optimal dynamic pricing of inventories with stochastic demand over finite horizons in many industries managers face the problem of selling a given stock of items by a deadline we investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm s objective is to maximize expected revenues examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry which markets space such as seats on airline flights cabins on vacation cruises and rooms in hotels that become worthless if not sold by a specific time we formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp price as a function of the stock level and the length of the horizon for a particular exponential family of demand functions we find the optimal pricing policy in closed form for general demand functions we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity finally we extend our results to the case where demand is compound poisson only a finite number of prices is allowed the demand rate is time varying holding costs are incurred and cash flows are discounted the initial stock is a decision variable and reordering overbooking and random cancellations are allowed

explaining business cycles in small open economies abstract this paper analyzes the role of world price shocks fluctuations in the prices of capital intermediate and primary goods and in the world real interest rate in the generation and propagation of business cycles in small open developing countries i construct a stochastic dynamic multi sector small open economy model the model is a variant of the specific factors model and reflects the major structural characteristics of developing economies i utilize variance decomposition methods to quantitatively evaluate the impact of world price shocks the results indicate that world price shocks account for a significant fraction of business cycle variability in developing countries

optimal dynamic pricing for perishable assets with nonhomogeneous demand we consider a dynamic pricing model for selling a given stock of a perishable product over a finite time horizon customers whose reservation price distribution changes over time arrive according to a nonhomogeneous poisson process we show that at any given time the optimal price decreases with inventory we also identify a sufficient condition under which the optimal price decreases over time for a given inventory level this sufficient condition requires that the willingness of a customer to pay a premium for the product does not increase over time in addition to shedding managerial insight these structural properties enable efficient computation of the optimal policy numerical studies are conducted to show the revenue impact of dynamic price policies price changes are set to compensate for statistical fluctuations of demand and to respond to shifts of the reservation price for the former our examples show that using optimal dynamic optimal policies achieves 2 4 7 3 revenue improvement over the optimal single price policy for the latter the revenue increase can be as high as 100 these results explain why yield management has become so essential to fashion retailing and travel service industries

migration and fuel use in rural mexico many households in developing countries rely on renewable natural resources as their main source of energy collecting and burning firewood requires a considerable amount of time has negative health consequences and can cause deforestation and depletion of local resources if forests are not properly managed a transition from traditional to modern fuels can benefit households by reducing these negative effects migration a quintessential feature of development may facilitate this transition but its impacts on fuel choice are theoretically ambiguous it can reduce the household labor available for firewood collection and provide cash to purchase substitutes however it has an income effect that changes the demand for home cooked food and energy to cook it firewood or gas could be used to meet the increase in energy demand to resolve this theoretical ambiguity we use an instrumental variables method with household panel data from rural mexico and investigate the impact of mexico to us migration and remittances on gas expenditures and household labor allocated to firewood collection sending a migrant to the united states causes a significant decrease in reliance on firewood collection and an increase in both stove and gas purchases these findings have potentially far reaching environmental implications as labor moves off the farm

smuggling and price disparity abstract this paper proposes a model of smuggling consistent with the coexistence of smuggling legal trade and price disparity defined as a domestic price which exceeds is less than the return from legal export import these phenomena have been found to characterize indonesian smuggling a framework is presented in which legal trade is used to cloak smuggling activity with the implication that the greater the volume of legal trade the less the costs of smuggling this model is then used to explain the observation noted above and to show that smuggling may be welfare increasing vis a vis the non smuggling situation and that even if the suppression of smuggling is costless tax revenue maximization may require a positive level of smuggling in addition the model is applied to coffee and rubber exports from indonesia

a survey of agricultural household models recent findings and policy implications semicommercial farms that produce multiple crops make up a large part of the agricultural sector in developing economies these farms or agricultural households combine two fundamental units of microeconomic analysis the household and the firm traditional economic theory has dealt with these units seperately but in developing economies in which peasant farms dominate their interdependence is of crucial importance researchers have developed models of agricultural households that combine producer and consumer behavior in a theoretically consistent fashion recent empirical applications of these models have extended them and expanded the range of policy issues which can be investigated using this general framework this article reports the results of empirical applications of this model in india indonesia japan the republic of korea malaysia nigeria senegal sierra leone taiwan and thailand it provides a comparative analysis of the policy implications of the approach for such matters as the welfare of farm households the size of marketed surplus the demand for nonagricultural goods and services and for hired labor and the availability of budget revenues and foreign exchange

terms of trade shocks and the balance of trade there is a harberger laursen metzler effect abstract according to the harberger laursen metzler hlm effect an exogenous increase in the terms of trade faced by a small open economy leads to an improvement in that country s trade balance in this paper structural vector autoregression techniques are used to investigate whether there is any systematic pattern in the responses of the trade balance to terms of trade shocks for a large number of small open economies two important results emerge first there is strong support in the data for the existence of an hlm effect second the response of the trade balance and real income to a terms of trade shock implied by the structural vector autoregression model are strongly consistent with those reported by mendoza 1995 from simulating a particular dynamic stochastic equilibrium model of a small open economy

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

does competition reduce price dispersion new evidence from the airline industry we analyze the effects of competition on price dispersion in the airline industry using panel data from 1993 q1 through 2006 q3 competition has a negative effect on price dispersion in line with the textbook treatment of price discrimination this effect is pronounced for routes with consumers characterized by relatively heterogeneous elasticities of demand on routes with a homogeneous customer base the effects of competition on price dispersion are smaller our results contrast with those of borenstein and rose who found that price dispersion increases with competition we reconcile the different results by showing that the cross sectional estimator suffers from omitted variable bias

on savings and investment dynamics in a small open economy abstract this paper constructs a stochastic overlapping generations two country model of savings and investment under conditions of perfect international capital mobility the focus of the analysis is on the relationship between savings and investment dynamics in a small open economy in response to stochastic variations in domestic and or foreign production technologies the model is simulated under alternative specifications of the stochastic distribution governing both technologies this provides insight into the very complicated nature and rich diversity of possible relationships between savings and investment dynamics

agricultural household models extensions applications and policy this book presents the basic model of an agricultural household that underlies most of the case studies undertaken so far the model assumes that households are price takers and is therefore recursive the decisions modeled include those affecting production and the demand for inputs and those affecting consumption and the supply of labor comparative results on selected elasticities are presented for a number of economies the empirical significance of the approach is demonstrated in a comparison of models that treat production and consumption decisions separately and those in which the decisionmaking process is recursive the book summarizes the implications of agricultural pricing policy for the welfare of farm households marketed surplus the demand for nonagricultural goods and services the rural labor market budget revenues and foreign exchange earnings in addition it is shown that the basic model can be extended in order to explore the effects of government policy on crop composition nutritional status health saving and investment and to provide a more comprehensive analysis of the effects on budget revenues and foreign exchange earnings methodological topics primarily the data requirements of the basic model and its extensions along with aggregation market interaction uncertainty and market imperfections are discussed the most important methodological issues the question of the recursive property of these models is also discussed

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

the effects of surprise and anticipated technology changes on international relative prices and trade abstract this paper argues that it is important to distinguish surprise and anticipated components of total factor productivity tfp when we study the international transmission of tfp shocks we document that surprise and anticipated shocks to us tfp induce distinct dynamics for international relative prices the real exchange rate and the terms of trade and international trade real exports real imports and the trade balance our empirical findings can reconcile some conflicting empirical results in the literature and hence lead to a better understanding of the international transmission of tfp shocks in addition we evaluate a standard international macroeconomic model and discuss the mechanisms that may help to replicate our empirical findings

dynamics of the trade balance and the terms of trade in ldcs the s curve abstract in their analysis of the dynamic behavior of terms of trade and the trade balance backus kehoe and kydland found that the lead and lag correlation between these two variables is s shaped for a set of oecd countries furthermore they show that this s curve can be replicated by a two country dynamic general equilibrium model surprisingly the s curve also describes the dynamic relationship between terms of trade and the trade balance for a large set of ldcs this s curve can also be reproduced by a small open economy model which captures some important features of ldc economies the s curve is unexpectedly robust to variations in the key parameters of the model the model also captures the business cycle properties of the ldc data

theories of poverty traps and anti poverty policies in this paper we provide a conceptual overview of alternative mechanisms leading to poverty traps at the individual level making a distinction between those that are due to external frictions e g market failure and those that are due to behavior under extreme scarcity in the absence of any frictions we develop a common theoretical framework to examine alternative scenarios characterizing conditions under which poverty traps in the sense of multiple stable steady states arise as opposed to possibly conditional convergence to a unique steady state we apply this framework to discuss the relative merits of alternative anti poverty policies such as unconditional and conditional cash transfers and direct interventions aimed at improving market access to the poor or improving public service delivery jel codes d13 d23 o12 o15

parallel fragmented or black defining market structure in developing economies abstract in describing market structure development economists employ such terms as fragmented informal parallel and segmented to account for the observed distributions of prices of both goods and factors although these terms are used interchangeably do they mean the same thing focusing on the parallel markets approach the paper identifies government policies which create excess demand or supply in particular markets as the core determinant of the emergence of an official unofficial market structure the legality of unofficial transactions proves critical in assessing the consequences of the parallel market situation contrasting alternative characterizations of market structure the paper concludes that the parallel market is a distinct analytical concept

can government purchases explain the recent u s net export deficits abstract this paper investigates the role of u s government purchases in explaining recent u s net export behavior i develop a two country neoclassical model that emphasizes linkages from government purchases to consumption i compare the model s implications for the movements and co movements of net exports against their data counterparts a parameterization in which government purchases and private consumption are complements and in which expectations of future government purchases are revised downward can account for much of the time path and co movements of net exports i conclude that u s government purchases play some role in explaining recent u s net export behavior

has ryanair s pricing strategy changed over time an empirical analysis of its 2006 2007 flights abstract this paper analyzes the question of whether ryanair s pricing strategies have changed over time we create a panel dataset of fares for all of ryanair s european flights over a two year period from 1 january 2006 to 31 december 2007 we calculate the average fare over a 90 day period prior to departure and the intensity of dynamic pricing for each flight in the panel in particular analysing the changes in these variables observed between pairs of equivalent flights our results show that overall both average fares and the intensity of dynamic pricing decreased in 2007 more than one third of flights saw a price reduction of more than 10 now that it has become the dominant low cost carrier in europe ryanair appears to be softening its dynamic pricing activities on existing routes typically employed to stimulate additional touristic demand thus booking in advance becomes relatively more expensive

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

trade liberalisation and poverty what are the links this paper asks whether a developing country s own trade liberalisation could translate into increased poverty and what information would be required to identify whether it will do so it plots the channels through which such effects might operate identifying the static effects via four broad groups of institutions households distribution channels factor markets and government and the dynamic issues of volatility long term economic growth and short term adjustment stresses an increase in the price of something a household sells labour good service increases its welfare thus the paper first explores the likely effects of trade liberalisation on the prices of goods and services taking into account the distribution sector also critical is whether trade reform creates or destroys markets trade reform is also likely to affects factor prices of which the wages of the unskilled is the most important for poverty purposes if reform boosts the demand for labour intensive products it boosts the demand for labour and wages and or employment will increase however not all developing countries are relatively abundant in unskilled labour and trade can boost demand for semi skilled rather than unskilled labour hence poverty alleviation is not guaranteed trade reform can affect tariff revenue but much less frequently and adversely than is popularly imagined even if it does it is a political decision not a law of nature that the poor should suffer the resulting new taxes or cuts in government expenditure opening up the economy can reduce risk and variability because world markets are usually more stable than domestic ones but sometimes it will increase them because stabilisation schemes are undermined or because residents switch to riskier activities the non poor can generally tide themselves over adjustment shocks from a liberalisation so public policy should focus on whether the initially poor and near temporary setbacks the key to sustained poverty alleviation is economic growth there is little reason to fear that growth will not boost the incomes of the poor similarly while the argument that openness stimulates long run growth has still not been completely proven there is every presumption that it will

smuggling and the black market for foreign exchange this paper develops a model of the black market for foreign exchange in which black market currency is demanded and supplied by firms engaged in smuggling it is demonstrated that quotas or foreign exchange rationing are not necessary to induce the coexistence of legal and black foreign exchange markets variants of the model analyze the implications of capital flight unbalanced trade quotas foreign exchange licensing and economies with more than two goods

water works the economic impact of water infrastructure abstract billions of hours are spent each year on water collection in developing countries this paper explores whether improvements in water technologies which decrease household distance to drinking water source and the time intensity of home production enable changes in household time allocation and thereby productivity gains in kyrgyzstan adults reallocate time to leisure and labor on the household farm average yearly household cereals production increased significantly results imply a rate of return to labor equaling 0 11 hour approximately half the hourly farm wage absent evidence of improved adult health results suggest that productivity gains were realized primarily through increased farm labor

cointegration aggregate consumption and the demand for imports a structural econometric this paper uses a two good version of hall s 1978 representative agent permanent income model to derive a structural import demand equation for nondurable consumer goods under the identification restriction that taste shocks are stationary the model is shown to imply that log imports log domestic goods and the log relative price of imports are co integrated the data decisively reject the null hypothesis that imports the relative price of imports and the consumption of home goods are not co integrated we employ the non linear least squares technique recently proposed by phillips and loretan 1990 to estimate the parameters of the import demand equation the long run price elasticity of import demand is estimated to be 0 95 the elasticity of import demand with respect to a permanent increase in real spending is estimated to be 2 20 these estimates fall within the range reported in studies by helkie and hooper 1986 cline 1989 and the many studies surveyed by goldstein and kahn 1985 the message of this paper is that at least for non durable consumer goods it is possible to interpret the traditional import demand equation as a co integrating regression and to interpret the price and expenditure elasticities estimated from such a trade equation as a co integrating vector estimates of the co integrating vector can be used to recover estimates of the utility parameters of the representative household the similarity between the ols and phillips loretan estimates of the parameters suggests that the simultaneous equation bias is not large this abstract was borrowed from another version of this item

rural livelihood diversification in sub saharan africa a literature review abstractthis article provides a comprehensive review of the literature on the nature and evolution of rural livelihood diversification in sub saharan africa and the situation regarding smallholders it reveals mixed findings about the causes and consequences of livelihood diversification on rural smallholders adopting this strategy a lot of evidence from the literature suggests that it is relatively better off smallholders with sufficient assets who achieve successful livelihood diversification mainly by exploiting opportunities and synergies between farm and nonfarm activities because of asset constraints increase in incomes and wealth based on livelihood diversification has not yet benefitted the large majority of smallholders

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

the j curve a literature review due to lag structure currency devaluation is said to worsen the trade balance first and improve it later resulting in a pattern that resemble the letter j hence the j curve phenomenon since its introduction by magee in 1973 brooking papers on economic activity 1 pp 303 25 a large number of studies have attempted to test the phenomenon using different techniques and different model specifications the results are at best ambiguous and deserve to be collected together for the future generation of researchers and graduate students this paper fills such a vacuum in the literature by reviewing the j curve related empirical papers

fuelwood consumption and forest degradation a household model for domestic energy substitution in rural india this paper disusses domestic en ergy supply and demand in rural india links be tween forest scarcity and household fuel collec tion are analyzed in a non separable household model focusing on substitution of non commer cial fuels from the commons and the private do main based on data from villages bordering a protected area a novel maximum entropy ap proach is used for estimation it is found that households respond to forest scarcity and in creased fuelwood collection time by substituting fuels from private sources for forest fuelwood however the magnitude of the response appears insufficient to prevent current fuelwood collection practices from causing serious forest degrada tion jel q24

spice price spikes simulating impacts of saffron price volatility in a gendered local economy wide model summary access to international markets provides smallholders with unprecedented opportunities but also exposes them to world market whims we use a local economy wide impact evaluation lewie model to analyze how the recent global saffron price variability affected morocco s taliouine taznakht region a specialized agro export economy with a stark gender division of labor prices of saffron increased by 71 per year over the 2007 09 period before falling quickly back to their trend our modeling approach allows us to simulate such shocks and evaluate impacts not only on producers but also on the local economies around them in our simulations positive price shocks and increases in productivity both cause large reallocations of labor resources particularly for female workers at harvest time we use monte carlo simulations to evaluate how saffron price variance affects the economy female wage income is especially sensitive to global price variability a 100 increase in saffron price variance leads to 133 increase in female wage income variance but only 36 for males accounting for general equilibrium effects is critical for understanding the ramifications of exposure to export price volatility in poor economies

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

small enterprise and firm level technical efficiency in the indonesian garment industry this paper examines technical efficieny in the indonesian garment industry based on the country s 1986 census of small industry drawing on a sample of 2250 firms our analysis suggests that inter firm variations in efficiency are very considerable the paper then investigates the correlates of these variations finding in particular a positive correlation between technical efficiency and each of export orientation financial integration and female participation in the workforce it is also found that there is a significant level of labour capital substitution in the industry

pull and push individual farming in hungary this paper is motivated by the fact that part time individual farming is commonly observed among rural households in a number of transition economies but it is not clear prima facie if such resource allocation is optimal a conceptual model of household labor allocation between individual farming and off farm wage employment is developed the model explicitly accounts for the role of household endowments in labor allocation as the analysis is conditioned on the status of factor markets the hypotheses are empirically tested using 1998 data from a country representative survey of rural households in hungary an advanced transition country which only recently became eu member state results provide evidence that capital market imperfections still remain implications for the policies related to agricultural sector restructuring employment and rural development are discussed

household level effects of electricity on income abstract this paper studies the effect of electricity on income using the nepal living standards survey iii nlssiii carried out in the years 2010 11 to account for endogeneity issues we use a two stage probit least squares 2spls model we find that causality runs both ways that is income explains whether a household is connected to electricity but also a household being connected to electricity has a very large and significant effect on income

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

does food aid disrupt local food market evidence from rural ethiopia the paper examines the impact of food aid on households marketing behavior based on a panel of households followed during 1994 2009 in 15 villages of ethiopia the impact of aid is examined at the intensive margin on quantities produced sold or bought by the households and at the extensive margin on the number of producers sellers and buyers food aid reduces the probability of being a producer it also increases the probability of being a seller after a reform of aid policy in 2004 from repeated emergency distributions toward a multi year program aiming at agricultural development

modeling the impact of agricultural growth and government policy on income distribution in india this article uses a limited general equilibrium model to investigate the growth and equity effects of a variety of economic and technical changes and selected agricultural policies in india it explores how changes in food prices rural wages and farm profits associated with the green revolution period affected income distribution between net buyers and sellers of food the model shows that income gains from the green revolution initially accrued to the wealthier rural groups but that after 1972 73 they were transferred to urban consumers and that by 1980 81 the per capita incomes of poor and wealthier rural groups alike were barely above their respective 1960 61 levels the model is also used in counterfactual analysis of the impact of changes in technological demographic investment taxation and income redistribution variables its findings indicate the importance of trade policies for the nature of the equity outcomes from agricultural growth and suggest that a reduction in population growth and an increase in nonagricultural employment and income are required to convert agricultural growth into reduced rural poverty

optimal pricing policies for perishable products in many industrial settings managers face the problem of establishing a pricing policy that maximises the revenue from selling a given inventory of items by a fixed deadline with the full inventory of items being available for sale from the beginning of the selling period this problem arises in a variety of industries including the sale of fashion garments flight seats and hotel rooms we present a family of continuous pricing functions for which the optimal pricing strategy can be explicitly characterised and easily implemented these pricing functions are the basis for a general pricing methodology which is particularly well suited for application in the context of an increasing role for the internet as a means to market goods and services

foreign exchange rationing and employment in industrializing countries abstract this paper analyzes the interaction of two constraints foreign currency controls and a minimum wage on the behavior of a small industrializing country the latter is characterized by the large proportion of intermediate inputs in total imports the main results are the following 1 the two distortions magnify the adverse effects on employment of a minimum wage 2 the rationing policy is self defeating on its own terms 3 devaluation is almost inevitable despite the political considerations that make it so difficult and 4 black markets may be tolerated so openly because they help undo some of the harmful effects noted above

airline pricing under different market conditions evidence from european low cost carriers abstract traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight this implies a monotonically increasing temporal profile of fares in this paper we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main european low cost carriers and measure its effectiveness we find that reduction of the offered airfare by one standard deviation raises a flight s load factor on average by 2 7 percent a measure unaffected by the intensity of competition in a route furthermore yield management interventions are less effective the higher the share of leisure holiday and visiting friends and relatives traffic on the route this result runs counter to the common perception of leisure passengers being more responsive to price changes

the philippines roll on roll off policy and its impact on household income abstractour paper captures the immediate impact of the roll on roll off policy that offered an alternative system of inter island transfer within the philippines it provides evidence on the effect

multi dimensional price elasticity for leisure and business destinations in the low cost air transport market evidence from easyjet this study investigates the price elasticity of demand in the european low cost carrier lcc industry by analysing internet fares for all easyjet flights departing from the amsterdam schiphol airport towards 21 european destinations between march and september 2015 results suggest that the price elasticity of demand greatly varies across different dimensions ranging from 0 535 for the business oriented route of hamburg to 1 915 for the leisure oriented route of split price elasticity is also found to be higher for reservations made more days in advance for reservations and departures occurring on weekends and for flights taking off during lunchtime and in the summer period all results are consistent with the different behaviours of leisure and business passengers and the ongoing increase in the business component of the lcc passenger mix

dollars for sale exchange rate policy and inflation in africa abstract in africa the government is often the main provider of foreign exchange acquired through aid or via a nationalized mining sector although a parallel market is also usually active a policy of indexing the official exchange rate on the parallel one is destabilizing while a nominal anchor policy has the opposite effect using the case of nigeria these stylized facts are interpreted in the light of an analytical model with rational expectations the case of guinea is also presented as an example of where the nominal anchor policy has succeeded

sri lanka s rural non farm economy removing constraints to pro poor growth summary we use a survey of rural enterprises from sri lanka to explore characteristics of the informal non farm sector and identify obstacles to its expansion and productivity value added in this sector amounts to 80 of agricultural gdp participating households incomes are significantly higher than those of households who do not participate barriers to entry are low and the impact of non farm development on inequality modest implying a large potential contribution to growth and poverty reduction infrastructure constraints negatively affect new startups investment in and productivity of existing enterprises with small enterprises being particularly affected

village banking and maternal and child health evidence from ecuador and honduras abstract many microcredit institutions bundle credit with health education or other programs this paper reviews arguments on such tie ins and concludes that net benefits are possible but requires empirical testing quasi experimental data from project hope s health banks and credit only village banks are then examined the paper presents evidence that health practices do not improve automatically with greater wealth in honduras results show that health bank participation is robustly associated with reduced subsequent conditional child diarrhea probability but in no specification does credit only bank participation have this effect in ecuador results suggest a larger effect of credit only banks in both countries health bank participation significantly raises subsequent healthcare over credit only participation and at least reduces the tendency to switch from breast feeding to bottle feeding as income rises effects on expenditures are ambiguous there is no clear link between tie ins and bank performance

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

the dynamics of a small open economy in response to monetary fiscal and productivity shocks abstract this paper evaluates empirically the relative importance of monetary and fiscal versus technology shocks in an open economy characterized by perfect international capital mobility the variance covariance matrix of these shocks is estimated a stochastic model is used to perform numerical simulations the results show that persistent shocks to productivity can reproduce several empirical regularities including the puzzling high correlation between national saving and investment remarkably well and that monetary and fiscal shocks play a minor role

the fallacy of composition argument is it relevant for ldcs manufactures exports abstract the constraints imposed upon ldcs export growth by international demand have been the subject of a long standing controversy in this paper we present estimates of manufactures export demand functions for 23 ldcs we focus first on the constraints that the international environment imposes upon export growth for an individual ldc to this purpose the small country hypothesis of an infinitely elastic export demand is tested and the claim that supply factors play a determinant role in affecting export performances is then assessed we turn next to the constraints on global ldc growth and ask whether exports from ldcs complete mostly with northern products or are better substitutes with exports from other ldcs this allows us to assess the heuristic value of cline s 1982 remark that a generalized outward shift in the ldcs export supply schedule would be associated with an important decline in prices and would undermine the success of a widespread export led strategy we find that for a representative ldc a large share almost 80 percent of the benefits of devaluation on export revenues are made to vanish when other ldcs competitors pursue similar policies

are agricultural markets more developed around cities testing for urban heterogeneity in separability in tanzania abstract a key question for policymakers concerned about feeding sub saharan africa s ssa rapidly growing cities is whether or not nearby farms benefit from improved agricultural markets evidence from case studies and agricultural location theory suggest so but urban heterogeneity has not yet been found in a common economic test of functioning agricultural markets the separability result the test is based on a key insight of the agricultural household model which finds that a farm s profit should be maximized independently from household utility given perfect factor markets i e separability but not so if the household faces at least two market failures i e non separability in this paper i test for geographic heterogeneity in separability between rural peri urban and urban districts using 2014 15 data from the world bank s living standards measurement study and integrated surveys on agriculture lsms isa from tanzania i find strong evidence that the correlation between pre harvest labor demand and household size implying non separability in rural areas is significantly weaker in three of tanzania s five largest cities dar es salaam arusha and mbeya given certain assumptions this can be interpreted as evidence of increased agricultural market functionality around these cities relative to rural areas overall these results contribute to the debate on how to achieve urban food security in ssa and give some validity to agricultural location theory and the separability test as tools to help policymakers characterize the nature of agricultural factor markets

the household and employment in small scale nonfarm enterprises abstract this paper investigates the elasticity of hired labor demand in malawian small scale nonfarm enterprises to illustrate some key issues in considering employment policy in the less developed country ldc context where such enterprises comprise a large share of the labor market it is argued that recognizing the household character of production has important bearing on the estimation and understanding of the hired labor demand function a variant of the household production models which have become prevalent in analyses of underdeveloped agriculture is used to demonstrate conceptual differences from conventional studies of labor demand of particular relevance is the conclusion that the disemployment effect of wage hikes is likely to be smaller than in the more conventional enterprise and that the demographic composition of the household will affect employment patterns

subsistence fishing in a 21st century capitalist society from commodity to gift abstract in this paper we examine the extent range and diversity of noncommercial wild ocean seafood subsistence harvests among commercial operators in washington and california usa and test the relationship between subsistence drivers and market behavior analyzing data from pacific fisheries information network between 1990 and 2010 we show that over 17 million kg of fish and shellfish were kept for personal use we used general additive models to examine patterns in proportion of personal use versus price for the top 10 species retained over the 20 year period for each of the three population groups washington commercial tribal indigenous fishing operators washington commercial nontribal operators and california commercial fishing operators out of the 26 species price relationships tested only one fits the market relationship with statistical significance and the model failed to predict personal use patterns for any of the other species we conclude that market sensitivity is not a reliable predictor for subsistence behavior although a nominal figure in the overall seafood catch the presence of subsistence practices among 21st century market based commercial fishing operators reveals a more diverse array of economic systems than previously imagined we suggest that alternative economies including subsistence and associated community share systems function to improve human wellbeing and strengthen community resilience by increasing food security and community food systems engaging in a quality of life practice and supporting social networks through seafood gifting and sharing

smallholder land access in post war northern mozambique summary this paper analyzes the inequality and determinants of flexibility in smallholder land access in post war northern mozambique this paper demonstrates that high land endowments in aggregate do not imply equal access to cultivated or fallow land at the household level even if land access has some flexibility across time a formal test establishes the low extent of flexibility in land access at the household level in the study site the econometric analysis further reveals that some groups of households such as female headed households and those with low asset endowments or weak social institutions suffer from significant rigidities in land access

engel s law and cointegration a time series counterpart of engel s law is that the expenditure share on food declines as the economy grows the main purpose of this paper is to test whether houthakker s addilog utility function can simultaneously explain this time series observation and cross sectional observations concerning engel s law ogaki and park s cointegration approach is used to estimate parameters of the utility function from time series data total expenditure elasticities implied by the estimated addilog utility function are compared with estimates of the elasticities from cross sectional data

can world real interest rates explain business cycles in a small open economy abstract while the world real interest rate is potentially an important mechanism for transmitting international shocks to small open economies much of the recent quantitative research that studies this mechanism concludes that it has little effect on output investment and net exports we re examine the importance of world real interest rate shocks using an approach that reverses the standard real business cycle methodology we begin with a small open economy business cycle model but rather than specifying the stochastic processes for the shocks and then solving and simulating the model to evaluate how well these shocks explain business cycles we use the model to back out the shocks that are consistent with the model s observable endogenous variables then we use variance decompositions to examine the importance of each shock we apply this methodology to canada and find that world real interest rate shocks can play an important role in explaining the cyclical variation in a small open economy in particular they can explain up to one third of the fluctuations in output and more than half of the fluctuations in net exports and net foreign assets

implications of non farm work to vulnerability to food poverty recent evidence from northern ghana summary using survey data from northern ghana this study seeks to establish the impact of participation in non farm work on the vulnerability of resource poor households to food poverty vulnerability to food poverty is assessed based on expected future food expenditure of households the potential endogeneity problem associated with participation in non farm work by households is overcome using a novel instrumental variable approach analysis of the determinants of expected future food expenditure is done using a standard feasible generalized least squares fgls method demographic and socioeconomic variables location variables and household facilities are included in the model as control variables our study finds that participation in non farm work significantly increased the future expected food consumption thereby alleviating the vulnerability of households to food poverty our study also confirms that current food poverty and future food poverty i e vulnerability to food poverty are not independent from each other non farm work plays a crucial role in providing the means to overcome the risk of food poverty in these resource poor households policies that promote off farm income generating activities such as small businesses and self employment as well as the creation and support of businesses that absorb extra labor from the farm should be encouraged in the study region because households in the study region are exposed to above average levels of hunger and food poverty the study recommends the government of ghana and development partners to take measures that enhance the resilience of these resource poor households

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

the effects of china s sloping land conversion program on agricultural households in the late 1990s china aimed to mitigate environmental degradation from agricultural production activities by introducing the world s largest payments for environmental services pes program the sloping land conversion program slcp in order to analyze its effects on agricultural households we develop a microeconomic agricultural household model ahm which can model the production consumption and non farm labor supply decisions of agricultural households in rural china in a theoretically consistent fashion based on this theoretical model we derive an empirical specification that we use to econometrically estimate the effects of the slcp and other exogenous factors using a large longitudinal farm household survey data set we estimate the empirical model with the hausman taylor estimation method the empirical results are generally consistent with the results of our theoretical comparative static analysis e g that the slcp significantly decreases agricultural production while the slcp increases non farm labor supply and total consumption in the yellow river basin these effects could not be observed in the yangtze river basin the recent reduction of the slcp compensation payment rates has had some notable but generally small effects

general equilibrium with parallel markets for goods and foreign exchange theory and application to ghana abstract this paper presents a simple model of a distorted economy with parallel markets which is motivated by the ghanaian experience the model has simultaneous illegal trade in goods and foreign exchange markets its general equilibrium determines the black market foreign exchange rate and the price of consumer goods after determining some comparative statics the predictions are tested on ghanaian monthly data from 1982 1983 the empirical results are shown to be consistent with those from the theoretical model

the terms of trade the real exchange rate and economic fluctuations this paper examines the relationship between terms of trade and business cycles using a three sector intertemporal equilibrium model and a large multicountry database results show that terms of trade shocks account for nearly one half of actual gdp variability the model explains weak correlations between net exports and terms of trade the harberger laursen and metzler effect and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity terms of trade shocks cause real appreciations and positive interest differentials although productivity shocks have opposite effects the puzzle that welfare gains of international asset trading are negligible is left unresolved copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the determinants of nonfarm income diversification in rural peru abstract this paper shows that in peruvian rural areas there has been substantial growth over the past decade in household employment outside of own farming at present 51 of the net income of rural households comes from these off farm activities and thus they certainly cannot be considered as marginal the reasons households diversify their incomes are several access to public assets such as roads and private assets such as education and credit is an important factor in diversification increasing access to these assets will help rural households to increase their self employment as well as wage employment in the nonfarm sector

the welfare consequences of directly unproductive profit seeking dup lobbying activities price versus quantity distortions abstract this paper is a contribution to the growing literature on the theory of what bhagwati 1982 has christened the theory of dup activities these are activities that use up real resources in making profits i e income without producing directly or indirectly a good they result therefore in the contraction of the availability set defined on goods for one generic subset of such dup activities namely distortion triggered lobbying activities the paper establishes asymmetrical propositions on the possibility of such dup lobbying resulting in a paradoxical improvement of welfare

terms of trade fluctuations and stabilization of producer prices by compensatory taxation abstract a small general equilibrium model is presented which highlights the role of the real exchange rate in the south in determining the terms of trade between the south and the north the dynamics of the model may generate terms of trade instability for some values of the parameters of the system compensatory taxation of export earnings by a stabilization fund in the south is shown to increase the likelihood of instability

low cost pricing strategies in leisure markets abstract the practice of dynamic pricing typical of low cost carriers is generally regarded as a form of price discrimination between leisure and business travellers on a single flight or route the same may not be true across different routes because of the different incidence of business travellers if price increases in the 15 days prior to departure are meant to discriminate business demand leisure demand should account for earlier price variations in the present study we used a database containing the daily fare over the 3 months prior to each flight operated by easyjet during 2009 for each route we defined the leisure index as the difference between the price rates of change during the 90 days and 15 days prior to departure overall business routes had lower average prices per km while leisure routes showed less dynamic price behaviour with higher minimum and lower maximum prices per km

hubs and high fares dominance and market power in the u s airline industry this article estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline the results indicate that an airline s share of passengers on a route and at the endpoint airports significantly influences its ability to mark up price above cost the high markups of a dominant airline however do not create much of an umbrella effect from which carriers with smaller operations in the same markets can benefit the article suggests a number of possible explanations for this asymmetry

smuggling trade and price disparity a crime theoretic approach abstract we provide a simple but fairly general model of smuggling capable of handling both the bhagwati hansen type of illegal trade through illegal entry points and the pitt type of illegal trade through legal entry points the paper focuses on the latter type of trade we take explicit account of the risk and uncertainty associated with illegal activity and moreover treat the real costs of smuggling as a choice variable of the firm it is shown that smuggling legal trade and price disparity may coexist as in pitt the economy s response to increased enforcement of laws against smuggling is explicitly analyzed it is shown that increased enforcement raises real per unit costs of smuggling and the domestic price of importables but lowers both the absolute quantity and the share of illegal imports in total imports the effect on welfare is ambiguous

crowding out in open economies results from a simulation study it has recently been shown that industrialized countries in the 1970s and 1980s are characterized by a high correlation between national saving and investment this regularly is considered puzzling in the context of highly integrated international capital markets in this paper the author shows that both the failure of real interest parity and productivity changes are each sufficient to generate a high positive correlation between national saving and investment these results indicate that it is easier than previously thought to reproduce a high correlation between saving and investment in models with perfect capital mobility

implications for minimum wage policies of an s shaped labor supply curve abstract a model of family labor supply provides a rationale for raising minimum wages when the labor supply response is negative at low wages under those circumstances the labor market can be caught in a malthusian poverty trap of excess supply unemployment overextended workdays child labor and falling wages raising minimum wages may therefore help resorb this excess supply and stabilize the labor market setting a virtuous cycle in motion in a two sector context such a policy would increase wages in both the covered and uncovered sectors evidence from a study of costa rica in particular is consistent with those conclusions

the parallel market of illegal aliens a computational approach abstract this paper develops the notion of illegal aliens as a parallel market in coexistence with the regular market of legal labor in the presence of both price controls on legal labor by minimum wage legislation and quantity controls on illegal aliens by immigration laws illegal aliens involve not only rural urban migration but also tax evasion and deportation costs we develop an analytical equilibrium structure which links markets for legal labor and illegal aliens illustrate how much an equilibrium can be computed and explore some implications of the linkage using united states data

give a man a fishpond modeling the impacts of aquaculture in the rural economy abstract the rapid growth of fish farming over the past three decades has generated heated debate over the role of aquaculture in rural development and poverty reduction central to these debates is the question of whether and how aquaculture impacts local incomes and employment yet little empirical evidence exists on the issue to address this question we propose a local economy wide impact evaluation lewie model which nests fish farm models within a general equilibrium model of their local economy the model is calibrated using primary data collected from 1102 households in myanmar s main aquaculture zone representative of 60 of the country s aquaculture farms using this model we examine the impact of aquaculture on the incomes and labor market outcomes of fish farming households but also crop farms and non farm households in the cluster simulating one acre increases in pond plot surface we find that 1 aquaculture generates much higher incomes per acre than agriculture 2 aquaculture generates larger income spillovers than agriculture for non farm households by way of retail and labor markets 3 small commercial fish farms generate greater spillovers than large fish farms these results bolster the notion that fish farming and in particular small scale commercial aquaculture may have a significant role to play in rural development and poverty reduction

smuggling and supply response coffee in ethiopia abstract during the 1980s substantial smuggling of coffee has been taking place in ethiopia the recent devaluation has raised hopes that substantial quantities of coffee will flow back to the official channels in this study data on the incentives to supply to the different channels are collated a model of official supplies is formulated which nests an empirical test between the smuggling models by bhagwati and hansen 1973 and by pitt 1981 the econometric results favor the latter and show a small but significant effect of the premium in the black market and a positive total supply response relative to the main competing crop chat the results imply that the increases in export earnings from the devaluation will be quite limited

labor supply the family and poverty the s shaped labor supply curve abstract the canonical model of labor supply is extended to account for subsistence needs and a frequently rigid division of labor within families gender various theories that have been put forward are thus reconciled in particular with respect to the distinct work choices of the poor the model predicts negative labor supply elasticities for secondary workers at low wage rates and positive ones at higher rates but near 0 for primary workers at all levels detailed time allocation data of the rural philippines support these conclusions as well as evidence from other studies including of industrialized countries policy implications are briefly discussed

on the use and misuse of profit functions for measuring the price responsiveness of peasant farmers a comment the standard profit function approach has been applied successfully in a number of ldcs to measure the price responsiveness of peasant farmers yet various problems afflict this approach including but not restricted to the existence of non competitive market structures zero valued observations exclusion of relevant variables lack of participation in output and or input markets and endogeneity of input and or output prices the impact of these problems on estimation results however can be minimised through modifications and adaptations of the standard approach better specification of the underlying technology and the use of selected functional forms

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

colonist land allocation decisions land use and deforestation in the ecuadorian amazon frontier as one of the last agricultural frontiers of the humid tropics amazonia is the largest area of the world currently undergoing frontier settlement although the earliest intrusions of foreign populations into amazonia date from pre hispanic times the large scale entrance of peasant colonists into the vast region is a recent phenomenon much of this movement represents the spontaneous migration of peoples but governments in the region have also become increasingly interested in opening up and integrating amazonia to national and international economies these actions are frequently seen as potential solutions to a number of national problems including the need to increase agricultural production correct spatial imbalances in the distribution of population exploit frontier lands for reasons of national security and defuse potentially serious political problems resulting from the existing agrarian structure landlessness and unemployment the upper basin of the amazon in ecuador bordering on the eastern slopes of the andes is one such area of frontier settlement recent decades have witnessed the rapid conversion of these amazonian forests to agricultural uses through a series of schemes bearing such labels as land development and colonization most forest intervention in the region has come at the hands of colonist farmers attempting to establish land claims along transport routes originally constructed to aid in petroleum exploration and exploitation these are farmers who formerly have made a living in long established farmlands and who for various reasons population pressures pervasive poverty maldistribution of farmland lack of inputs for intensive cultivation lack of nonagrarian livelihood opportunities and generally inadequate rural development have been increasingly squeezed out of their homelands a marginal person by virtue of his low socioeconomic and political status the farmer often perceives