a dual definition for the factor content of trade and its effect on factor rewards in us manufacturing sector we introduce a dual definition of the factor content of trade fct using the concept of the equivalent autarky equilibrium estimating a symmetric normalized quadratic revenue function for the u s manufacturing sector between 1965 and 1991 we find that the fct for capital is positive while the fct for skilled and unskilled labor is negative suggesting that the leontief paradox is not present then the growth rate of the factor rewards is decomposed to the fct endowments and technological change effects we find that technological change is the most important determinant in explaining wage inequality between skilled and unskilled labor

iv quantile regression for group level treatments with an application to the distributional effects of trade we present a methodology for estimating the distributional effects of an endogenous treatment that varies at the group level when there are group level unobservables a quantile extension of hausman and taylor 1981 because of the presence of group level unobservables standard quantile regression techniques are inconsistent in our setting even if the treatment is independent of unobservables in contrast our estimation technique is consistent as well as computationally simple consisting of group by group quantile regression followed by two stage least squares using the bahadur representation of quantile estimators we derive weak conditions on the growth of the number of observations per group that are sufficient for consistency and asymptotic zero mean normality of our estimator as in hausman and taylor 1981 micro level covariates can be used as internal instruments for the endogenous group level treatment if they satisfy relevance and exogeneity conditions our approach applies to a broad range of settings including labor public finance industrial organization urban economics and development we illustrate its usefulness with several such examples finally an empirical application of our estimator finds that low wage earners in the united states from 1990 to 2007 were significantly more affected by increased chinese import competition than high wage earners

uniqueness of market equilibrium on a network a peak load pricing approach abstract in this paper we establish conditions under which uniqueness of market equilibrium is obtained in a setup where prior to trading of electricity transmission capacities between different market regions are fixed in our setup firms facing fluctuating demand decide on the size and location of production facilities they make production decisions constrained by the invested capacities taking into account that market prices partially reflect scarce transmission capacities between the different market zones for this type of peak load pricing model on a network we state general conditions for existence and uniqueness of the market equilibrium and provide a characterization of equilibrium investment and production the presented analysis covers the cases of perfect competition and monopoly the case of strategic firms is approximated by a conjectural variations approach our result is a prerequisite for analyzing regulatory policy options with computational multilevel equilibrium models since uniqueness of the equilibrium at lower levels is of key importance when solving these models thus our paper contributes to an evolving strand of literature that analyzes regulatory policy based on computational multilevel equilibrium models and aims at taking into account individual objectives of various agents among them not only generators and customers but also e g the regulator deciding on network expansion

alternative models of restructured electricity systems part 1 no market power different equilibrium concepts have been proposed by various authors schweppe et al hogan et al chao and peck wu et al to analyse competitive electricity systems we establish correspondences between these different models through a single framework and provide additional interpretations of these equilibrium concepts this unifying conceptual view also provides a computationally feasible approach to simulate the market it also opens the way to the modeling of some imperfect markets

on the long run effects of market splitting why more price zones might decrease welfare in liberalized electricity markets we observe different approaches to congestion management while nodal pricing is implemented in canada and some markets in the united states european markets are split up into a limited number of price zones with uniform prices in order to at least partially realize the benefits of regional price differentiation zonal boundaries often coincide with national borders but some countries are also split into multiple zones in this paper we shed light on possible negative welfare effects of market splitting that arise in a model where investment incentives in new generation capacity are taken into account if zones are misspecified we show that standard approaches to configure price zones on the basis of projected nodal price differences or congested transmission capacity may fail to suggest reasonable zone specifications also an adjustment of available transfer capacities atcs between zones or a switch to flow based market splitting does not ensure positive welfare effects our analysis suggests that a careful and detailed evaluation of the system is needed to ensure a reasonable zone configuration

the factor content of foreign trade in the factor proportions trade theory the heckscher ohlin theory the factor content of the pattern of trade plays a major role both in theoretical and in empirical investigations it is therefore valuable to identify restrictions on permissible vectors of the factor content of trade which necessarily hold in equilibrium if certain restrictions are empirically testable they can be used for preliminary testing of the theory before a more thorough examination is undertaken or they can be used to reject the theory it is my intention to develop in this paper a set of restrictions on the vectors of the factor content of trade which can be used for these purposes it is well known that autarky commodity prices impose restrictions on possible patterns of trade these restrictions provide a precise prediction of the pattern of trade for a two country two commodity world in the sense that the exporter of a good is readily identifiable from autarky price data as the country with the lower relative price of the good i will start by showing that in the presence of factor price equalisation autarky factor rewards impose restrictions on the factor content of trade patterns which are completely analogous to the restrictions imposed by autarky commodity prices on the commodity patterns of trade this result is in line with the view that in the factor proportions model trade in commodities represents indirect trade in factor services unfortunately these restrictions rely on autarky information and they are therefore not very useful for empirical work in order to overcome this difficulty i explore an alternative approach i argue that common predictions of the factor content of trade flows which are based on post trade observable data the data relevant for empirical studies rely on unnecessarily restrictive assumptions i e the assumption that preferences are homothetic and identical across countries and the assumption of factor price equalisation the assumption of identical homothetic preferences seems to be necessary when factor price equalisation is assumed because in this case there is an indeterminancy in the pattern of production nevertheless the two assumptions taken together imply the same factor content of a country s net import vector from the rest of the world for every equilibrium production pattern however in a many country world the factor content of bilateral trade flows depends on the realised production patterns and they cannot therefore be predicted i will show that in the absence of factor price equalisation which many

consistent and robust delimitation of price zones under uncertainty with an application to central western europe abstract new and alternative delimitations of price zones for central western europe cwe might constitute a mid term solution to cope with the increasing congestion in the electricity transmission grids the significantly growing infeed from renewable energy sources puts more and more pressure on the grid and emphasizes the need for improved congestion management thus a new delimitation of price zones is frequently considered in current discussions and research the present paper applies a novel hierarchical cluster algorithm that clusters locational marginal prices and weights nodes depending on their demand and supply situation to identify possible new price zone configurations pzcs the algorithm is applied in a scenario analysis of six scenarios reflecting main drivers that influence the future development of european electricity markets in line with the trilemma of energy policy targets robustness of the new configuration is an important criterion for price zone configurations according to the european guideline on capacity allocation and congestion management cacm therefore a robust price zone configuration is computed taking into account all the six individual scenarios results show that shape size and price variations of price zones on the one hand strongly depend on the individual scenario on the other hand the identified robust configuration is shown to outperform other configurations particularly also the current price zone configuration in cwe

output inflation and stabilization in a small open economy evidence from mexico abstract we study the sources of fluctuation in output and inflation for mexico considering fiscal real money growth exchange rate and asset market disturbances which are identified using an estimable equilibrium model incorporating important features of high inflation economies changes in inflation are influenced by all shocks while output growth is explained by real fiscal and asset shocks the results lend strong support to the fiscal view of inflation and to a lesser degree support the balance of payments view we also find that higher inflation and higher budget deficits cause each other to spiral upward

the impacts of trade on the brazilian labor market a cge model approach abstract the paper assesses the impacts of trade liberalization on macroeconomic variables and labor market indicators in brazil the discussion comes out of an earlier debate on the role of trade liberalization in shaping labor market outcomes in the well known heckscher ohlin and stolper samuelson hos theorems to address these issues we use a computable general equilibrium cge modeling approach to model the patterns of export growth by sector and their effects on macroeconomic and labor market indicators overall our results show that trade liberalization contributes to improve economic welfare by means of greater output lower domestic prices and higher labor demand the benefits of this economic improvement tend however to be appropriated by the most skilled workers in the most trade oriented sectors contradicting the predictions of the hos theorems

determinants of the structure of u s foreign trade 1958 1976 abstract the heckscher ohlin model with three direct factor inputs is borne out for u s net exports of manufactures in annual cross section regressions for 1958 1976 the coefficient on unskilled labor became significantly more negative over the period and there is evidence that the negative sign on physical capital may reflect the inclusion of natural resource industries further analysis based upon 1960 and 1970 census years suggests the importance as well of skill and technological variables calculations of the total factor requirements of u s trade uphold the leontief paradox for 1958 but not for 1972

an engineering economic approach to transmission planning under market and regulatory uncertainties wecc case study we propose a stochastic programming based tool to support adaptive transmission planning under market and regulatory uncertainties we model investments in two stages differentiating between commitments that must be made now and corrective actions that can be undertaken as new information becomes available the objective is to minimize expected transmission and generation costs over the time horizon nonlinear constraints resulting from kirchhoff s voltage law are included we apply the tool to a 240 bus representation of the western electricity coordinating council and model uncertainty using three scenarios with distinct renewable electricity mandates emissions policies and fossil fuel prices we conclude that the cost of ignoring uncertainty the cost of using naive deterministic planning methods relative to explicitly modeling uncertainty is of the same order of magnitude as the cost of first stage transmission investments furthermore we conclude that heuristic rules for constructing transmission plans based on scenario planning can be as suboptimal as deterministic plans

two price zones for the german electricity market market implications and distributional effects abstract we discuss the implications of two price zones i e one northern and one southern bidding area on the german electricity market in the northern zone continuous increases in capacity with low variable costs cause large regional supply surpluses in the market dispatch while in the southern zone conventional capacity decreases as the spatial imbalance of supply and load is increasing the current single bidding area more often results in technically infeasible market results requiring curative congestion management measures there is an ongoing discussion about the potential effects of introducing bidding zones in germany this paper applies an electricity sector model with network representation to analyze the system implications and the distributional effects of two bidding zones in the german electricity system in 2012 and 2015 results show a modest decrease in cross zonal re dispatch levels particularly in 2015 however overall network congestion and re dispatch levels increase in 2015 and also remain on a high level for two bidding zones results are very sensitive to more than two bidding zones and additional line investments illustrating the challenge to define stable price zones in a dynamic setting with two bidding areas prices in the model results increase in the southern zone and decrease in the northern zone the average price deviation grows from 0 4eur mwh in 2012 to 1 7eur mwh in 2015 with absolute values being significantly higher in hours when price differences occur stakeholders within zones are exposed to the price deviations to a different extent distributional effects are surprisingly small compared to the wholesale price or different network charges

factor bias sector bias and the effects of technical progress on relative factor prices abstract the effects of technical progress on relative factor prices in the two country two good two factor heckscher ohlin model are investigated technical progress is classified according to factor augmenting bias factor using bias and sector bias a complete set of relations between technical progress parameters and relative factor prices depending on the elasticities of substitution in demand and in production are worked out the relative importance of factor bias and sector bias of technical change in determining relative factor prices are examined

the factor proportions model with many nations goods and factors theory and evidence recently several authors have markedly improved our understanding of the factorproportions trade model when there are arbitrarily many goods factors and or nations vanek 1968 appears to be the first rigorously to derive theorems in the spirit of the simple heckscher ohlin h o theory concerning the factor content of a nation s total trade subsequently horiba 1974 has investigated conditions under which vanek s results hold bilaterally for trade among many nations lastly in harkness 1978 i considered the implications of vanek s model for a nation s total but not its bilateral commodity trade nonetheless none of these models nor their implications have been subjected to rigorous empirical tests this paper provides such tests on observed trade patterns among canada the united states and the rest of the world row section i briefly reviews the vanek horiba version of the factor proportions model demonstrating how a nation s total and bilateral net factor service trade flows are linked to her total and bilateral relative factor endowments the implications for direct commodity trade are derived in section ii by extension of my earlier 1978 results section iii deals with problems arising from the absence of some data necessary to empirical implementation of the model section iv presents the results of empirical tests conclusions are found in section v

retrospectives on the genius behind david ricardo s 1817 formulation of comparative advantage last year marked the 200th anniversary of ricardo s famous four numbers paragraph on comparative advantage which is one of the oldest analytical results in economics following the lead of james mill 1821 these four numbers have been interpreted as unit labor coefficients this interpretation has provided the basis for the development of the ricardian model from john stuart mill 1852 to eaton and kortum 2002 however if we accept the labor unit interpretation of these numbers ricardo s exposition in his 1817 principles of political economy and taxation makes little logical sense building on sraffa s 1930 interpretation of ricardo s numbers as labor embodied in trade our discussion reveals the amazing simplicity and generality of ricardo s comparative advantage formulation and gains from trade logic

trade and wage inequality local versus global comparative advantages this paper shows that disentangling the local and global dimensions of trade can be crucial to get a better understanding of the trade impact on wage inequality in particular it allows us to reconcile the empirical evidence with the heckscher ohlin samuelson predictions our focus here is on italy as for local trade within its own cone of diversification italy is specialised in the production of unskill intensive goods while for global trade with respect to the other cone of diversification it is mainly specialised in the production of skill intensive goods on the evidence of these specialisation patterns we point out that the local trade has a strong impact on wage inequality in particular in line with the heckscher ohlin samuelson predictions the local export performance reduces wage inequality as it favours blue collar workers as for global trade it affects and increases wage inequality through the export channel again consistent with the heckscher ohlin samuelson predictions

does foreign direct investment affect wage inequality an empirical investigation we use a panel of more than 100 countries for the period 1980 2002 to analyse the relationship between inward foreign direct investment fdi and wage inequality we particularly check whether this relationship is nonlinear in line with a theoretical discussion we find that the effect of fdi differs according to the level of development we depict two different patterns one for oecd developed and one for non oecd developing countries results suggest the presence of a nonlinear effect in developing countries wage inequality increases with fdi inward stock with such effect diminishing with further increases in fdi for developed countries wage inequality decreases with fdi inward stock and there is no robust evidence to show that this effect is nonlinear

the economics of planning electricity transmission to accommodate renewables using two stage optimisation to evaluate flexibility and the cost of disregarding uncertainty abstract aggressive development of renewable electricity sources will require significant expansions in transmission infrastructure we present a stochastic two stage optimisation model that captures the multistage nature of transmission planning under uncertainty and use it to evaluate interregional grid reinforcements in great britain gb in our model a proactive transmission planner makes investment decisions in two time periods each time followed by a market response uncertainty is represented by economic technology and regulatory scenarios and first stage investments must be made before it is known which scenario will occur the model allows us to identify expected cost minimising first stage investments as well as estimate the value of information the cost of ignoring uncertainty and the value of flexibility our results show that ignoring risk in planning transmission for renewables has quantifiable economic consequences and that considering uncertainty can yield decisions that have lower expected costs than traditional deterministic planning methods in the gb case the value of information and cost of disregarding uncertainty in transmission planning were of the same order of magnitude approximately 100 m in present worth terms further the best plan under a risk neutral decision criterion can differ from the best under risk aversion finally a traditional sensitivity analysis based robustness analysis also yields different results than the stochastic model although the former s expected cost is not much higher

renewable electric energy integration quantifying the value of design of markets for international transmission capacity abstract integrating large quantities of variable renewable electricity generation remains a political and operational challenge one of the main obstacles in europe to installing at least 200 gws of power from variable renewable sources is how to deal with the insufficient network capacity and the congestion that will result from new flow patterns we model the current methodology for controlling congestion at international borders and compare its results under varying penetrations of wind power with models that simulate an integrated european network using nodal localised marginal pricing the nodal pricing simulations illustrate that congestion and price patterns vary considerably between wind scenarios and within countries and that a nodal price regime could make better use of existing network capacity introducing substantial operational cost savings and reducing marginal power prices in the majority of european countries

trade policy preferences and factor abundance abstract this paper provides a theoretical and empirical analysis of public opinion towards free trade investigating cleavages both between and within countries we study the distributional effects of trade policy in a neoclassical heckscher ohlin economy with not just two but many input factors in production we demonstrate that the factor price changes induced by trade policy are negatively associated with the factor content of free trade and therefore factor abundance using large scale international survey data we test whether these predicted distributional effects are reflected in the trade policy preferences of workers with different labor market skills in order to isolate the effects of factor abundance from other skill related confounding factors we employ a within skill group estimator that exploits the cross country variation in factor abundance in line with theory the data show that individuals whose skills are in more abundant domestic supply have significantly more positive attitudes towards trade

market splitting in germany new evidence from a three stage numerical model of europe abstract with the sharp increase in redispatch measures seen during recent years the importance of an efficient congestion management has increased particularly in germany as the current market design with a single bidding area ignores the physical constraints of the transmission grid there is an ongoing discussion about introducing price zones against this background we develop a three stage approach to model redispatch and market splitting for germany while considering interactions with interconnected countries we identify an increasing spatial imbalance between generation and load and delays in grid extension as being the main drivers for the increase of modeled redispatch volumes from 2012 to 2020 we show that market splitting reduces imminent congestion although results are sensitive to the zonal delimitation and corresponding net transfer capacities the overall welfare effect is negligible but price differences between the bidding areas investigated i e one northern and southern price zone result in considerable distributional effects while consumers in northern germany would benefit producer rents and in particular the value of wind energy would decrease the opposite is true for southern germany we conclude that market splitting constitutes a solution to reduce redispatch measures as long as transmission grid expansion is further delayed

a specification test of the heckscher ohlin theory abstract under strong assumptions the heckscher ohlin model predicts not only that factor endowment differences alone determine trade patterns but that they do so in a particularly simple way the factor content of trade should be a linear function of national and world factor endowments the evident empirical shortcomings of this simple relationship need not however imply the more general empirical failure of endowment based trade theories this paper provides empirical evidence consistent with a more general endowment based model by showing that the strong heckscher ohlin relationship excludes important additional channels through which factor endowments affect the pattern of trade

cointegration how short is the long run abstract when testing for cointegration and faced with short sample periods it is common for researchers to turn to more frequently sampled observations that is to move from annual to quarterly or monthly data in order to increase the number of observations we argue that such a gain in the degrees of freedom is more apparent than real essentially cointegration is a long run concept and hence requires long spans of data to give tests for cointegration much power rather than merely large numbers of observations using monte carlo simulations we demonstrate this for four popular tests for cointegration

generation capacity expansion in a risky environment a stochastic equilibrium analysis we cast models of the generation capacity expansion type formally developed for the monopoly regime into equilibrium models better adapted for a competitive environment we focus on some of the risks faced today by investors in generation capacity and thus pose the problem as a stochastic equilibrium model we illustrate the approach on the problem of the incentive to invest agents can be risk neutral or risk averse we model risk aversion through the cvar of plants profit the cvar induces risk adjusted probabilities according to which investors value their plants the model is formulated as a complementarity problem including the cvar valuation of investments an illustration is provided on a small problem that captures several features of today s electricity world a choice often restricted to coal and gas units a peaky load curve because of wind penetration uncertain fuel prices and an evolving carbon market we assess the potential of the approach by comparing energy only and capacity market organizations in this risky environment our results can be summarized as follows a deterministic analysis overlooks some changes of capacity structure induced by risk whether in the capacity market or energy only organizations the risk neutral analysis also misses a shift towards less capital intensive technologies that may result from risk aversion last risk aversion also increases the shortage of capacity compared to the risk neutral view in the energy only market when the price cap is low this may have a dramatic impact on the bill to the final consumer the approach relies on mathematical programming techniques and can be extended to full size problems the results are illustrative and may deserve more investigation

the effect of fossil energy and other environmental taxes on profit incentives for change in an open economy evidence from the uk this paper argues that the underlying supply and demand analysis of fossil energy and other environmental taxes needs further elaboration when a country a introduces national fossil energy or environmental taxes and b is open to international trade at given world prices we provide evidence that such conditions are plausible for many sectors in the uk a key implication is that the short run effects of such taxes should not be felt in final good prices since these are determined in world markets but in terms of underlying profitability these changes in underlying profits provide two key incentives for producers to change to more environmentally friendly production techniques and to switch resources to production of less environmentally harmful goods using input output techniques we provide evidence for the uk to show how existing fossil energy and other green taxes have affected underlying profitability the evidence shows quite strong profit incentives to shift resources from a small number of energy intensive industries to others

technology differences in empirical studies of international trade we show that the specification of technology differences in recent empirical studies of trade is not supported by basic growth theory and may lead to biased estimates of the pattern of specialization and trade

people flows in globalization the policy debate over globalization in the past decade has largely bypassed the international mobility of labor restrict trade and cries of protectionism resound suggest linking labor standards to trade and it s protectionism in disguise limit capital flows and the international monetary fund is on your back but restrict people flows that s just an accepted exercise of national sovereignty during the last few decades when most countries reduced barriers to trade in goods and services and liberalized financial capital markets most also sought to limit immigration in this essay i examine what we know about the causes and consequences of immigration i argue that people flows are fundamental to creating a global economy and that the interplay among immigration capital and trade is essential to understanding the way globalization affects economies i consider ways to reduce barriers to immigration that could improve the well being of workers around the world

the effect of counter trading on competition in electricity markets in a competitive electricity market nodal pricing is the most efficient way to manage congestion counter trading is inefficient as it gives the wrong long term signals for entry and exit of power plants however in a non competitive market additional entry will improve the competitiveness of the market and will increase social benefit by reducing price cost margins this paper studies whether the potential pro competitive entry effects could make counter trading more efficient than nodal pricing we find that this is unlikely to be the case and expect counter trading to have a negative effect on overall welfare the potential benefits of additional competition more competitive prices and lower production cost do not outweigh the distortions additional investment cost for the entrant and socialization of the congestion cost to final consumers

varieties and the transfer problem abstract we revisit the classic transfer problem accounting for two channels of adjustment increased trade in existing goods and services the intensive margin and net creation and destruction of product varieties the extensive margin over the medium term the latter reduces the scope for real exchange rate and terms of trade variability in response to cross border flows we embed our transfer analysis in popular models of current account adjustment where initial imbalances are driven by domestic demand for or foreign supply of net saving possibly associated with over optimistic expectations simulation exercises based on 2006 data suggest that a transfer of the size of the pre crisis u s current account deficit may require only moderate trend depreciation in real terms and that the aggregate welfare impact of the transfer is disconnected from the size of the relative price correction

procompetitive gains from trade and comparative advantage having made the concepts of pro or anticompetitive output changes precise necessary and sufficient conditions for trade gains are derived under conditions of increasing returns to scale and imperfect competition in a general equilibrium model with any finite number of goods and factors these conditions yield generalizations of the theorems of comparative advantage in goods and implicit factor trade the factor content version of the h o theorem other generalizations can be obtained if one assumes quasihomothetic preferences and that welfare effects are dominated by price rather than income effects copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

sectoral fluctuations in mexico and the 1993 recession the sectoral fluctuations that occurred during mexico s 1993 recession are studied the 1993 recession differed from other recessions in that it was preceded by a period of low inflation and positive government surplus our empirical analysis suggests that slowdowns in natural resource intensive sectors were partially responsible for the 1993 recession in mexico

what are the benefits of co optimizing transmission and generation investment eastern interconnection case study transmission planning has traditionally followed a generation first or reactive logic in which network reinforcements are planned to accommodate assumed generation build outs the emergence of renewables has revealed deficiencies in this approach in that it ignores the interdependence of transmission and generation investments for instance grid investments can provide access to higher quality renewables and thus affect plant siting disregarding this complementarity increases costs in theory this can be corrected by proactive transmission planning which anticipates how generation investment responds by co optimizing transmission and generation investments we evaluate the potential usefulness of co optimization by applying a mixed integer linear programming formulation to a 24 bus stakeholder developed representation of the u s eastern interconnection we estimate cost savings from co optimization compared to both reactive planning and an approach that iterates between generation and transmission investment optimization these savings turn out to be comparable in magnitude to the amount of incremental transmission investment we also evaluate three congestion metrics as screens for reducing the number of candidate transmission investments they each improve solution times but the estimated potential benefit metric is much more effective in identifying cost effective lines than the others

the general validity of the heckscher ohlin theorem despite a number of attempts to extend it the heckscher ohlin theorem remains woefully restricted in terms of the generality of the assumptions needed for its proof in its traditional form as a statement about the commodity composition of trade the theorem is valid only in the highly abstract environment of the two factor two good twocountry model that has been the mainstay of trade theory for half a century a weaker version of the theorem involving the factor content of trade rather than its commodity composition has been proved for any number of factors goods and countries but this generality has so far been bought only at the cost of other and perhaps equally restrictive assumptions 2 the purpose of this paper is to provide statements and proofs of the heckscher ohlin h o theorem that are more general than those currently available the approach taken is similar to that used in my 1980 article for an extension of the theory of comparative advantage in terms of correlations between autarky prices and trade in section i i lay out the assumptions on which the analysis is based these assumptions provide the outlines of a reasonably general model in which there may be any numbers of goods and factors and in which factor prices may be equalized or not trade impediments in the form of tariffs or export taxes are permitted though transportation costs are not 3 in section ii i discuss the difficulty of inferring the factor content of trade in a world of unequal factor prices and i provide several alternative definitions of that concept for use later in the paper these together with the assumptions of section i are used in section iii to prove a theorem on the value at autarky prices of the factor content of trade in section iv this theorem is used to prove a first corollary that makes a more direct statement about the pattern of trade it says that worldwide there must be a negative correlation between the factor content of trade by factor and country and the corresponding autarky factor prices it is precisely these autarky factor prices that constitute the ohlin measure of factor scarcity therefore the corollary provides a formal statement of the general idea that countries tend to export the services of those factors which they have in relative abundance and it may be regarded as a generalization of the factor content version of the h o theorem finally a generalization of the commodity version of the theorem is proved in section v the concept of a covariance is generalized university of michigan i have benefitted greatly from the comments of paul degrauwe wolfgang mayer michael mussa carl simon and robert stern as well as others who participated in seminars at the universities of michigan chicago and cincinnati and at the national bureau of economic research an anonymous referee also made valuable comments with additional goods and factor price equalization the theorem runs afoul of the indeterminacy of production and trade noted by paul samuelson 1953 and james melvin 1968 without factor price equalization trade impediments and intermediate production can cause reversals of the pattern of trade as shown in my 1979 article if additional factors and countries are also added it becomes difficult even to state the theorem let alone to prove it 2melvin stated such a theorem for the three good two factor case and jaroslav vanek 1968 proved it for the general case but only by assuming factor price equalization trent bertrand 1972 and jon harkness 1979 were able to drop the factor price equalization assumption but replaced it with restrictions on consumption of either goods or factors by country of origin it is unclear to me however that these restrictions can ever be met in a model that is otherwise plausible harkness 1978 has also used the factor content version of the theorems as the motivation for a regression equation relating commodity trade to factor intensities this bears some resemblance to my analysis below in section v see however james anderson 1981 and edward leamer and harry bowen 1981 who have criticized his result with a reply by harkness 1981 3for ease of exposition i do not allow here for transportation costs these were included in an earlier version of this paper following the technique in my 1980 article

the effects of protection on the factor content of japanese and american foreign trade data on pre tokyo round tariffs and ad valorem approximations of nontariff barriers are used in the michigan computational model of world production and trade to calculate changes in commodity trade attributable to protection in japan and the united states data on factor requirements in production are then used to calculate the factor contents of these computed changes in trade results indicate that japanese protection is more distortionary of factor markets in japan and the united states than is american protection and that u s manufacturing labor would be the least likely to gain from trade liberalization in japan and or the united states copyright 1988 by mit press

a welfare analysis of electricity transmission planning in germany we analyze the electricity transmission planning process in germany netzentwicklungsplan which separates transmission expansion decisions from generation dispatch we employ an economic modeling approach to analyze two different network planning settings in the first setting there is no trade off between transmission network development and generation dispatch as is currently the case in germany a second setting alternatively allows for such a trade off and thus represents a welfare superior way of transmission network planning applications with the two model variants are carried out for the german electricity system in 2035 the results illustrate overinvestment in transmission capacity and decreased welfare associated with the netzentwicklungsplan

an interpretation of the factor content of trade abstract this paper shows that the factor content of trade can be used to indicate effects of trade on relative factor prices factor prices in two trading equilibria can be compared by comparing instead their two equivalent autarky equilibria constructed by changing factor endowments by the factor content of trade using relationships between autarky factor prices and factor endowments several relationships are derived between factor prices with trade and its factor content the most general result is a positive correlation between relative changes in the factor content of trade appropriately normalized and proportional changes in factor prices

risk constrained multi stage wind power investment when deciding on wind power investments three major issues arise the production variability and uncertainty of wind facilities the eventual future decline in wind power investment costs and the significant financial risk involved in such investment decisions recognizing the above important issues this paper proposes a risk constrained multi stage stochastic programming model to make optimal investment decisions on wind power facilities along a multi stage horizon the proposed model is illustrated using a clarifying example and a case study

uncertain bidding zone configurations the role of expectations for transmission and generation capacity expansion abstract ongoing policy discussions on the reconfiguration of bidding zones in european electricity markets induce uncertainty about the future market design this paper deals with the question of how this uncertainty affects market participants and their long run investment decisions in generation and transmission capacity generalizing the literature on pro active network expansion planning we propose a stochastic multilevel model which incorporates generation capacity investment network expansion and market operation taking into account uncertainty about the future bidding zone configuration using a stylized two node network we disentangle different effects that uncertainty has on market outcomes if there is a possibility that future bidding zone configurations provide improved regional price signals welfare gains materialize even if the change does not actually take place as a consequence welfare gains of an actual change of the bidding zone configuration are substantially lower due to those anticipatory effects additionally we show substantial distributional effects in terms of both expected gains and risks between producers and consumers and between different generation technologies

international competition downsizing and wage inequality a country with cournot competition and free entry experiences an increase of its market size either due to economic growth or international integration of its goods markets this implied increase in competition leads to shrinking mark ups and forces firms to reduce overhead costs relative to output this implies a reallocation at the aggregate level from administrative to productive activities relative factor rewards change and wage inequality increases the factor which loses in relative terms can even lose in real terms from a quantitative perspective international competition is demonstrated to be the more plausible cause of rising wage inequality c 2007 published by elsevier b v

transmission and generation investment in electricity markets the effects of market splitting and network fee regimes abstract we propose an equilibrium model that allows to analyze the long run impact of the electricity market design on transmission line expansion by the regulator and investment in generation capacity by private firms in liberalized electricity markets the model incorporates investment decisions of the transmission system operator and private firms in expectation of an energy only market and cost based redispatch in different specifications we consider the cases of one vs multiple price zones market splitting and analyze different approaches to recover network cost in particular lump sum generation capacity based and energy based fees in order to compare the outcomes of our multilevel market model with a first best benchmark we also solve the corresponding integrated planner problem using two test networks we illustrate that energy only markets can lead to suboptimal locational decisions for generation capacity and thus imply excessive network expansion market splitting heals these problems only partially these results are valid for all considered types of network tariffs although investment slightly differs across those regimes

factor content functions and the theory of international trade this paper introduces the concepts of direct and indirect factor trade utility functions and uses them to derive marshallian and hicksian factor content functions which express the quantities of factors of production embodied in net imports as functions of the exogenous variables facing the economy the properties of these functions are discussed and they are used to derive a number of new results in particular it is shown that in certain circumstances the existence of gains from trade is sufficient for the heckscher ohlin theorem to hold in its factor content form

winners and losers a micro level analysis of international outsourcing and wages our paper investigates the link between international outsourcing and wages utilizing a large household panel and combining it with industry level information on industries outsourcing activities from input output tables this approach avoids prob lems such as aggregation bias potential endogeneity bias and poor skill definitions that commonly hamper industry level studies we find that outsourcing has had a marked impact on wages applying two alternative skill classifications we find evidence that a 1 percentage point increase in outsourcing reduced the wage for workers in the lowest skill categories by up to 1 5 while it increased wages for high skilled workers by up to 2 6 this result is robust to a number of different specifications jel classification f16 j31 gagnants et perdants une analyse micro economique de la sous traitance internationale et des salaires ce memoire etudie le lien entre la sous traitance internationale et les salaires a l aide de donnees d un grand panel de menages qu on combine avec des donnees au niveau des industries sur les activites de sous traitance de celles qui en font obtenues des tableaux interindustriels cette approche evite les problemes qui habituellement polluent les etudes au niveau de l industrie biais d agregation biais d endogeneite potentielle mauvaises definitions des habiletes on decouvre que la sous traitance a un effet sur les salaires a l aide de differentes formes de classification des habiletes il appert qu un point de pourcentage d augmentation dans la sous traitance reduit les salaires des travailleurs dans les categories d habilete les plus basses de 1 5 alors qu il accroit les salaires de travailleurs specialises de 2 6 ce resultat est robuste et avere meme quand on utilise diverses specifications

technology trade and factor prices abstract the view that recent changes in the distribution of income primarily reflect technology rather than trade may be the majority opinion but has been harshly criticized by some trade economists this paper will argue that the critique in fact misses the point essentially because the critics undertake the wrong thought experiments trade volumes are not irrelevant if one poses the question correctly one immediately realizes that small trade volumes are inconsistent with a story that attributes large distributional effects to trade the factor bias of technological change is not immaterial except in the case where such change takes place in a small open economy as opposed to one that can affect world prices and where technical change occurs only in that economy rather than occurring simultaneously in other economies as well since the real situation does not meet either criterion factor bias definitely does matter most surprisingly the much maligned use of a factor content approach to infer the effects of trade on factor prices turns out to be an entirely justified procedure when carefully applied

factor prices and the factor content of trade revisited what s the use abstract this paper examines and extends a result of deardorff and staiger an interpretation of the factor content of trade journal of international economics 1988 24 93 107 d s who showed how the factor content of trade may indicate the factor price adjustments that can be attributed to that trade it elaborates on what this means and also extends it beyond several of the assumptions that d s used the strongest result in d s only for cobb douglas technology is extended to common constant elasticities of substitution and for small changes more general technologies also the assumption of nonspecialization is shown to be unnecessary with cobb douglas technology more generally noncompeting imports equate with hicks neutral technological improvements

the eu regulation on cross border trade of electricity a two stage equilibrium model the regulation on cross border exchanges of electricity in the european union is meant to enhance the trade of electricity between member states by facilitating access to the network and improving the management of congestion at the interconnections this paper presents a computational model that embeds these two features the problem is cast in the form of a two stage equilibrium between regional regulators in the first stage they decide on the allocation of their regional network costs between generators and customers either they maximise their regional welfare non cooperatively nash equilibrium or they centralise the decision as a super regulator leading to a cooperative equilibrium in the second stage equilibrium the consequences of first stage s decisions are assessed by modelling the energy market as the result of imperfect competition equilibrium on competitive market coupled with regulated pricing on the domestic less competitive markets the rules that come out of the first stage game largely influence the final equilibrium we illustrate this on an extensive numerical example showing that the model behaves properly and identifying policy issues worth of further investigations c 2006 elsevier b v all rights reserved