeconomic stability in china abstract china has undertaken measures to regulate the prices of petroleum products since 1998 in order to deal with the world oil price shocks on its macro economy however the effects of price regulation are yet unknown especially when the world oil price fluctuates in different regimes the study first analyses the mechanisms of petroleum product price ppp regulation in the case of gasoline and the crude oil gasoline price fluctuation transmission followed by the identification of regimes and their time intervals using regime switching vector autoregressive model and then estimates the effects of gasoline price regulation in reducing macroeconomic volatility it is found that the world crude oil fluctuates in different regimes the mild fluctuation regime and the violent fluctuation regime the ppp regulation can reduce oil price volatility and then macroeconomic volatility but it is more effective in the mild fluctuation regime the findings present a deeper understanding of the stabilization effect of ppp regulation on the macroeconomy provide an evidence for sustaining china s ppp regulation for the purpose of macroeconomic stability and offer policymakers new information for petroleum product pricing reforms

the multinational firm direct investment is incorporated into a simple general equilibrium model of international trade the analysis focuses on an attempt to endogenize the internalization decision it is argued that a reasonable approach assumes that arm s length contracts must be simple so that complex arrangements require internalization the model relates direct investment to the degree of underlying uncertainty and to fundamental trade determinants such as relative factor endowments the behavior of the model contrasts sharply with that of the markusen helpman model which takes internalization for granted

granting votes exposing the political bias of intergovernmental grants using the within between specification for panel data instead of alleviating fiscal inequalities intergovernmental grants are often used to fulfill the grantors political goals this study uses a unique panel dataset on more than 500 croatian municipalities over a 12 year period to uncover the extent to which grant distribution is biased owing to grantors electoral concerns instead of the default fixed effects approach to modelling panel data we apply a novel within between specification aimed at uncovering the contextual source of variation focusing on the effects of electoral concerns on grant allocation within and between municipalities we find evidence of a substantial political bias in grant allocations both within and between municipalities particularly when it comes to local level electoral concerns the paper offers researchers a new perspective when tackling the issue of politically biased grant allocation using panel data particularly when they wish to uncover the simultaneous impact of time variant and time invariant factors or when they cannot apply a quasi experimental approach because of specific institutional contexts

rockets and feathers the asymmetric speed of adjustment of uk retail gasoline prices to cost changes abstract the paper develops a quadratic quantity adjustment model to test the hypothesis put forward in the recent monopolies and mergers commission report that the speed of adjustment of uk retail gasoline prices to cost changes is more rapid when costs rise than when they fall and that the adjustment path is more concentrated around the mean value on the upswing using data from 1982 to 1989 evidence of faster and more concentrated responses to cost increases were found

unsticking the flypaper effect in an uncertain world abstract we provide a novel explanation for the flypaper effect based on insurance arguments in our model the flypaper effect arises due to the differential response of precautionary savings to private income or fiscal transfers shocks in an uncertain world with incomplete markets the model generates two testable implications i the flypaper effect is a decreasing function of the correlation between fiscal transfers and private income and ii such relationship is stronger the higher is the volatility of fiscal transfers and or private income an empirical analysis of argentinean provinces for the period 1963 2006 finds strong support for the model s implications

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

the political determinants of federal expenditure at the state level it has been shown that states with higher per capita senate representation have higher federal spending per capita atlas c m gilligan t a hendershott r j and zupan m a 1995 american economic review 85 624 629 with a more recent data sample more highly disaggregated data and a different set of political control variables we are able to confirm the main result of atlas et al that per capita senate representation is positively related to federal expenditure this effect is strongest for procurement expenditures by contrast we do not find support for their result that spending increases with per capita representation in the house of representatives several other political variables are found to be significant in a subset of the expenditure equations

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

the relationship between oil price shocks and china s macro economy an empirical analysis china postdoctoral science foundation 20090460751 ministry of education of the people s republic of china 09yjc790167 09yja820074 national social science funds 09zd050 08ajy031

does energy price regulation benefit china s economy and environment evidence from energy price distortions abstract china s energy prices have long been regulated due to the critical role energy plays in economic growth and social development which leads to energy price distortion to some extent to figure out whether energy price regulations will benefit china s economy measured by gdp growth and environment measured by carbon emissions we conducted an in depth simulation using path analysis where five energy products natural gas gasoline fuel oil steam coal and coking coal are selected and three measurements absolute relative and moving of energy price distortions are calculated the results indicate that with a series of energy pricing policies the price distortion for a single type of energy has gradually transformed while the energy pricing system in china is not fully market oriented yet furthermore china s economy benefits from relative and moving distortions while the absolute distortions of energy prices have negative impacts on economic growth finally with regard to the environment carbon emissions call for fewer distortions

licensing versus direct investment a model of internalization by the multinational enterprise a firm must decide whether to serve a foreign market by exporting building a foreign branch plant or licensing the production to an existing foreign producer the existence of reputations implies that any licensing agreement must provide a licensee with the incentive to maintain the reputation this creates a motive for the firm to internalize transactions by building a branch plant i e by becoming a multinational the model reflects a more general notion that the inability of the firm to control a licensee s agent s actions can provide incentives for multinational activity the paper explores the determinants of the firm s mode of operation as well as the consequences of certain government policies

china s oil policy and its impact the oil industry is extremely important to china s overall economic growth fiscal stability and international trade but oil industry reforms have been undertaken slowly and gradually in 1994 the government reimposed central control over its oil industry by fixing the price of crude and petroleum products and channelling virtually all sales through state agencies this move marks a temporary retreat from the ongoing experiment with oil deregulation which picked up speed since 1992 for as long as it lasts this renewed central recontrol over oil prices and distribution will create increased uncertainty for foreign participation

competition for foreign direct investments abstract this paper models international competition for foreign direct investment as a common agency problem using the theory of menu auctions developed by bernheim and whinston in the model national governments act as principals and a multinational corporation as the single agent governments are assumed to maximize the net wage income generated by the corporation s investment it is shown that in the equilibrium of this game a high wage country may be able to attract investment even though all countries use subsidies furthermore it is shown that a country may choose to pay the highest subsidies even if it attracts less investment than in the unsubsidized regime our framework can also be used to study interregional subsidy competition within a country

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

competing destinations gravity model an application to the geographic distribution of fdi the competing destinations formulation of the gravity model ensues from the fact that unlike the classical version this approach explicitly acknowledges the interdependence of the flows between a set of alternative locations i e country recipients are competing for foreign direct investment fdi this article examines empirically a range of theoretical hypotheses about the determinants of fdi location in a panel data regression framework the results of the estimation of a gravity model lend support to the proximity concentration and internalization hypotheses also the fact that fdi has been found to be decreasing in the competition posed by alternative locations is suggestive of the superiority of the competing destinations version of the gravity equation over its classical formulation

the effects of real wages and labor productivity on foreign direct investment the volume of foreign direct investment fdi both into and out of the united states has grown rapidly in the past several decades theoretically labor costs in both source and host countries could be important determinants of these flows but thus far no consistently significant effects have been reported for fdi flows between the u s and other industrialized countries in this paper i estimate equations for u s fdi flows to and from five other industrialized countries the explanatory variables include both source and host country real wages and labor productivity but to put my work in perspective i shall first in section ii discuss recent literature in the area then section iii briefly discusses a theoretical model to highlight the possible effects of the labor variables the empirical procedure and results are presented in section iv and a summary in section v

asymmetric pass through of oil prices to gasoline prices evidence from a new country sample abstract this paper investigates the asymmetric pass through of oil prices to gasoline prices under the non linear autoregressive distributed lags nardl model the analysis adds to the unsettled discussion of whether retail gasoline prices respond asymmetrically to oil prices and it is carried out for the us the uk spain italy and greece spanning the period january 2009 to july 2016 these countries have been selected on the basis that fuel markets are differentiated by the structure of retail markets oligopolistic behavior production lags and market competition which depends on extraction refinery and distribution the analysis considers markets that differ in terms of their structure both short and long run non linearity are tested by deriving both the positive and negative partial sum decompositions of the dependent variable in addition it was feasible to quantify the responses to positive and negative oil price shocks from the asymmetric dynamic multipliers the findings indicate that oil and gasoline prices provide mixed evidence of an asymmetric behavior short run asymmetry is found in the italian market while in the spanish market there is evidence of both short and long run asymmetry the remaining cases greece u k u s illustrate a symmetric pass through scheme of oil to retail gasoline prices

the impact of oil price shocks evidence from the industries of six oecd countries most of the studies about the macroeconomic consequences of oil price shocks have been focused on us aggregate data in contrast to these studies this paper empirically assesses the dynamic effect of oil price shocks on the output of the main manufacturing industries in six oecd countries the pattern of responses to an oil price shock by industrial output is diverse across the four european monetary union emu countries under consideration france germany italy and spain but broadly similar in the uk and the us moreover evidence on cross industry heterogeneity of oil shock effects within the emu countries is also reported

legislative representation bargaining power and the distribution of federal funds evidence from the us congress this article investigates the relationship between representation in legislatures and the geographic distribution of federal funds in a legislative bargaining model we demonstrate that funds are concentrated in high representation areas and two channels underlie this result the proposal power channel reflects the role of representation in committee assignments and the vote cost channel reflects the role of representation in coalition formation in our empirical analysis we find that small states relative to large states receive more funding in the us senate relative to the house we also find empirical support for the two channels underlying this relationship throughout the history of federations and international organisations a key consti tutional design question involves how jurisdictions of different sizes are represented in legislative bodies and how their votes will ultimately be weighted large jurisdictions typically argue for delegation sizes or voting weights that are roughly proportional to population whereas small jurisdictions typically argue for an equal number of delegates or votes for each jurisdiction this conflict over representation is presumably driven at least in part by a belief that increased representation strengthens bargaining power in the battle over the geographic distribution of funds authorised by these legislative bodies in this article i analyse the relationship between legislative representation bar gaining power and the geographic distribution of federal funds from both a theoretical and empirical perspective in addition to investigating the existence of a relationship between representation and federal funds i also explore the underlying mechanisms that is i ask which political institutions such as agenda control provided to commit tees and the formation of coalitions under majority rule shape the bargaining power of jurisdictions in central legislatures and thus facilitate the relationship between repre sentation and the distribution of federal spending to provide a framework for analysing these issues i begin by developing a simple theoretical model of a central legislature that determines the crossjurisdiction distri bution of local public goods which are financed by a national tax base both delegation sizes and population are variable allowing me to consider a variety of institutional arrangements for jurisdictional representation legislators represent local interests and given the common pool problem associated with concentrated benefits and dis persed tax costs attempt to increase ownjurisdiction spending but to restrain spending elsewhere the model follows a recent literature on legislative bargaining in which a proposer must secure a majority of votes in order to pass legislation and due to the

seat vote curves loyalty effects and the provincial distribution of canadian government spending federal government spending in the canadian provinces for 1962 2002 is examined with emphasis on the role of seat vote elasticities in majoritarian electoral systems fixed effects regressions establish that per capita federal spending in a province increases with political competition as measured by provincial seat vote elasticities and with loyalty to the federal government as measured by the degree of provincial support for the federal government however too much loyalty can be counter productive because very loyal provinces are uncompetitive with low seat vote elasticities

electoral goals and center state transfers a theoretical model and empirical evidence from india we construct a model of redistributive politics where the central government is opportunistic and uses its discretion to make transfers to state governments on the basis of political considerations these considerations are the alignment between the incumbent parties at the central and state levels and whether a state is a swing state or not a testable prediction from the model is that a state that is both swing and aligned with the central government is especially likely to receive higher transfers we test this prediction using indian data for 14 states from 1974 75 to 1996 97 we find that a state which is both aligned and swing in the last state election is estimated to receive 16 higher transfers than a state which is unaligned and non swing

voting weights and formateur advantages in the formation of coalition governments over the last two decades a large and important literature has emerged that uses game theoretic models of bargaining to study legislative coalitions to test key predictions of these models we examine the composition of coalition governments from 1946 and 2001 these predictions are almost always expressed in terms of parties minimal integer voting weights we calculate such weights for all parliamentary parties in addition we develop a statistical model that nests the predictions of many of these models of the distribution of posts we find that for parties that join but did not form the government there is a linear relationship between their share of the voting weight in parliament and their share of cabinet posts the party that forms the government the formateur receives a substantial bonus relative to its voting weight the latter finding is more consistent with proposal based bargaining models of coalition formation and suggests that parties gain disproportionate power not because of their size but because of their proposal power

an econometric characterization of business cycle dynamics with factor structure and regime switching a dynamic factor model with regime switching is proposed as an empirical characterization of business cycles the approach integrates the idea of comovements among macroeconomic variables and asymmetries of business cycle expansions and contractions the first is captured with an unobservable dynamic factor and the second by allowing the factor to switch regimes the model is estimated by maximizing its likelihood function and the empirical results indicate that the combination of these two features leads to a successful representation of the data relative to extant literature this holds for within and out of sample and for both revised and real time data copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

determinants of biofuel oriented land acquisitions in sub saharan africa abstract the recent surge of investors interest for african land has triggered the debate about the drivers and effects of the so called land grabbing after a review of the relationship between investment in land and biofuel development in sub saharan africa we contribute to the existing literature in four dimensions we use the updated version of land matrix whose potentialities are currently underexploited we concentrate on land deals for cultivating biofuel crops which are emblematic of the food land energy nexus we focus on fdi to the african continent the most targeted region for land grabbing finally we delve deeper into the influence of institutional quality by testing the role of different institutional dimensions we find that abundance of water resources and general business conditions security and regulatory quality facilitate the investment in land for biofuels as for land governance what matters is the strength and security of land tenure rights rather than the type of tenure system

how large are global fossil fuel subsidies summary this paper estimates fossil fuel subsidies and the economic and environmental benefits from reforming them focusing mostly on a broad notion of subsidies arising when consumer prices are below supply costs plus environmental costs and general consumption taxes estimated subsidies are 4 9 trillion worldwide in 2013 and 5 3 trillion in 2015 6 5 of global gdp in both years undercharging for global warming accounts for 22 of the subsidy in 2013 air pollution 46 broader vehicle externalities 13 supply costs 11 and general consumer taxes 8 china was the biggest subsidizer in 2013 1 8 trillion followed by the united states 0 6 trillion and russia the european union and india each with about 0 3 trillion eliminating subsidies would have reduced global carbon emissions in 2013 by 21 and fossil fuel air pollution deaths 55 while raising revenue of 4 and social welfare by 2 2 of global gdp

were there regime switches in u s monetary policy working paper 2004 14 june 2004 abstract a multivariate model identifying monetary policy and allowing for simultaneity and regime switching in coefficients and variances is confronted with u s data since 1959 the best fit is with a model that allows time variation in structural disturbance variances only among models that also allow for changes in equation coefficients the best fit is for a model that allows coefficients to change only in the monetary policy rule that model allows switching among three main regimes and one rarely and briefly occurring regime the three main regimes correspond roughly to periods when most observers believe that monetary policy actually differed and the differences in policy behavior are substantively interesting though statistically ill determined the estimates imply monetary targeting was central in the early 80s but was also important sporadically in the 70s the changes in regime were essential neither to the rise in inflation in the 70s nor to its decline in the 80s jel classification e52 e47 c53 key words counterfactuals lucas critique policy rule monetary targeting simultaneity volatility model comparison i the debate over monetary policy change in an influential paper clarida gali and gertler 2000 cgg presented evidence that us monetary policy changed between the 1970 s and the 1980 s indeed that in the 70 s it was drastically worse they found that the policy rule apparently followed in the 70 s was one that when embedded in most stochastic general equilibrium models would imply non uniqueness of the equilibrium and hence vulnerability of the economy to sunspot fluctuations of arbitrarily large size their estimated policy rule for the later period on the other hand eliminated this indeterminacy these results are a possible explanation of the volatile and rising inflation of the 70 s and of its subsequent decline the cgg analysis has two important weaknesses one is that it fails to account for stochastic volatility us macroeconomic variables and particularly the federal funds rate have gone through periods of tranquility and of agitation with forecast error variances varying greatly from period to period ignoring such variation does not lead to inconsistent estimates of model parameters when the forecasting equations themselves are constant but it strongly biases toward a finding of changed parameters tests of the stability of the forecasting equations the other weakness is that the cgg analysis rests on powerful and implausible identifying assumptions they require that we accept that the response of the monetary authority to expected future inflation and output does not depend on the recent history of inflation money growth or output it is hard to understand why this should be so especially in the 70 s when monetarism was a prominent theme in policy debates congress was requiring reports from the fed of projected time paths of monetary aggregates and financial markets were reacting sensitively to weekly money supply numbers the requirement for existence and uniqueness of equilibrium in dynamic models is that the monetary policy rule show a more than unit response of interest rates to the sum of the logs of all nominal variables that appear on the right hand side of the reaction function if we force a particular measure of expected future inflation to proxy for all the nominal variables that actually appear independently in the reaction function we are bound to get distorted conclusions on the one hand because expected future inflation will be a noisy measure of the full set of nominal influences on policy we might get downward bias in our estimates from the usual errorsin variables effect on the other hand to the extent that expected future inflation like most expected future values shows less variation than current nominal variables we could find a mistaken scaling up of coefficients

volatility and slow technology diffusion abstract i study the effects of uncertainty on technology adoption and thereby on volatility and growth i present an analytically tractable model in which i uncertainty about the returns to adoption delays technology diffusion and ii the mean and volatility of output growth are jointly determined in equilibrium i then test the key predictions of the model by studying the introduction of three major information and communication technologies icts computers internet and cell phones i find that countries with more volatile growth rates of real gdp per capita have higher time adoption lags and lower average growth as predicted by the model

estimating the value of proposal power this paper investigates the role of proposal power in the allocation of transportation projects across u s congressional districts in 1991 and 1998 the evidence supports the key qualitative prediction of legislative bargaining models members with proposal power those sitting on the transportation authorization committee secure more project spending for their districts than do other representatives support for the quantitative restrictions on the value of proposal power is more mixed i then empirically address several alternative models of legislative behavior including partisan models informational roles for committees models with appropriations committees and theories of committees as preference outliers

energy price regulatory price distortion and economic growth a case study of china energy prices are often distorted by government control which is justified on the grounds that such control will help mitigate the negative impact of price volatility from oil imports and thus positively affect the domestic economy in this paper we show in a two sector growth model that regulatory price distortion can negatively affect the economy and then based on the model we empirically estimate the impact of the price distortion on output growth in china using monthly time series data from 2005m1 to 2012m12 in contrast to the usual argument for regulatory control to mitigate price volatility we find that regulatory price distortion negatively affects output growth in china during both the short and long term because it is robust to different measures of output and price distortion hence the argument that using price regulation to protect economic growth is undermined and subsequently this study lends its support to energy price deregulation a market oriented energy price regime may improve the resilience of the domestic economy to global oil price shocks

money growth and inflation a regime switching approach abstract we develop a markov switching model for inflation with time varying transition probabilities inflation is characterized by two regimes high and low inflation and the probability of regime changes depends on money growth using bayesian techniques we apply the model to the euro area germany the us the uk and canada for data from the 1960s up to the present our estimates suggest that a smoothed measure of broad money growth corrected for real time estimates of trend velocity and potential output growth has important leading indicator properties for switches between inflation regimes thus money growth provides an important early warning indicator for risks to price stability

international investment location decisions abstract in international location tournaments governments compete for foreign investment with tax and other short run incentives such tournaments can be won if agglomeration economies are sufficiently powerful to overcome investors desire to spread investments as a hedge against risk we focus on manufacturing investments by u s multinationals in the 1980s our econometric results suggest that agglomeration economies are indeed the dominant influence on investor calculations paradoxically short run incentives have limited apparent impact on location choice we conclude that high cost tournament play is unnecessary for countries with good infrastructure development specialized input suppliers and an expanding domestic market

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association