variable returns to scale in production and patterns of specialization this paper discusses some trade and welfare implications of the two sector model based on increasing returns to scale irs in one industry and decreasing returns to scale drs in the other it has been shown by horst herberg and murray kemp that given homothetic production functions with irs in one industry and drs in the other the production possibilities frontier ppf is strictly concave to the origin near the irs axis and strictly convex to the origin near the drs axis while this result constitutes an important finding and is contrary to the general impression among economists even twelve years after the publication of herberg and kemp s paper no attempt has been made to analyze its implications for welfare and patterns of specialization in this paper i consider a simple twocommodity model with irs in one industry and drs in the other and discuss some interesting implications of variable returns to scale vrs first i demonstrate that in this model if a small open economy specializes completely in production it will do so in the drs commodity and not in the irs commodity as is generally believed second if at a given price ratio an internal production equilibrium exists a welfaremaximizing small open economy will never specialize completely in production even though the ppf exhibits decreasing opportunity costs over a part of its range third given output generated economies and diseconomies of scale welfare maximization for a small country requires a permanent tax subsidy scheme encouraging expansion of the irs industry and contraction of the drs industry finally in a two country model with identical tastes and technology across the countries free trade equilibrium may result in incomplete specialization by the exporter of the irs commodity and complete specialization by the exporter of the drs commodity in the course of the analysis i argue that tinbergen s formulation of frank graham s case for protecting the irs industry is incorrect i then present a possible reformulation of it in section i the basic production model is introduced in section ii the model is analyzed and in section iii it is argued that all the results continue to hold in the multifactor case

allocation of fixed transmission cost to wheeling transactions by cooperative game theory this paper describes a methodology to allocate the cost of transmission network facilities to wheeling transactions in decentralized power systems the authors propose that the responsibility placed on transmission facilities involved in each transaction be according to the transmission usage pattern their proposal incorporates the mw mile method and considers economies of scale of transmission network facilities they also incorporate a nucleolus scheme in the cooperative game theory to deal with matters of conflict the applicability of their method is demonstrated in a numerical example

transmission system management and pricing new paradigms and international comparisons the transmission system once the necessary but nearly invisible component of the electric power system is now the focus of physical electrical and financial attention of the utility and more significantly their potential suppliers customers this paper has three primary objectives the first is to present a discussion of a new paradigm for the electric power industry the second is to review transmission pricing options specifically those utilizing either long run lrmc or short run srmc marginal cost based approaches the third is to provide a review of innovative approaches to transmission asset management and finance as seen from international experience

foreign ownership and the theory of trade and welfare some standard topics in the theory of international trade are reconsidered in this paper by distinguishing between national and aggregate income when fixed supplies of foreign inputs are present within the home country under conditions that would ensure a national welfare gain if foreign ownership were absent international transfer economic growth or tariff policy might cause a national welfare loss in the presence of foreign ownership the techniques developed could be applied to other domestic distinctions such as those based on race sex age or ethnicity and to the theory of customs unions in a three country world

an integrated framework for cost allocation in a multi owned transmission system this paper describes a methodology for allocating transmission costs among users of a centralized transmission service in the proposed approach the share of each participant is proportional to its impact on power system transmission investment requirements this allocation rule provides incentives for all participants to remain in the pool and ensures revenue reconciliation it is shown that under some simplifying assumptions the proposed scheme reduces to a modified mw mile rule thus providing some insight on that method s economic basis other issues such as credits for counterflows and distortions due to economies of scale are also addressed the methodology is illustrated in case studies with the brazilian power system

commodity transfers and the international economic order a comment abstract graciela chichilnisky has recently examined the transfer problem in a free trade model with three income groups she argues that a transfer of endowments from a high income group in the north to the south will have such an adverse effect on the latter s terms of trade that it will end up worse off after the transfer and this holds in a stable market this note elaborates on chichilnisky s model and identifies necessary and sufficient conditions for her result it is claimed that the result derives from implicit and implausible restrictions on the trading behaviour of the low income group in the north

equitable allocation of congestion relief cost to transactions this paper investigates a bid based congestion management scheme for a system that accommodates many bilateral transactions the paper proposes a new allocation method for allocating the cost of congestion relief to transactions that cause the congestion the allocation reflects the actual usage of the congested facilities by the transactions and recovers the cost also proposed in the paper is a consistency test to quantify and test the equity fairness of the method test results illustrate that the method provides better price signals for relieving congestion on lines than the shadow prices the test results also indicate that the method recovers the cost the results on consistency indicate that the proposed method is consistent provided that the transactions causing counterflows on congested lines be compensated

gains from trade under variable returns to scale recently several trade theorists have investigated the welfare consequences of international trade under variable returns to scale for example kemp and negishi 11 using the revealed preference arguments obtain the sufficient conditions under which the opening of trade and an improvement in the terms of trade are nonharmful in the presence of variable returns to scale production subsidies and consumption taxes eaton and panagariya 7 reexamine these issues in the context of pareto welfare criterion it is noteworthy that the assumption of constant returns to scale is retained in their discussions on production subsidies and consumption taxes 1 the purpose of this paper is to explore the welfare implications of tariffs and consumption taxes as well as the welfare rankings of these policy instruments under variable returns to scale we obtain several interesting results for example social welfare for a small country can be maximized by introducing in addition to free trade a policy of production tax cum subsidy such that the output of the industry exhibiting greater smaller returns to scale is pushed to the maximum minimum a higher tariff rate needs not result in a lower welfare whereas a higher rate of consumption tax necessarily leads to a lower welfare furthermore a tariff may be superior to an equivalent consumption tax the paper evolves as follows the model and assumptions are presented in section ii section iii is the analysis regarding non optimality of free trade free trade versus no trade

the possibility of recipient harming donor benefiting transfers with more than two countries the possibility of a commodity transfer among nations which simultaneously benefits the donor and harms the recipient is examined an example of a three country exchange economy is presented where a transfer may be made which gives the counter intuitive result the result is then explained

the generalized theory of transfers and welfare bilateral transfers in a multilateral world paul samuelson s 1952 1954 classic papers on the transfer problem addressed two separate analytical issues the positive effect of a transfer on the terms of trade and the welfare effect of the transfer on the donor and the recipient since then a considerable body of literature has grown up on the positive analysis while samuelson 1954 himself had extended the 2 x 2 x 2 free trade analysis to allow for tariffs and transport costs subsequent writers have analyzed other extensions of the model for example to allow for nontraded goods as with leisure in samuelson 1971 or general nontraded goods in john chipman 1974 and ronald jones 1970 1975 remarkably however the welfare analysis of transfers has not paralleled these developments since wassily leontief 1936 produced an example of immiserizing transfer from abroad and samuelson 1947 argued that the example required market instability the proposition that has monopolized attention has been that a transfer in the conventional 2 x 2 x 2 model in its free trade version cannot immiserize the recipient or enrich the donor as long as world markets are stable in the walras sense interestingly samuelson 1954 who did extend the positive analysis to include tariffs did not go on to ask whether immiserization of the transfer recipient and hence symmetrically enrichment of the donor in a two country model could now arise consistent with market stability recently the welfare analysis of transfers has been extended in two different directions both apparently unconnected and both yielding the conclusion that transfers from abroad can be immiserizing and that the donor may improve its welfare despite market stability one route to this conclusion has been the introduction of a third economic agent or country that is outside of the transfer process in the appendix of his 1960 paper analyzing the interaction between trade policy and income distribution harry johnson discussed the possibility of welfareparadoxical redistribution between two factor income classes capital and labor in an open economy thereby providing what can be interpreted as a treatment of the threeagent transfer problem for the case in which donor and recipient are both completely specialized in the ownership of a single different factor an independent analysis of the three agent transfer problem using a restrictive model with given endowments of goods and fixed coefficients in consumption was also undertaken in an important paper by david gale 1974 2 brecher and bhagwati bhagwati department of economics columbia university new york ny 10027 brecher department of economics carleton university ottawa on kis 5b6 hatta department of political economy the johns hopkins university baltimore md 21218 we thank the national science foundation grant no 524718 for partial financial support of the research underlying this paper the paper was written when brecher and hatta were visiting columbia university 1981 82 gratefully acknowledged are helpful comments and suggestions from john chipman avinash dixit jacques dreze robert feenstra jacob frenkel ronald jones murray kemp andreu mas colell michael mussa john riley lars svensson and robert willig from anonymous referees and from seminar participants at berkeley harvard minnesota rochester chicago and the university of california los angeles after the present paper was submitted for publication and following its presentation at rochester our attention was drawn to this appendix which was noticed by a student of ronald jones subsequently we learned from makoto yano that motoshige itoh had pointed out an important related paper by ryuotaro komiya and t shizuki 1967 whose condition 11 for the johnson case anticipated our equation 12 below we are grateful for having both of these references brought to our attention 2 gale constructs an example in which the donor is enriched along with the recipient furthermore this immediately implies that a reverse transfer will immis

allocation of transmission fixed charges an overview the application of marginal cost in pricing the transmission services has shown not effective mainly due to revenue reconciliation problems to overcome this a set of other methods derived from the mw mile rule has been suggested to allocate transmission fixed costs this paper compares such methods known as embedded cost methods in a centralized transmission network environment although these methods actually share the total cost and are very simple they are usually rejected due to the lack of a good economic reasoning the economic issue and the impact on the system expansion planning of such allocation are addressed in this paper some examples with the brazilian transmission system illustrate the results derived from this analysis

a load flow based method for calculating embedded incremental and marginal cost of transmission capacity this paper describes the principles of a load flow based method for allocating the cost of transmission capacity the method estimates the usage of each transmission facility with cost defined on a per facility basis embedded incremental and marginal cost of transmission capacity are defined and compared to each other a discussion of other load flow based methods and their application to marginal cost is included

does public scientific research complement private investment in research and development in the pharmaceutical industry abstract this paper analyzes how pharmaceutical research and development r d investment responds to publicly supported biomedical research performed mainly at universities and nonprofit institutions new microlevel data on investment by the u s national institutes of health allow measures of public basic and clinical research in seven medical classes to be included in a distributed lag model explaining pharmaceutical r d investment using a panel of medical classes observed over 18 years the analysis found strong evidence that public basic and clinical research are complementary to pharmaceutical r d investment and thereby stimulate private industry investment however differences in the relevance and degree of scientific and market uncertainty between basic and clinical research lead to differences in the magnitude and timing of the pharmaceutical investment response

the long term impact of transmission pricing transmission pricing has been one of the major issues on the ongoing debate about deregulation and privatization many papers have dealt with the static nature of the tariff using the incremental and the embedded cost approaches however few of them have focused on the dynamic aspects of the tariff and therefore on its impact on the long term expansion planning of both generation and transmission the main target of this paper is to address some interesting topics about the effect of the transmission pricing methods on system cost in this new environment where generation is treated as an open market and transmission as a monopoly some examples with the brazilian power system illustrate the main points shown in this paper

the possibility of an immiserizing transfer under uncertainty in a two country two commodity trade model with production uncertainty an international transfer can harm the recipient and benefit the donor this result holds even when equilibrium prices are stable moreover the form in which the transfer is paid can matter for the welfare consequences of the transfer

allocation of fixed costs in distribution networks with distributed generation in this paper we propose a method for the allocation of fixed capital and nonvariable operation and maintenance costs at the medium voltage mv distribution level the method is derived from the philosophy behind the widely used mw mile methodology for transmission networks that bases fixed cost allocations on the extent of use that is derived from load flows we calculate the extent of use by multiplying the total consumption or generation at a busbar by the marginal current variations or power to current distribution factors pidfs that an increment of active and reactive power consumed or generated in the case of distributed generation at each busbar produces in each circuit these pidfs are analogous to power transfer distribution factors ptdfs unlike traditional tariff designs that average fixed costs on a per kwh basis across all customers the proposed method provides more cost reflective price signals and helps eliminate possible cross subsidies that deter profitable in the case of competition or cost effective in the case of a fully regulated industry deployment of dg by directly accounting for use and location in the allocation of fixed costs an application of this method for a rural radial distribution network is presented

the transfer problem with three agents once again characterization uniqueness and stability abstract an earlier paper in this journal chichilnisky 1980 gave for the first time sufficient conditions for the transfer paradox to occur in 3 agent economies with stable markets this paper comments on several other papers written about these results and extends the results further here we give necessary as well as sufficient conditions for the transfer problem to occur in an economy with three agents at a unique and walrasian stable equilibrium

wheeling of power under deregulated environment of power system a bibilographical survey the power industry is moving rapidly from regulated conventional setup to a deregulated environment there is an urgent need to keep a track of international experiences and activities taking place in this emerging field this paper gives a bibliographical survey and general backgrounds of research and development in the field of power system wheeling under deregulated environment based on over 170 published articles wheeling in general and the establishment of wheeling rate in particular are subjects of extensive debate today this will be very much useful for all countries especially those developing countries which are moving toward the unbundling of electricity supply industry esi the collected literature have been divided into many section so that new researchers do not face any difficulty for obtaining literature particularly in the area of wheeling of power under deregulated environment

transfers returns to scale tied aid and monopolistic competition we examine transfers and tied aid in a model with increasing returns to scale and monopolistic competition transfers give rise to an additional love of variety welfare effect and affect the utility possibility locus generic tied aid may exacerbate or reverse these results the popularity of aid tied to specific manufactured goods can be explained through rent seeking behavior since such aid gives rise to profits in the donor country these profits in turn largely repatriate the transfer such that donors can appear to be more generous than they really are

the theory of tariffs under variable returns to scale and inter industrial externalities the theory of nominal tariff in general and the well known metzler paradox in particular have been rigorously developed by metzler 14 jones 13 johnson 12 and batra 1 ch 5 among others the analysis has been typically conducted under the strong assumption that the economy is devoid of any inter industrial and or intra industrial externalities some aspects of inter industrial externalities which have played a major role in the development of welfare economics in the past three decades have been explored by chang 3 and herberg kemp and tawada 11 and the implications of intra industrial variable returns to scale which are external to the firms have been examined by eaton and panagariya 7 8 panagariya 9 parai 10 choi and yu 4 5 and beladi 2 many of the standard trade theories have been shown to be significantly affected by the presence of either type of the externalities it is notable that the implications of the externalities for the tariff theory however have not been studied the purpose of this paper thus is to examine several aspects of the standard theory of tariffs in a framework allowing various production externalities specifically we will explore the effects of a change in the tariffs and or the terms of trade on the import demand as well as the effects of tariff on the terms of trade and the domestic price ratio several interesting results emerge from this analysis for example in contrast to the conventional results an improvement in the terms of trade for a given tariff may dampen the import demand and a higher tariff for a given terms of trade may raise it an increase in the tariff rate need not improve the terms of trade and hence may raise the domestic price ratio of the importable good by more than the tariff rate although the presence of inter industrial and intraindustrial externalities does not affect the sufficient condition for the metzler paradox it does modify a necessary condition for the paradox this paper is organized as follows section ii delineates the assumptions and the model section iii examines the effects of tariffs and or the terms of trade on import demands section iv

cost of wheeling methodologies the cost of wheeling and the methodology by which it is computed is a high priority problem throughout the power industry due to the growth in transmission facilities the cost differentials between utility companies and the dramatic growth in nonutility generation capacity this paper contains descriptions and summaries of computational procedures and data requirements of four embedded cost methodologies two long run incremental cost methods and the short run marginal cost method four methodologies are also presented for allocating the wheeling costs among a number of wheels when simultaneously present on a company s system as required for the standard long run incremental cost method

the costs of wheeling and optimal wheeling rates wheeling is the transmission of electrical energy from a buyer to a seller through a transmission network owned by a third party this paper provides a theoretically sound yet practical to implement basis for setting wheeling rates these wheeling rates are based on marginal costs determined by losses and effects of line flow and voltage magnitude constraints adjusted up or down as necessary to account for embedded capital costs i e revenue reconciliation simple numerical examples are provided to illustrate interesting phenomena such as negative wheeling rates which yield positive net revenue comparisons with present day wheeling rates show that major differences exist the wheeling rates of this paper yield a no lose situation for the buying selling and wheeling utilities

three methods to share joint costs or surplus abstract we study cost sharing methods with variable demands of heterogeneous goods additive in the cost function and meeting the dummy axiom we consider four axioms scale invariance si demand monotonicity dm upper bound for homogeneous goods ubh placing a natural cap on cost shares when goods are homogeneous average cost pricing for homogeneous goods acph the random order values based on stand alone costs are characterized by si and dm serial costsharing by dm and ub the aumann shapley pricing method by si and acph no other combination of the four axioms is compatible with additivity and dummy journal of economic literature classification numbers c71 d62 d63

immiserizing transfer under variable returns to scale this paper examines the welfare consequences of a unilateral transfer for both the transfer paying and the transfer receiving country in which the production functions are subject to variable returns to scale we obtain the conditions for the strong paradox that is the welfare of the transfer paying country improves and that of the transfer receiving country declines in the standard two country framework the conditions for the weak paradox that is both the transferor and transferee gain or lose simultaneously and the normal results that is the transferor loses and the transferee gains are also derived transferts appauvrissants quand les rendements a l echelle sont variables ce memoire examine les effets de bien etre d un transfert unilateral a la fois pour le pays donateur et le pays recipiendaire quand les fonctions de production ont des rendements variables a l echelle les auteurs d6veloppent les conditions qui sous tendent le paradoxe fort i e le cas oii le bien r ils d6rivent aussi les conditions qui sous tendent le paradoxe faible i e le cas oui les deux pays gagnent ou

the multi country transfer problem abstract a general formula is derived for the welfare effects of a set of transfers among several countries in a two good model with production and substitution and compatible with walrasian stability the relation to recent work on transfer paradoxes is sketched

the economic dispatch with consideration of transmission service charge for a generation company summary form only given as follows this paper presents a novel economic dispatch strategy for a generation company which owns several units with different fuel costs efficiency and locations and has a bilateral contract with several large customers the proposed strategy not only considers the generation cost but also takes into account the wheeling charge for the use of the transmission system a modified megawatt mile method is proposed to calculate the wheeling cost in this paper finally the calculation result of economic dispatch for a generation company with two units and their loads in a real power system is demonstrated

cost of transmission system usage based on an economic measure throughout today s unbundled power systems it is assumed that the transmission system is a natural monopoly and therefore it should be regulated to compensate for the revenue requirements of the owners of the transmission system and encourage its future expansion transmission pricing schemes should be designed fairly also the schemes must aim to achieve the objective of maintaining system security by encouraging proper operation and maintenance of existing and investment in new facilities in this paper based on a simple economic principle a novel method for allocation of the fixed cost of the transmission system to agents using these facilities is developed this new method introduces the concept of critical capacity of a line and considers congestion in the transmission system to allocate the share of the transmission system revenue requirement that each agent has to provide identifying and charging the agents who cause congestion is very important as it sends the correct economic signal to transmission network users this is a novel feature of this method thus making it most suitable for systems where congestion does occur we also point out briefly the reliability concerns of the new method a simple eight bus network representative of the pjm iso system together with its market pricing mechanism is used as a competitive power system to illustrate the main features of the proposed method