profit shifting and trade agreements in imperfectly competitive markets governments have a reason to form a trade agreement when an international externality is associated with their trade policy choices when countries are large if a government raises its import tariff the world offshore price of the imported good is reduced the importing country then enjoys an improvement in its terms of trade and the exporting country suffers a negative terms of tradeexternality asjohnson 1954 argues whengovernmentsmaximizerealnational income and markets are perfectly competitive the associated noncooperative equilibrium is inefficient and governments can achieve greater welfare by forming an appropriately designed trade agreement bagwell and staiger 1999 and grossman and helpman 1995 extend the modeling framework to allow that governments have political economic preferences allowing for a wide range of possible political economic motivations bagwell and staiger 1999 show that the noncooperative equilibrium is inefficient if and only if governments are motivated by the terms of trade consequences of their trade policies building from this finding they then characterize the form that an efficiency enhancing trade agreement might take they show that the principles of reciprocity and nondiscrimination the latter embodied in the most favorednation mfn obligation play a useful role in guiding governments toward efficient policies in this article we move beyond the competitive markets paradigm and expand the analysis to markets with imperfect competition thereby introducing the realistic possibility that firms have market power a firm with market power is itself large in the sense that it does not regard the market price as fixed instead such a firm recognizes that its decisions may influence the price at which its output sells the terms of trade externality is still present in markets with imperfectcompetition butthewell known profit shifting rolefortradepoliciesinimperfectly competitive markets suggests that other international externalities might also be present for a sequence of workhorse models with imperfectly competitive markets we examine the rationale foratradeagreementandconsidertheformthatanefficiency enhancingtradeagreementmight take

a comparison of salient rewards in experiments money and class points abstract we use laboratory decisions with different salient rewards to elicit individual values of a risk mitigation investment in a low probability environment statistically significant gender differences were found with class points however gender differences disappeared when monetary incentives were used

the impact of credit on peasant productivity and differentiation in nicaragua abstract an endogenous switching regressions framework is used to structure and identify the impact of credit on small farm food production in nicaragua the results which emerge weakly support the hypothesis that credit had a positive impact on production and could be expected to reduce the pattern of structurally unbalanced growth in nicaraguan agriculture however the estimated impact is of a form which implies a process of differentiation and unequal growth in the peasant sector in the wake of the new opportunities afforded by credit

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

rural nonfarm activities and agricultural crop production in nigeria although most rural households are involved in the farm sector the nonfarm sector has grown significantly in recent decades and its role in rural development has become increasingly important this article examines the effect of participation in nonfarm activities on crop expenses of farm households in nigeria the relationship is modeled using a nonseparable agricultural household model that suggests that participating in nonfarm activities can relax the credit constraints facing farm households and reduce risk thereby helping households improve farm production and smooth consumption over time the results show that participation in nonfarm activities by nigerian farmers has a positive and significant effect on crop expenses and in particular on payments for hired labor and inorganic fertilizers separate analysis of the six geopolitical zones in nigeria indicates that it is in the south south and south east zones where nonfarm participation appears to induce more hiring of labor the results support the hypothesis that nonfarm participation helps relax liquidity constraints but suggests how that liquidity is used is zone specific in general the results also indicate that liquidity is used more to pay for inputs into staple production as opposed to cash crops

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

gender differentials in farm productivity implications for household efficiency and agricultural policy abstract within many african households agricultural production is simultaneously carried out on many plots controlled by different members of the household detailed plot level agronomic data from burkina faso provides striking evidence of substantial inefficiencies in the allocation of factors of production across the plots controlled by different members of the household production function estimates imply that the value of household output could be increased by 10 15 by reallocating currently used factors of production across plots this finding contradicts standard models of agricultural households a richer model of behaviour which recognizes that the individuals who comprise a household compete as well as co operate has important implications for the structure of agricultural production and for the design of agricultural policy

rural nonfarm income and its impact on agriculture evidence from albania using data from the 2005 albania living standards measurement study alsms05 survey this article analyzes the overall impact of household nonfarm income generating activities riga on agricultural expenditures as well as technical efficiency of rural farm households we also differentiate the impact for subsistence and commercial farmers who are in the top 25 of the distribution of value of annual agricultural sales our results show that on the whole albanian rural households utilize their nonfarm earnings not to invest in time saving efficiency increasing technologies but to move out of crop production we derive similar findings when we try to estimate the same relation separately for commercial and subsistence farmers however for commercial farmers we find a positive impact of household nonfarm earnings on livestock expenditures

farm productivity in burkina faso effects of animal traction and nonfarm income the purpose of this invited paper is to stimulate at the micro meso and macro levels debate on positive analytical approaches to agricultural productivity the session focuses on africa because it is the only developing region where crop output and yield growth is lagging seriously behind population growth the present paper treats the micro farmhousehold level macro and meso analyses are useful for tracing productivity effects of policy and infrastructure change employing broad samples over long periods micro analyses tend to track smaller samples over shorter periods but dig below the aggregate surface to discern and explain productivity differences over crops zones and farmer groups micro analysis is useful for policy and technology formulation and for infrastructure and commodity promotion strategies further many aggregate studies are limited to only a few composite product categories because of lack of more detailed data on labor land and capital allocations over crops to obtain finer distinctions among crops one needs detailed farm management surveys since the spate of african farm management studies in the 1960s and 1970s soils have rapidly degraded access to land has become increasingly constrained factor and credit markets have changed structurally and nonfarm activity by farm households has apparently increased these changes should affect productivity across farm types suggesting the need to revive attention to farm level analysis past farm level productivity work in africa which largely used positive analysis tended to stratify the sample exogenously based on farm characteristics generally by farm size use of animal traction access to credit use of new seed varieties land tenure status or income we follow these earlier studies by stratifying the farm household data by a factor we expect to affect technical parameters namely farm capital in the guinean zone of burkina faso in particular we stratify according to whether the household owns animal traction equipment foll wing barrett et al and jaeger and matlon besides adding to empirical evidence on the productivity effects of animal traction we endogenously stratify the sample with a selectivity model an approach too rarely taken with a few recent exceptions such as carter in productivity research we then estimate production functions controlling for selectivity bias such an approach also allows us to test the indirect effect of nonfarm income on productivity through its effect on technology adoption as embodied in farm capital acquisition studies of nonfarm income effects on capital acquisition are not absent in the literature e g barrett et al in eastern burkina but they have been somewhat neglected in farm level work and neglected even more in aggregate level research because of the rarity of rural nonfarm income data

politically realistic objective functions and trade policy profs and tariffs abstract this paper demonstrates a mathematical correspondence between the deus ex machina tariff formation approach and political economy approach the correspondence implies that the tariff chosen by lobbying influenced policy makers will be equivalent to a tariff chosen by a deus ex machina government that gives too much weight to profits this result allows many political economy issues to be addressed in the simple framework of a deus ex machina government which faces a politically realistic objective function prof

profit shifting and trade agreements in imperfectly competitive markets profit shifting and trade agreements in imperfectly competitive markets do new rationales for trade agreements arise once imperfectly competitive markets are allowed we consider several trade models that feature imperfectly competitive markets and argue that the basic rationale for a trade agreement is in fact the same rationale that arises in perfectly competitive markets in all of the models that we consider and whether or not governments have political economic objectives the only rationale for a trade agreement is to remedy the inefficient terms of trade driven restrictions in trade volume we also show that the principles of reciprocity and nondiscrimination continue to be efficiency enhancing in these settings

determinants and effects of income diversification amongst farm households in burkina faso using four years of household data from three agroecological zones in burkina faso sahelian sudanian and guinean the article examines the determinants and effects of household income diversification harvest shortfalls and terms of trade are found to drive diversification but land constraints do not income diversification is associated with higher incomes and food consumption and more stable income and consumption over years

trade wars and trade talks when governments meet in the international arena their actions reflect the political situations at home previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest here we introduce domestic politics into the analysis of international economic relations we study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups our analysis sheds light on the determinants of the structure of protection in non cooperative and cooperative policy equilibria

multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

export price shocks and rural labor markets the role of labor market distortions abstract to what extent can workers in developing countries seize gains from trade to answer this question we resort to a unique exogenous labor demand shock triggered by a surge in the world market price of cotton in 2010 11 by capitalizing on tajikistan s geographic variation in the suitability for cotton production we identify the effect of the export price hike on wages of rural workers the shock induces agricultural firms to shift towards labor intensive cotton production the subsequent greater labor demand doubles wages for female cotton pickers on small entrepreneurial private farms but does not affect their wages on large parastatal farms we present evidence that parastatal farms recruit workers for low wages based on monopsony power and expand employment based on labor coercion of children and public sector workers our results highlight the importance of accounting for competitive structures in local labor markets when assessing the wage pass through of world market prices to workers in developing countries

domestic policies national sovereignty and international economic institutions to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world this question is at the center of the debate over the future role of the wto formerly gatt in the realm of labor and environmental standards in this paper we establish that the market access focus of current wto rules is well equipped to handle the problems associated with choices over labor and environmental standards in principle with relatively modest changes that grant governments more sovereignty not less these rules can deliver globally efe cient outcomes i introduction to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world at a broad level this question probes the limits of any international economic institution whether geared toward real or e nancial concerns that is designed to promote global efe ciency while respecting national sovereignty naturally the answer depends upon the particular problem that the institution is meant to solve in other words the answer depends upon the inefe ciency that would arise under unilateral policy choices at a more specie c level this question is at the center of the debate concerning the appropriate scope of the world trade organization wto formerly gatt recently member countries have considered ways to broaden the wto s orientation beyond conventional trade policy measures to include labor and environmental standards there are now initiatives to introduce the issue of labor standards directly onto the negotiating agenda of the wto with the purpose of creating a wto social clause the social clause would specify a set of minimum international labor standards and then permit restrictions to be placed against imports from countries not complying with these minimum standards with regard to environmental policies a wto committee on trade and environment has been established to identify the relationships between trade and environmental measures and to

links between nonfarm income and farm investment in african households adding the capital market perspective farm household surveys in the 1970s and 1980s showed that nonfarm activities provide an important share of household income contrasting with the conventional image of rural african households as deriving their food entitlement almost exclusively from the land e g matlon collier and lal low reardon et al haggblade hazell and brown much of the literature on nonfarm income has concentrated

agricultural input credit in sub saharan africa telling myth from facts recent evidence shows that many sub saharan african farmers use modern inputs but there is limited information on how these inputs are financed we use recent nationally representative data from four countries to explore input financing and the role of credit therein a number of our results contradict conventional wisdom found in the literature our results consistently show that traditional credit use formal or informal is extremely low across credit type country crop and farm size categories instead farmers primarily finance modern input purchases with cash from nonfarm activities and crop sales tied output labor arrangements which have received little empirical treatment in the literature appear to be the only form of credit relatively widely used for farming

financial decision making are women really more risk averse 40 males 33 females gain gambling gain domain loss gambling loss domain a contextual frames b abstract gambling frames studies the application of experimental methods provided stronger control of the economic environment in which decisions were made we elicited data which call into question the prevalence of stereotypic risk attitudes in financial decision making first we find that the comparative risk propensity of male and female subjects is strongly dependent on the financial decision setting second and more important we observe no gender differences in risk propensity when subjects face contextual decisions since in practice financial decisions are always contextual our results suggest that the above gender stereotype may not reflect true male and female attitudes toward financial risks i gender specific risk behavior an experimental design our experiment was designed to examine gender specific risk propensity in decisions relevant for investors and managers table 1 gives an overview of the experimental design in the main treatment we implemented risky choices in the form of investment and insurance decisions choice behavior in this treatment henceforth called the context treatment directly measures the risk behavior of male and female subjects in contextual financial decisions we also ran a control treatment in which the same risky choices were presented as abstract gambling decisions this control treatment henceforth called the abstract treatment allows us to validate the risk behavior induced by our experimental procedure in the light of the above mentioned gambling evidence in the context treatment subjects were confronted with risky choices in two different decision contexts subjects first had to complete a series of investment decisions they were then presented with a series of identical choices this time however framed as insur1 wealth effects from income differences outside the laboratory may still affect risk behavior in our experiment they are controlled for in our model 2 experimental instructions are available in german from the authors or in english from our web page www wif ethz ch publikationen htm ance decisions each investment and insurance decision incorporated a choice between a risky lottery and a certain payoff with the series of choices implemented in the two frames we elicited our subjects certainty equivalents for the same four risky lotteries l1 l2 l3 l4 in both contexts we implemented two frames in the context treatment in order to measure the risk propensity of subjects toward both perceived gains and perceived losses in both frames all possible payoffs for each decision were positive in the investment frame these payoffs were also presented as gains while in the insurance frame the same payoffs were presented as losses relative to an initial endowment therefore elicited certainty equivalents in the investment frame measure subjects risk propensities in the gain domain while certainty equivalents in the insurance frame measure risk propensity in the loss domain if in contextual financial decisions female subjects are generally more risk averse than men our results should display ceteris paribus lower female certainty equivalents in both the investment and insurance frames 3 the four lotteries l1 l2 l3 and l4 each had two possible outcomes payoffs in swiss francs 1 sfr a 0 60 and their probabilities were 30 sfr 6 10 sfr 6 30 sfr 2 10 sfr 2 30 sfr 6 10 sfr 6 and 50 sfr 2 20 sfr 2 respectively 4 experimental evidence suggests that individual risk propensity will vary systematically between the gain and loss domain daniel kahneman and amos tversky 1979 383 vol 89 no 2 gender and economic transactions 3y16 my68 mp 383 friday dec 10 08 20 am lp aer my68 figure 1 differences in mean certainty equivalents ce between male and female subjects by frame note certainty equivalents and male female differences are measured in swiss francs in the abstract treatment we confronted a different group of subjects with exactly the same risky decisions as those in the main treatment however as mentioned before all choices in this control treatment were framed as abstract gambling decisions again two frames were implemented in the gaingambling and loss gambling frames we measured the risk attitudes of subjects toward gambles in the gain and loss domain respectively subjects in both treatments were told in advance that one of their choices would determine their experimental earnings further all subjects completed a post experimental questionnaire which yielded information on each subject s disposable income this information is necessary to exclude wealth effects due to income differences outside the laboratory as an explanation of gender specific choice behavior

farm productivity in rwanda effects of farm size erosion and soil conservation investments this paper examines the effects of farm size soil erosion and soil conservation investments on land and labor productivity and allocative efficiency in rwanda there were several key results first there is a strong inverse relationship between farm size and land productivity and the opposite for labor productivity for smaller farms there is evidence of allocative inefficiency in use of land and labor probably due to factor market access constraints second farms with greater investment in soil conservation have much better land productivity than average those with very eroded soils do much worse than average smaller farms are not more eroded than larger farms but have twice the soil conservation investments third land productivity benefits substantially from perennial cash crops and the gains to shifting to cash crops are highest for those with low erosion and high use of fertilizer and organic matter program and policy effort to encourage and enable farmers to make soil conservation investments to use fertilizer and organic matter and to participate in cash cropping of perennials will have big payoffs in productivity land markets that allow smaller farmers to buy land could also increase aggregate productivity

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

monetary incentives versus class credit evidence from a large classroom trust experiment this paper reports an experimental investigation of a trust game using either cash or class credit as incentives to participants we recruit from two auditorium classes in one class each token has cash value in the other each token is worth extra credit points added to the students overall average at the end of the semester the results indicate that using extra credit points to motivate participants generates qualitatively similar data on average as participants incentivized with cash we do find a difference in behavior with second movers who expect a low grade but those incentivized with class credit are closer to the game theoretic prediction

erratum to multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

promoting sustainable intensification and productivity growth in sahel agriculture after macroeconomic policy reform abstract policy reforms and structural adjustment programs in sahelian countries have eliminated many public agricultural support programs creating a vacuum that has not yet been filled by the private sector sahelian farmers thus face more difficult access to inputs and higher input costs input use has stagnated or declined yet higher population and less land for expansion of cultivation make it vital to increase the productivity of already cultivated land through adoption of intensive agricultural production techniques while partial intensification is becoming common too little investment is occurring in inputs and land improvements that maintain soil fertility control erosion and improve water availability partial intensification therefore risks being an unsustainable strategy higher and more sustainable productivity growth requires significantly increased use of chemical and organic fertilizer improved seeds bunds and animal traction the dilemma is how to ensure that such investments are financially and economically profitable and affordable in terms of government budgets it is crucial to 1 improve input access and reduce the unit cost of inputs to farmers through infrastructure investment 2 increase the productivity of fertilizer and improved seed by encouraging complementary farm level investments 3 improve the coordination of input and output marketing systems and improve incentives for private sector involvement 4 improve farmers ability to buy inputs using credit and non farm income 5 reduce the financial risks of purchased input use through integrated input output markets and innovative credit schemes and 6 evaluate the net economic benefits of selected agricultural support programs including input subsidies

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

household strategies and rural livelihood diversification this article reviews the recent literature on diversification as a livelihood strategy of rural households in developing countries with particular reference to sub saharan africa livelihood diversification is defined as the process by which rural families construct a diverse portfolio of activities and social support capabilities in order to survive and to improve their standards of living the determinants and effects of diversification in the areas of poverty income distribution farm output and gender are examined some policy inferences are summarised the conclusion is reached that removal of constraints to and expansion of opportunities for diversification are desirable policy objectives because they give individuals and households more capabilities to improve livelihood security and to raise living standards

cash and alternate methods of accounting in an experimental game abstract four methods of communication are compared in the trust game berg j dickhaut j mccabe k 1995 trust reciprocity and social history games and economic behavior 10 122 142 in different treatments subjects exchange currency use play money or write down how much they send and return the final variation is the strategy method in which the responder makes a choice for every possible amount sent the amount sent and propensity to send the entire 10 did not vary among formats but responders returned less of the available funds and were more likely to return zero in the original cash method choices in the strategy method were similar to choices using the game methods