explaining the border effect the role of exchange rate variability shipping costs and geography this paper exploits a three dimensional panel data set of prices on 27 traded goods over 88 quarters across 96 cities in the us and japan we show that a simple average of good level real exchange rates tracks the nominal exchange rate well suggesting strong evidence of sticky prices focusing on dispersion in prices between city pairs we find that crossing the us japan border is equivalent to adding as much as 43 000 trillion miles to the cross country volatility of relative prices we turn next to economic explanations for this so called border effect and to its dynamics distance unit shipping costs and exchange rate variability collectively explain a substantial portion of the observed international market segmentation relative wage variability on the other hand has little independent impact on segmentation 2001 elsevier science b v all rights reserved

convergence to the law of one price without trade barriers or currency fluctuations using a panel of 51 prices from 48 cities in the united states we provide an upper bound estimate of the rate of convergence to purchasing power parity we find convergence rates substantially higher than typically found in cross country data we investigate some potentially serious biases induced by i i d measurement errors in the data and find our estimates to be robust to these potential biases we also present evidence that convergence occurs faster for larger price differences finally we find that rates of convergence are slower for cities farther apart however our estimates suggest that distance alone can only account for a small portion of the much slower convergence rates across national borders

an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

population agglomeration and the effectiveness of enterprise subsidies a chinese analysis this paper investigates the impact of population agglomeration on the relation between government subsidies and firm innovation it constructs a parsimonious model to show that the positive effect

the canadian border and the us dollar the impact of exchange rate changes on us retailers this paper provides a micro level investigation into the impact of changes in the uscanada nominal exchange rate on retailers in us regions lying close to the uscanada border using a large data set on product level retail prices and sales in the united states over a nine year period we explore the links between changes in exchange rates cross border travel and the price and quantity responses of us retailers this allows us to assess the importance of geography and distance in affecting the pass through of exchange rate changes into prices and quantities at the level of the consumer we develop a two stage theoretical model of cross border travel and industry equilibrium for retail sales at the border our empirical results accord well with the implications of the model

international corporate diversification and the cost of equity european evidence abstract this paper analyzes the impact of corporate international diversification cid on domestic and world betas through the notion of psychic distance between countries using a large european sample of 598 firms our findings indicate that this dimension significantly influences corporate risk exposure by isolating three additive components of the foreign sales ratio fsr we obtain the most significant results by geographically partitioning the sample provided that firms are further classified by sector our framework sheds new light on how the cid of firms belonging to sweden and the united kingdom as well as the consumer cyclical consumer non cyclical and information technology sectors sometimes can reduce and sometimes increase firm betas

trust market participation and economic outcomes evidence from rural china markets can only function properly in the presence of sufficient trust we explore the relation between trusting behavior and market integration in rural china we link the results of a trust experiment to actual behavior in the field participation in the labor market versus informally exchanging labor and find that high trust households are more likely to use formal markets we proceed by exploring the relation between labor market participation and economic outcomes finding tentative evidence of a causal relation running from market participation to higher levels of income

real exchange rates and relative prices an empirical investigation abstract this paper uncovers a striking empirical regularity the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country this fact seems to hold for all goods except very simple homogeneous products models of real exchange rates are likely to have predictions regarding this relation so this fact may provide a useful gauge for discriminating among models

product and international diversification among japanese multinational firms this paper examines the relationship of performance with product and international diversification on japanese multinational firms from 1977 to 1993 we show the relationships between diversification and performance change over time through the use of multiple time periods and accounting for keiretsu membership results show that while diversity strategies vary between keiretsu and non keiretsu firms performance is not much different across time periods performance varies considerably but strategies are less variable product diversity has weak effects on firm performance only in one time period while international diversification has negative profitability and positive growth consequences in in some periods these results suggest first that diversification strategies and their effects on performance vary across time periods and generally produce some unexpected findings we do not find strong interactive diversity effects copyright 2000 john wiley sons ltd

north american migration returns to skill border effects and mobility costs utilizing a utility maximizing roy type discrete choice model of worker location in canadian provinces and u s states that incorporates returns to skill amenities fixed costs distance langua

do state borders matter for u s intranational trade the role of history and internal migration empirical evidence of the impact of borders on international trade flows using the gravity equation approach abounds this paper examines the empirical relevance of state borders in u s interstate trade for various specifications of the gravity equation we find a large and economically significant subnational border effect for some specifications however two model specifications drastically reduce if not eliminate the border effect i dynamic panel specifications controlling for past levels of trade and ii models conditioning on internal migration les resultats empiriques de l analyse des impacts des frontieres sur les flux de commerce international en utilisant les modeles de gravite sont devenus monnaie courante ce texte examine l impact des frontieres entre etats a l aide de cette technique il s avere que les effets de frontieres infranationales sont grands et significatifs pour certaines specifications du modele cependant deux specifications du modele reduisent dramatiquement s ils n eliminent pas l effet de frontiere i des specifications qui prennent en compte les niveaux anterieurs de commerce et ii des specifications qui dependent de la migration interne

openness and wage inequality in kenya 1964 2000 summary this paper analyzes the evolution of wage inequality in kenya during 1964 2000 our measure of wage inequality is the ratio of wages in manufacturing to wages in agriculture which can be seen as an indicator of sectoral wage inequality or as a proxy for skilled to unskilled wages we find that changes in relative wages have primarily been driven by the degree of openness while other factors such as the capital labor ratio educational attainment relative labor productivity and the ratio between agricultural and manufacturing prices had no significant effect we conclude that international market integration has reduced wage inequality in kenya

multinational corporations vs domestic corporations international environmental factors and determinants of capital structure this paper examines whether or not u s based multinational corporations mncs have different capital structures than u s domestic corporations dcs and if so what causes the differences in explaining the difference between the capital structures of mncs and dcs previous studies tended to directly discuss the relationships between international environmental factors e g political risk foreign exchange risk and the capital structure a framework of analysis is proposed in this paper that examines the influence of environmental factors on the firm related capital structure determinants e g agency costs bankruptcy costs that in turn affect the capital structure of the mnc among the determinants that are examined more emphasis is placed on the discussion of agency costs since no previous studies have applied this concept in the international arena empirical tests were conducted to investigate whether mncs are significantly different from dcs regarding agency costs of debt bankruptcy costs and capital structure contrary to conventional wisdom the empirical findings show that mncs do not have lower bankruptcy costs and that they tend to have lower debt ratios than dcs

thick and thin borders in the european union how deep internal integration is within countries and how shallow between them the existence of large border effects is one of the main puzzles of international macroeconomics the seminal paper by mccallum found that trade between any two canadian provinces was on average 22 times greater than trade between any canadian province and any united state us although various authors have estimated internal and external border effects for the whole european union and some specific european countries none has done so in the manner that mccallum s seminal paper stymied by lack of data on region to region international trade flows this study uses a novel data set that captures intra and international truck shipments between spanish regions and regions in seven european countries during the period 2004 11 it computes internal and external border effects offering novel results for aggregate flows and the importing countries and estimates several specifications of the gravity equation so as to tackle such issues as the multilateral resistance term heteroskedasticity and zero flows and non linear relation between trade and distance the paper also adds a detailed analysis on the external border effect for each spanish exporting region and each of the seven european countries considered by means of this analysis we shed new light on the relative integration between regions of these seven countries and spanish exporting regions finally we conduct an extrapolation exercise computing the trade potentials that would be expected in a fully integrated europe and estimating how long full integration would take to achieve between each spanish exporting region and each european importing country to this regard two alternative scenarios are considered one using the growth rates of the spanish exports before the crisis 2001 08 and other considering the postcrisis growth rates 2011 13

the economic significance of national border effects to address the economic significance of national border effects this paper provides evidence on two fundamental questions 1 do large border effects arise because of high perceived price wedges between foreign and domestic products or because imports and domestic goods are very close substitutes and 2 if price wedges are important do they reflect distortionary barriers to trade or do they arise from nondistortionary factors such as differences in transactions costs or product characteristics i conclude that while border effects may imply barriers welfare costs and a role for policy distortions are probably not as substantial as initial border results suggested jel f1

border effects and the availability of domestic products abroad trade between countries could fall short of trade within a country because 1 the volume of international trade is less than the volume of domestic trade for a given product the intensive margin or 2 some goods that are sold domestically are simply not exported the extensive margin my theoretical model illustrates that either of these two factors could explain a given aggregate border effect i examine the empirical relevance of this distinction by isolating the fraction of total domestic production attributable only to exporters finding that around one half of the border effect may be attributed to each explanation jel classification f1 les effets de frontieres et la disponibilite de produits domestiques a l etranger le commerce entre pays peut etre moindre que le commerce a l interieur d un pays parce que 1 le volume de commerce international est moindre que le volume du commerce interieur pour un produit donne la marge intensive ou 2 certains biens qui sont vendus a l interieur d un pays ne sont tout simplement pas exportes la marge extensive un modele theorique montre que l un et l autre de ces facteurs pourraient expliquer un certain effet de frontiere au niveau agrege on montre l importance empirique de cette distinction en isolant la fraction de la production interieure totale attribuable strictement aux exportateurs et il s avere qu a peu pres la moitie de l effet de frontiere est attribuable a chacune des deux explications

towards a new trade policy between the usa and middle east countries estimating trade resistance and export potential at the time of the conclusion of free trade areas ftas between the usa and middle east and north african mena countries there is a lack of literature concerning the measurement of the current us export position with regards to these countries and the us export potential in this area from recent developments of gravity models this paper derives an estimable equation which includes various trade resistance variables notably border effects multilateral resistance as well as specific bilateral effects the model is tested in order to scrutinise the impact of these variables on us exports to mena countries as well as the us export potential in this area to that end a selection of panel data specifications is proposed mainly hausman and taylor models as well as arellano and bond dynamic models results unambiguously indicate that as compared to the other oecd countries the usa suffers from a substantial trade integration deficit with mena countries this is reflected by the strongly negative values of the us mena bilateral fixed effects as well as the high bilateral border effects in addition the estimated actual potential us export ratio to these countries is only 0 76 therefore implementing an fta between the usa and mena countries may allow the former to progressively improve its export position in this area this would also help mena countries diversify their supplying sources

subnational home market bias in vietnam evidence from enterprise level data this paper contributes to the home market bias literature where administrative or political borders limit trade across borders home bias is well documented at the national and subnational level to sort out macro e g location characteristics and micro e g enterprise characteristics factors behind home bias we use small and medium sized enterprise sme data from vietnam using the fractional multinomial logit model we find that the proportion of sme sales outside of their home markets is positively associated with enterprise size age number of business association memberships and the distance of smes most important supplier in contrast the proportion of sme sales to neighbouring provinces is negatively associated with the share of sme production for final consumption besides enterprise level frictions market characteristics matter too the proportion of sme sales to customers in their home markets is negatively associated with home or neighbouring provinces governance quality while the proportion of sales to customers in neighbouring provinces is positively associated with these areas governance quality these suggest that good governance frees sme resources for use in selling to less familiar markets

the law of one price intranational evidence for canada this study investigates the behaviour of intranational prices for 45 specific consumer goods across 25 canadian cities it finds positive roles for distance and provincial borders in intercity price disparities while sizable the provincial border effect is an order of magnitude smaller than the estimates for the canada u s border a majority of the intercity relative price series are stationary around small mean values indicating that long run price differences are close to zero the intercity prices converge at rates considerably faster than the consensus estimates for international prices in fact half lives for intercity price deviations average well under a year jel classification f15 f31 la loi d un seul prix resultats intra nationaux pour le canada ce memoire examine le comportement des prix intra nationaux de 45 biens de consommation specifiques dans 25 villes canadiennes il semble que la distance et les frontieres inter provinciales ont un impact sur les differentiels de prix entre villes meme si l impact des frontieres inter provinciales est important il est beaucoupplus petit que l impact de la frontiere canada u s une majorite des series de prix relatifs entre villes sont stationnaires autour de petites valeurs moyennes ce qui suggere que les differences de prix a long terme s approchent de zero il est clair que les prix entre villes convergent a des taux considerablement plus rapides que ce qu on observe au niveau international en fait les deviations de prix entre villes ont une esperance de vie qui en moyenne est de moins d un an

multinational corporations vs domestic corporations financial performance and characteristics the analysis in this paper is composed of two segments first the financial performance of a sample of multinational corporations mncs is compared with that derived for a control group of domestic corporations dmcs using market based performance measures then the paper presents a comparison of selected financial characteristics of the firms in the two groups the results suggest the dmcs appear to have a significantly superior risk adjusted market based performance are significantly less capitalized and have higher total risk as well as higher systematic risk the fact that mncs are substantially larger than dmcs is not found to be a significant factor in explaining the observed difference between the two groups performance

the firm as a dedicated hierarchy a theory of the origins and growth of firms in the formative stages of their businesses entrepreneurs have to provide incentives for employees to protect rather than steal the source of organizational rents we study how the entrepreneur s response to this problem determines the organization s internal structure growth and its eventual size large steep hierarchies will predominate in physical capital intensive industries and will have seniority based promotion policies by contrast e at hierarchies will prevail in human capital intensive industries and will have up or out promotion systems furthermore e at hierarchies will have more distinctive technologies or cultures than steep hierarchies the model points to some essential differences between organized hierarchies and markets at the root of most enterprises generating economic surplus is an entrepreneur with a unique critical resource such as an idea good customer relationships a new tool or superior management technique a fundamental problem of entrepreneurship is how to enlist the cooperation of the many agents necessary for production without ceding to them too much of the surplus generated by the enterprise the risk of being expropriated however is always inherent in production in particular the entrepreneur has to give her employees whom we call managers close proximity or access to the critical resource for them to learn to produce effectively for example a manager has to understand the idea be in contact with the key customers and suppliers or even learn the entrepreneur s unique managerial techniques in order to work effectively but access also gives the manager the opportunity to expropriate this critical resource and compete against the entrepreneur managers may steal the idea walk away with clients or mimic the entrepreneur s management style and start up a rival concern the greater the access a manager has the more he can appropriate and the more effectively he can compete this paper explores the role of organizational design in

why do poor people co hold debt and liquid savings i examine the use of flexible savings and loan accounts offered by safesave a microfinance institution serving poor slum dwellers in dhaka bangladesh i find that 59 per cent of the clients co ho

measuring firm size in empirical corporate finance abstract in empirical corporate finance firm size is commonly used as an important fundamental firm characteristic however no research comprehensively assesses the sensitivity of empirical results in corporate finance to different measures of firm size this paper fills this hole by providing empirical evidence for a measurement effect in the size effect in particular we examine the influences of employing different proxies total assets total sales and market capitalization of firm size in 20 prominent areas in empirical corporate finance research we highlight several empirical implications first in most areas of corporate finance the coefficients of firm size measures are robust in sign and statistical significance second the coefficients on regressors other than firm size often change sign and significance when different size measures are used unfortunately this suggests that some previous studies are not robust to different firm size proxies third the goodness of fit measured by r squared also varies with different size measures suggesting that some measures are more relevant than others in different situations fourth different proxies capture different aspects of firm size and thus have different implications therefore the choice of size measures needs both theoretical and empirical justification finally our empirical assessment provides guidance to empirical corporate finance researchers who must use firm size measures in their work

the measurement of the degree of foreign involvement this paper extends errunza and senber 1984 in assessing the relationship between alternative measures of the degree of foreign involvement dfi and the conditions under which the use of a specific measure will not affect the outcome of empirical studies on corporate international diversification the results suggest that among 21 pairs of seven most widely used series of dfi only three series foreign assets foreign earnings and foreign tax ratios in two pairs are equivalent evidence of constant returns to scale between the ratio of foreign to total assets and the ratio of foreign to total earnings is also discussed

financial literacy and consumer credit portfolios we use survey data from a sample of uk households to analyse the relation ship between financialliteracy and consumer credit portfolios we show that individ uals who borrow on consumer credit exhibit worse financial literacy than those who do not borrowers with poor financialliteracy hold higher shares of high cost credit such as home collected credit mail order catalogue debt and payday loans than those with higher literacy we also show that individuals with poor financialliteracy are more likely to lack confidence when interpreting credit terms and to exhibit confusion over financialconcepts they are also less likely to engage in behaviour which might help them to improve their awareness of the credit market

a model of money and credit with application to the credit card debt puzzle many individuals simultaneously have significant credit card debt and money in the bank the credit card debt puzzle is given high interest rates on credit cards and low rates on bank accounts why not pay down the debt while economists have gone to elaborate lengths to explain this observation we argue it is a special case of the rate of return dominance puzzle from monetary economics we analyze the issue by extending standard monetary theory to incorporate consumer debt this seems interesting in its own right since developing models where money and credit coexist is a long standing challenge and it helps put into context recent discussions of consumer debt

the border effect in spain this paper analyses the border effect in spain using a unique dataset on intranational trade flows over the period 1995 98 the results indicate that after controlling for market size and distance spanish regions trade around 22 times more with the rest of spain than they do with oecd countries moreover the size of the spanish bias is lower in the case of the spanish regions exports than in the case of imports although the difference is not statistically significant in most cases finally the border effect is not uniform across spanish regions

the online shadow of offline signals which sellers get contacted in online b2b marketplaces this article extends the understanding of what impels buyers to contact particular sellers in online business to business b2b marketplaces which are typically characterized by sparse social structures and concomitant limitations in observing social cues integrating an institutional perspective with signaling theory our core argument is that offline seller characteristics that are visible online in particular geographic location and legal status convey credible signals of seller behavior because they provide buyers with information on sellers local institutional quality and the institutionally induced obligations and controls acting on sellers using unique data from a large italian online b2b marketplace between the fourth quarter of 1999 and july 2001 we find that both sellers local institutional quality and their legal statuses affect a buyer s likelihood of contacting a seller moreover consistent with the idea that a buyer s own local institutional quality generates a relevant reference point against which sellers are evaluated we find that a buyer is progressively more likely to contact sellers the higher their local institutional quality relative to the buyer jointly our findings imply that in online b2b marketplaces signals conveyed by sellers geographic locations and legal statuses may constitute substantive sources of competitive heterogeneity and market segmentation

a dual self model of impulse control we propose that a simple dual self model gives a unified explanation for several empirical regularities including the apparent time inconsistency that has motivated models of quasi hyperbolic discounting and rabin s paradox of risk aversion in the large and small the model also implies that self control costs imply excess delay as in the o donoghue and rabin models of quasi hyperbolic utility and it explains experimental evidence that increased cognitive load makes temptations harder to resist the base version of our model is consistent with the gul pesendorfer axioms but we argue that these axioms must be relaxed to account for the effect of cognitive load

measuring self control problems we develop a survey instrument to measure self control problems in a sample of highly educated adults this measure relates in the manner that theory predicts to liquid wealth accumulation and personality measures yet while self control problems are typically seen as resulting in overconsumption and low wealth we identify a significant group who underconsume and thereby accumulate high levels of wealth in addition self control problems are smaller in scale for older than for younger respondents those who put money aside in retirement accounts may be delaying access to a point at which self control problems are no longer important jel d12 d14

north south and distance in the gravity model abstract it is generally assumed that distance in the gravity model strictly reflects frictions impeding bilateral trade however distances north south could also reflect differences in factor endowment that provide opportunities for profitable trade this paper investigates the hypothesis that if we control for distance in the ordinary sense differences north south promote international trade the hypothesis receives ample support moreover the significance of differences north south survives a battery of robustness tests concerning period distinctions between differences in latitude north north north south and south south and controls for other measures of differences in factor endowment such as differences in per capita output and differences in average temperature rainfall and seasonal range in temperature the impact of differences north south on bilateral trade has also been falling this decline in turn might be partly responsible for the weakening of the influence of distance that has been occurring since world war ii this last hypothesis receives confirmation as well finally the paper examines the impact of internal distance and remoteness on trade since both variables are country specific this is done by studying their impact on the country fixed effects themselves in the earlier estimates internal distance turns out to have a far greater impact than remoteness by an order of 10

are multinational corporations safer the failure probabilities of a sample of multinational corporations mncs are derived and compared with those of a control group of domestic corporations dmcs the results suggest that the mean insolvency probability of dmcs is significantly higher than that of the mncs it is also observed that mncs are significantly more capitalized and the standard deviation of their equity as well as their average systematic risk are also significantly lower furthermore the average insolvency probability of the dmcs is more sensitive to changes in the values of the parameters than those of the mncs

gstp tariff reduction and its effects on south south trade in manufactures using a gravity model with import tariffs on manufactures as an explanatory variable both at the import and at the export side the impact of tariffs on trade in manufactures is analyzed for a sample of 39 less developed country ldc importers the consequences of an agreement on a global system of trade preferences gstp for manufactures are estimated by lowering these tariffs for intra ldc trade by 20 and 50 alternatively the short term effects are found to be relatively modest and the long term effects considerably larger trade diversion from developed country dc to ldc suppliers has only limited impact

international corporate diversification market valuation and size adjusted evidence errunza and senbet es 7 analyze the effects of international operations on the market value of the firm both at theoretical and empirical levels the theoretical model which is largely heuristic exploits the costly supply adjustment of multinational firms mncs in providing international portfolio diversification services to investors who face differential cost barriers to direct holdings of assets across national boundaries mncs compete as financial intermediaries to undo the barriers so that in equilibrium profits are driven out mncs and pure domestic firms sell at an equivalent risk adjusted return however costly financial intermediation and the associated relative efficiency leads to a positive valuation effect for mncs relative to purely domestic firms further the equilibrium analysis implies that demand side investor barriers to international capital flows alone are inconsequential to the valuation of mncs in their pure financial role but that the interaction with the supply side costs are necessary to produce a valuation effect at the corporate level es subject the theory to an empirical analysis in a value based approach by employing a variant of tobin s 17 qratio the analysis controlling for industrial market power suggests that the relationship between the excess valuation and the degree of international involvement doi has magnified over periods characterized by severe u s government controls vis a vis the more recent periods in this paper we formalize the theoretical argument by viewing indirect portfolio diversification by mncs as a means of completing the international capital market we employ a paradigm in the unanimity literature and formally characterize the equilibrium in which there is a rationale for mnc financial intermediation we then perform an expanded empirical study by employing generalized least squares and maximum likelihood procedures since the positive relationship between excess valuation and doi as suggested in es 7 might be attributed to the so called small firm or size and the p e effects the test methodology controls for such effects also the traditional literature has relied upon foreign sales percentage as a proxy for doi in view of the well recognized limitations of this proxy we employ four different measures of international

the effects of international operations on the market value of the firm theory and evidence this paper investigates the existence of monopoly rents associated with international operations in a market value theoretic framework the benefits of international operations evolve from such factors as 1 imperfections in the product and factor markets 2 differential international taxation and 3 imperfections in the financial markets in this paper these factors are subject to an equilibrium analysis in the context of recent advances in financial theory in particular imperfections in the financial sector arising from corporate international diversification are examined in a framework which allows a supply adjustments by multinational firms and b the interaction of barriers to international capital flows faced by both firms and investors taking the u s capital market and investors as a base we then specify the conditions under which the foregoing imperfections get priced out in an equilibrium these pricing effects cannot be detected empirically through the methodologies employed by the existing studies which examine the effects of corporate international diversification indeed it was an attempt to rescue the limitations of these studies which initially motivated our paper the existing empirical inquiries into this area rely on traditional risk adjusted performance measures e g 7 or international analogs of return generating processes e g 1 8 instead at the empirical level we employ a value based method which is in the same vein of the thomadakis 17 approach developed to identify the monopoly benefits of industrial market structure we conduct the tests over subperiods characterized by differential government controls in an attempt a to separate the pure financial motives for multinationality from other motives and b to detect if the benefits of international operations carry through recent periods

the trade creating effects of business and social networks evidence from france using theory grounded estimations of trade flow equations this paper investigates the role that business and social networks play in shaping trade between french regions the bilateral intensity of networks is quantified using the financial structure and location of french firms and bilateral stocks of migrants compared to a situation without networks migrants are shown to double bilateral trade flows while networks of firms multiply trade flows by as much as four in some specifications finally taking network effects into account divides the estimation of the impact of transport costs and of the effect of administrative borders by around three

trade in the triad how easy is the access to large markets in this paper we measure market access between the united states the eu and japan the triad using the effect of national borders on trade patterns we investigate overall and industry level trends of bilateral trade openness and provide explanations for those using proxies for bilateral observed protection tariffs and ntbs home bias of consumers product differentiation and levels of fdi the explanations related to actual protection home bias and substitutability of goods put together explain a large part of the border effect between blocs of the triad although they do not explain the whole of the border effect puzzle jel classification f12 f15 commerce dans la triade jusqu a quel point l acces aux grands marches est il facile cet article mesure le niveau d integration commerciale entre les pays de l ue le japon et les etats unis la triade en utilisant l effet des frontieres nationales sur le commerce international nous etudions le niveau et l evolution du degre d ouverture bilateral ainsi que les differentes explications possibles des effets frontiere estimes qui sont testees a l aide de variables capturant la protection tarifs et bnts le biais domestique des consommateurs le degre de differenciation des produits et les niveaux d ide bilateraux les explications liees a la protection au biais domestique et a la substituabilite entre produits considerees ensemble expliquent une bonne partie de l effet frontiere entre pays de la triade meme si elles n expliquent pas la totalite de l enigme

measuring internal trade distances a new method applied to estimate provincial border effects in canada in this paper we suggest an improved methodology for comparing the intensity of trade across and within national and provincial boundaries earlier efforts to assess border effects for provinces or for countries without internal trade statistics made fairly arbitrary assumptions about average distances for internal trade flows we improve on earlier efforts by taking more complete account of the distribution of population within each province or country internal distance is estimated as a population weighted average of intra city and intercity distances as well as distances to and within rural areas we find higher estimates of internal distances and hence border effects than found in previous studies

do liquidity constraints and interest rates matter for consumer behavior evidence from credit card data this paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply the data consist of a panel of thousands of individual credit card accounts from several different card issuers with associated credit bureau data we estimate both marginal propensities to consume mpcs out of liquidity and interest rate elasticities we also evaluate the ability of different models of consumption to rationalize our results distinguishing the permanent income hypothesis pih liquidity constraints precautionary saving and behavioral models we find that increases in credit limits generate an immediate and significant rise in debt counter to the pih the average mpc out of liquidity ddebt dlimit ranges between 10 14 the mpc is much larger for people starting near their limits consistent with binding liquidity constraints however the mpc is significant even for people starting well below their limit we show this response is consistent with buffer stock models of precautionary saving nonetheless there are other results that conventional models cannot easily explain e g why so many people are borrowing on their credit cards and simultaneously holding low yielding assets unlike most other studies we also find strong effects from changes in account specific interest rates the long run elasticity of debt to the interest rate is approximately 1 3 less than half of this elasticity represents balance shifting across cards with most reflecting net changes in total borrowing the elasticity is larger for decreases in interest rates than for increases which can explain the widespread use of temporary promotional rates the elasticity is smaller for people starting near their credit limits again consistent with liquidity constraints

ceo pay and firm size an update after the crisis in the size of stakes view quantitatively formalised in gabaix and landier 2008 ceo compensation reflects the size of rms aected by talent in a competitive market the years 2004 2011 were not part of the initial study and oer a laboratory to examine the theory with new positive and negative shocks executive compensation measured ex ante did closely track the evolution of average firm value supporting the size of stakes view out of sample during 2007 2009 rm value decreased by 17 and ceo pay by 28 during 2009 2011 firm value increased by 19 and ceo pay by 22

are small firms less vulnerable to overpriced stock offers we show an inverted u relation between targetiveness probability of being targeted and firm size however this pattern describes stock offers and is more pronounced during hot markets characterized by higher stock valuations for cash offers we find a negative and monotonic relation these contrasting patterns suggest that small firms in the bottom nyse size quartile are less vulnerable to overpriced stock offers in addition we find that the stock acquirers of small targets are less overvalued than those of large targets and that the announcement returns are less negative for stock acquirers of small targets than for those of large targets

the impact of regional and institutional factors on labor productive performance evidence from the township and village enterprise sector in china this paper investigates the determinants of township and village enterprise tve labour productivity in china examining behaviour at both the national and regional levels the results suggest that human capital the real wage level foreign intensity export intensity capital investment and firm size are the most important factors affecting labour productivity at the national level but their relative importance varies significantly between the regions the results also indicate that government privatization reforms had a major impact on labour productivity in the tve sector across the regions

liability and large scale long term hazards this paper analyzes the application of liability to large scale long term hazards the key features distinguishing such hazards are the long temporal separation between exposure to a hazard and disease and the large damages when injuries finally emerge the large scale of damages creates a strong incentive to avoid liability payments and the long temporal separation creates numerous avenues through which parties can avoid paying possible damage awards the analysis focuses on the incentive to avoid paying damages by vertically divesting production tasks associated with serious occupational risks such divestiture can lower liability costs if the small firm operating the risky stage goes out of business before latent injuries emerge or has insufficient assets to pay damages and declares bankruptcy when suits are filed the paper then presents an empirical regression analysis of small firm entry into the u s economy between 1967 and 1980 the period in which liability laws were changing the point estima

the red and the black mental accounting of savings and debt in the standard economic account of consumer behavior the cost of a purchase takes the form of a reduction in future utility when expenditures that otherwise could have been made are forgone the reality of consumer hedonics is different when people make purchases they often experience an immediate pain of paying which can undermine the pleasure derived from consumption the ticking of the taxi meter for example reduces one s pleasure from the ride we propose a double entry mental accounting theory that describes the nature of these reciprocal interactions between the pleasure of consumption and the pain of paying and draws out their implications for consumer behavior and hedonics a central assumption of the model which we call prospective accounting is that consumption that has already been paid for can be enjoyed as if it were free and that the pain associated with payments made prior to consumption but not after is buffered by thoughts of the benefits that the payments will finance another important concept is coupling which refers to the degree to which consumption calls to mind thoughts of payment and vice versa some financing methods such as credit cards tend to weaken coupling whereas others such as cash payment produce tight coupling our model makes a variety of predictions that are at variance with economic formulations contrary to the standard prediction that people will finance purchases to minimize the present value of payments our model predicts strong debt aversion that they should prefer to prepay for consumption or to get paid for work after it is performed such pay before sequences confer hedonic benefits because consumption can be enjoyed without thinking about the need to pay for it in the future likewise when paying beforehand the pain of paying is mitigated by thoughts of future consumption benefits contrary to the economic prediction that consumers should prefer to pay at the margin for what they consume our model predicts that consumers will find it less painful to pay for and hence will prefer flat rate pricing schemes such as unlimited internet access at a fixed monthly price even if it involves paying more for the same usage other predictions concern spending patterns with cash charge or credit cards and preferences for the earmarking of purchases we test these predictions in a series of surveys and in a conjoint like analysis that pitted our double entry mental accounting model against a standard discounting formulation and another benchmark that did not incorporate hedonic interactions between consumption and payments our model provides a better fit of the data for 60 of the subjects the discounting formulation provides a better fit for only 29 of the subjects even when allowing for positive and negative discount rates the pain of paying we argue plays an important role in consumer self regulation but is hedonically costly from a hedonic perspective the ideal situation is one in which payments are tightly coupled to consumption so that paying evokes thoughts about the benefits being financed but consumption is decoupled from payments so that consumption does not evoke thoughts about payment from an efficiency perspective however it is important for consumers to be aware of what they are paying for consumption this creates a tension between hedonic efficiency and what we call decision efficiency various institutional arrangements such as financing of public parks through taxes or usage fees play into this tradeoff a producer developing a pricing structure for their product or service should be aware of these two conflicting objectives and should try to devise a structure that reconciles them

wealth accumulation and the propensity to plan why do similar households end up with very different levels of wealth we show that differences in the attitudes and skills with which they approach e nancial planning are a signie cant factor we use new and unique survey data to assess these differences and to measure each household s propensity to plan we show that those with a higher such propensity spend more time developing e nancial plans and that this shift in planning is associated with increased wealth these e ndings are consistent with broad psychological evidence concerning the benee cial impacts of planning on goal pursuit those with a high propensity to plan may be better able to control their spending and thereby achieve their goal of wealth accumulation we e nd direct evidence supporting this effortful self control channel in the very strong relationship we uncover between the propensity to plan and budgeting behavior

self control financial literacy the co holding puzzle we use uk survey data to analyze the puzzling co existence of high cost revolving consumer credit alongside low yield liquid savings in household balance sheets which we name the co holding puzzle approximately 12 of households in our sample co hold on average 3800 of revolving consumer credit on which they incur interest charges even though they could immediately pay down all this debt using their liquid assets co holders are typically more financially literate with above average income and education in most estimates co holding is also associated with impulsive spending behavior on the part of the household our results provide empirical support to theoretical models in which households co hold as a means of managing self control problems

ceo duality and firm performance what s the fuss rising shareholder activism following poor corporate performance and a subsequent drop in shareholder value at many major u s corporations had rekindled interest in duality and corporate governance despite limited empirical evidence duality chairman of the board and ceo are the same individual has been blamed in many cases for the poor performance and failure of firms to adapt to a changing environment in examining the relationship between duality and firm performance this study considers the announcement effects of changes in duality status accounting measures of operating performance for firms that have changed their duality structure and long term measures of performance for firms that have had a consistent history of a duality structure our results suggest that 1 the market is indifferent to changes in a firm s duality status 2 there is little evidence of operating performance changes around changes in duality status and 3 there is only weak evidence that duality status affects long term performance after controlling for other factors that might impact that performance

the boundaries of the firm revisited why do firms exist what is their function and what determines their scope these remain the central questions in the economics of organization they are also central questions for business executives and corporate strategists the worldwide volume of corporate mergers and acquisitions exceeded 1 6 trillion in 1997 it is hard to imagine that so much time effort and investment bankers fees would be spent on adjusting firm boundaries unless there was some underlying economic gain indeed the exceptional levels of merger and acquisition activity over the past two decades are a strong indication that economically significant forces do determine organizational boundaries the study of firm boundaries originated with the famous essay by coase 1937 who raised the question of why we observe so much economic activity inside formal organizations if as economists commonly argue markets are such powerful and effective mechanisms for allocating scarce resources coase s answer was in terms of the costs of transacting in a world of imperfect information when the transaction costs of market exchange are high it may be less costly to coordinate production through a formal organization than through a market in large part thanks to the work of williamson 1975 1985 recent decades have seen a resurgence of interest in coase s fundamental insight that firm boundaries can be explained by efficiency considerations our understanding of firm boundaries has been sharpened by identifying more precisely the nature and sources of transaction costs in different circumstances in the process the focus of

domestic market integration and regional economic growth china s recent experience from 1995 2011 summary this paper constructs an enhanced indicator for trade barrier and examines the endogenous relationship between market integration and regional economies across china from 1995 to 2011 beyond the current literature this study shows the endogenous relationship is significant reflecting a virtuous cycle domestic openness contributes to the economies in the central region more than in the other regions the feedback effect is stronger in the eastern and central regions than in the western and northeastern domestic openness and regional economies are adversely affected by state owned enterprises and government non productive expenditure several policy implications relevant to chinese economy are drawn from the findings

national borders and international trade evidence from the european union in this paper the impact of national borders on international trade within the european union is considered using a gravity model i find that averaged over all eu countries intranational trade is about ten times as high as international trade with an eu partner country of similar size and distance this relatively strong home bias suggests that even within the european union national borders still have a decisive impact on trade patterns jel classification f02 f14 f15 o52 ce memoire examine l impact des frontieres nationales sur le commerce international a l interieur de l union europeenne on montre que en moyenne pour tous les pays de l union europeenne le commerce intranational est a peu pres dix fois plus important que le commerce international avec un pays partenaire de l union europeenne de meme taille et a meme distance ce degre relativement important de preference nationale suggere que meme dans le cadre de l union europeenne les frontieres nationales ont encore un impact determinant sur les patterns de commerce

a picture of wage inequality and the allocation of labor through a period of trade liberalization the case of brazil this paper constructs a picture of the labor market impact of trade liberalization in brazil we examine the level and dispersion of wages the skilled wage premium and employment composition before and after trade liberalization after trade reform there was a rise in the returns to college education which since the share of college workers also rose is attributable to rising demand this change did not increase overall wage dispersion because of the small share of college educated workers and because of decreasing returns to intermediate levels of education

managerial attributes and executive compensation we study the role of firm and manager specific heterogeneities in executive compensation we decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay we then show that in many settings it is important to include fixed effects to mitigate potential omitted variable bias furthermore we find that compensation fixed effects are significantly correlated with management styles i e manager fixed effects in corporate policies finally the method used in the article has a number of potential applications in financial economics the author 2011 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

intra national home bias some explanations wolf demonstrates that trade within the united states appears substantially impeded by state borders we revisit this finding with improved data we show that much intranational home bias can be explained by wholesaling activity shipments by wholesalers are much more localized within states than shipments from manufacturing establishments controlling for relative prices and the use of actual rather than imputed shipment distances also reduces home bias estimates

trade policy trade costs and developing country trade this paper briefly reviews new indices of trade restrictiveness and trade facilitation that have been developed at the world bank the paper also compares the trade impact of different types of trade restrictions applied at the border with the effects of domestic policies that affect trade costs based on a gravity regression framework the analysis suggests that tariffs and non tariff measures continue to be a significant source of trade restrictiveness for low income countries despite preferential access programs this is because the value of trade preferences is quite limited a new measure of the relative preference margin developed in the paper reveals that this is very low for most country pairs most countries with very good duty free access to a market generally have competitors that have the same degree of access the empirical analysis suggests that measures to improve logistics performance and facilitate trade are likely to have the greatest positive effects in expanding developing country trade increasing the trade impacts of lowering remaining border barriers by a factor of two or more

exploiting naivete about self control in the credit market we develop a model of the credit market where competitive lenders oer long term contracts specifying a non linear schedule of possible repayment schedules to borrowers who may dier both in their taste for immediate gratication and their prior beliefs about that taste the equilibrium contract to a borrower with given beliefs is discontinuous it features an advantageous option involving fast repayment and a penalty for deviating and repaying later these predictions seem to resemble some salient features of many credit card and mortgage contracts for fully sophisticated borrowers the discontinuity acts as a commitment device and yields fast repayment but all other borrowers even those with an arbitrarily small amount of naivete end up delaying repayment despite the penalty and receive little benet from commitment furthermore because they believe they will repay early they underestimate the cost of credit and hence borrow too much non sophisticated borrowers cross subsidize sophisticated borrowers while sophisticated borrowers discipline rms by preventing very exploitative contracts we identify natural conditions under which the above results obtain even if

excess market value the multinational corporation and tobin s q ratio the results of this study show that there is a positive and significant relationship between excess market value of multinational corporations and the degree of international involvement as measured by foreign sales percentage however the excess market value is not determined by the number of foreign subsidiaries nor the interaction between foreign sales and the number of foreign subsidiaries the relationship between excess market value and the two frequently used measures of monopoly power concentration ratio and the lerner index was also examined this study found that the lerner index contributes significantly in explaining excess market value but concentration ratio does not furthermore the positive and significant coefficients of advertising and r d intensity serve as evidence that product market imperfections appear to play a bigger role in explaining the excess market value experienced by mncs during our sample period

trade in polarized america the border effect between red states and blue states political and cultural polarization in the united states is widely discussed but does it relate to any economic disconnection among states we estimate the border effect between red and blue states using the gravity equation with a nonlinear generalized method of moments estimator to simultaneously overcome the problems associated with endogeneity cross state price differences and zero trade flow the border effect is robustly confirmed for the 2000s while not so robustly detected for the 1990s notably in 2007 the border reduces trade between red and blue states to approximately 75 of the trade within each set of states this estimated border effect is much smaller than the united states canada national border effect estimated by anderson and van wincoop 2003 and by feenstra 2002 yet is comparable to the border effect that nitsch and wolf 2009 find for the former west and east germanies approximately loyears after reunification while the border effect in germany after reunification is decreasing the border effect between the red and blue states is emerging we also find the border effect is more significant for consumption rather than intermediate goods the border effect is an important indicator for a potential dismantling of the economic connectivity in the united states jel d72 f10 fi5 r1 i introduction recent u s presidential elections have raised concern about polarization in u s politics and culture namely the united states is divided into two nations the red states we call it the red nation preserving the term state for an individual state and the blue states the blue nation in the red nation culturally and religiously conservative republicans are dominant while in the blue nation liberal democrats are the majority so far the focus of the discussion is the extent of the polarization abramowitz and saunders 2008 fiorina et al 2008 its determinants gelman et al 2010 and its implications on federal policy making glaeser et al 2005 mellow and trubowitz 2005 economic implications have not been largely discussed however the polarization may suggest economic divisions because it is a sign of geographic sorting of people and their preferences this article provides evidence that economic disconnectivity between the red and blue nations emerged in the 2000s we explore 1 whether there is a border effect on interstate trade 2 if the effect exists how large it is and 3 what types of goods are most affected in the context of existing literature and recent u s political and cultural events we then provide possible explanations for our findings this study uses a gravity equation of international trade to examine the effect of the fictional national border between the red and blue nations the methodology was originally applied by mccallum 1995 to estimate the degree of impact of the national border on trade between the united states and canada he finds that intercountry trade is less than 5 of the intracountry trade of canada controlling for other factors following mccallum s 1995 work several studies have proposed methodological improvements we apply an updated estimation method nonlinear generalized method of moments gmm estimator of a gravity equation to examine the border effect between the red and blue nations our analysis finds a statistically and economically significant border effect between the red and blue nations especially in years 2002 and 2007 we examine the border effect in 1993 1997 2002 and 2007 the years in which trade flow data are available from the federal commodity flow survey cfs the border effect is not robustly found in 1993 and 1997 however it is robustly detected in 2002 and 2007 even with additional controls or alternative specifications at the industry level analysis we find that the border effect is significant for consumption goods such as food tobacco and printed products but not for intermediate products i

ceo incentives and firm size we develop a model that clarifies how to measure ceo incentive strength and how to reconcile the enormous differences in pay sensitivities between executives in large and small firms the crucial parameter is shown to be the elasticity of ceo productivity with respect to firm size we find that ceo marginal products rise significantly with firm size confirming rosen s conjecture that ceos of large firms have a chain letter effect on firm performance and overall ceo incentives are roughly constant or decline slightly with firm size we employ a multitask model to discuss implications for the design of control systems

the disappearance of the border barrier in some european union countries bilateral trade this paper estimates the tariff equivalent of the border barrier in each bilateral trade among european union countries the results show that there are large differences in the border barrier across european union countries bilateral trade in some bilateral trade flows the border barrier has almost disappeared whereas in other cases it is still equivalent to a 75 per cent tariff the results also show that some countries have low border barriers in most of their bilateral trade flows with other eu members whereas other countries persistently present large border barriers

will regional economic integration influence carbon dioxide marginal abatement costs evidence from chinese panel data with frequent trade and technology diffusion the barriers between regions are gradually weakening and regions have become more integrated over recent years regional economic integration not only stimulates labour mobility but also achieve scale economy both of which may also influence carbon dioxide co2 marginal abatement costs through affecting energy consumption co2 emissions productivity growth and technical progress nevertheless to the best of our knowledge none of the studies has currently concerned the influence of regional economic integration on co2 marginal abatement costs to fill this research gap this study first theoretically clarifies the influence mechanism of regional economic integration on co2 marginal abatement cost and then empirically attempts to investigate their relationship in the context of china with panel data models to serve this purpose the provincial co2 marginal abatement cost and regional economic integration are estimated by parametric directional distance function and price based approach respectively the results show that china s regional economic integration level indeed gradually improved over 2002 2011 except in 2003 04 and 2006 09 due to the spread of severe acute respiratory syndrome sars and the sub prime loan crisis moreover evolution of regional economic integration indeed contributes to the increase of co2 marginal abatement cost at 5 significance level using robust tests it can be found that the results are also reliable and robust to sub samples