determinants of trade costs and trade growth accounting between india and the european union during 1995 2010 this study aimed to utilise the micro founded measure of trade cost derived by novy to estimate the relative bilateral trade costs of india with its european union partners the advantage of using such a model is that the trade costs can be derived entirely using observable trade data the results show that indian tariff equivalent with its major eu trading partners has declined by 20 percentage points between 1995 and 2010 with malta and latvia experiencing the greatest decline the study then decomposes the bilateral trade growth to ascertain whether it is an outcome of increased domestic production or reduction in bilateral and multilateral trade barriers novy s model indicates that the decline in relative bilateral trade costs explains the greatest percentage of this trade growth which is partially offset by decline in multilateral resistance terms that has diverted trade away to other trading partners primarily in south and south east asia and north america

how robust is the kearney foreign policy globalisation index we argue that the kearney foreign policy kfp index of globalisation is constructed by making some problematic assumptions about the measurement normalisation and weighting of the variables included in the index we propose alternative measurement normalisation and weighting rules and using these rules recalculate the ranking of the fifty countries using the original kfp data specifically we use in various combinations i variables adjusted for geographical characteristics of countries ii statistically optimal weights obtained by principal components analysis iii a normalisation rule that treats different years of observations separately we find that the country rankings change significantly when adjusted variables are used indicating that the original kfp index is partially measuring geographical differences between countries

real exchange rates and time varying trade costs this paper re examines the empirical modeling of purchasing power parity ppp deviations in the presence of commodity market frictions first we show that a specific type of smooth transition models can closely approximate the functional form of the theoretical adjustment mechanism derived by dumas 1992 dynamic equilibrium and the real exchange rate in a spatially separated world review of financial studies 5 2153 180 for the case of constant as well as changing trade costs second we develop for the first time an empirical model of the real exchange rate which allows for changes in the degree of market integration by employing a long span of data on the dollar sterling real exchange rate and a micro founded proxy for trade frictions we provide novel evidence of a significant relationship between the persistence of the real exchange rate and the level of trade costs this finding suggests that both the difficulty of detecting ppp and the extend of rogoff s puzzle vary over time with the degree of trade restrictiveness finally we highlight policy repercussions of our results

comparison shopping as a simultaneous move game this paper analyzes simultaneous move models of comparison shopping it shows that the equilibria in wilde schwartz 1979 can be rationalized as symmetric mixed strategies in an appropriately defined game in which information acquisition costs are endogenous it also shown that in the simultaneous move version of salop stiglitz 1977 nonexistence of equilibrium is not a problem in fact a variety of forms of equilibria emerge in that model pure strategy mixed strategy and blends of the two copyright 1992 by royal economic society

no price like home global house prices 1870 2012 how have house prices evolved in the long run this paper presents annual house price indices for 14 advanced economies since 1870 based on extensive data collection we are able to show for the first time that house prices in most industrial economies stayed constant in real terms from the 19th to the mid 20th century but rose sharply in recent decades land prices not construction costs hold the key to understanding the trajectory of house prices in the long run residential land prices have surged in the second half of the 20th century but did not increase meaningfully before we argue that before world war ii dramatic reductions in transport costs expanded the supply of land and suppressed land prices since the mid 20th century comparably large land augmenting reductions in transport costs no longer occurred increased regulations on land use further inhibited the utilization of additional land while rising expenditure shares for housing services increased demand

comment on trade integration in colombia a dynamic general equilibrium study with new exporter dynamics abstract this paper provides a series of comments aimed mainly at addressing the empirical relevance of the proposed interpretation of the mechanism and partly at considering the possible interaction between the trade and labor market reforms that took place in colombia in the same period in particular it first highlights the stylized facts about colombian exports and exporters that the model aims to theoretically reconcile and i briefly summarize the mechanism proposed in the microeconomic block of the theory next it focuses on two crucial assumptions made in the model it proposes a complementary way of presenting the mechanism and proposes ways to evaluate the empirical relevance on the competing interpretations finally it focuses on the broader economic and institutional background characterizing colombia in the early nineties and highlights the possibility that other reforms taking place in the same years may have interacted with trade liberalization in shaping firms distribution and export dynamics as well as welfare

what separates us sources of resistance to globalization with increasing sophistication economists have been estimating gravity equations for five decades robust evidence shows that borders and distance impede trade by much more than tariffs or transports costs can explain we therefore advocate investigation of other sources of resistance despite the greater difficult involved in measuring and modelling them from our selective review of recent findings a unifying explanation emerges a legacy of historical isolation and conflict forged a world economy in which neither tastes nor information are homogeneously distributed cultural difference and inadequate information manifest themselves most strongly at national borders and over distance

globesity the effects of globalization on obesity and caloric intake abstract we examine the effect of globalization in its economic and social dimensions on obesity and caloric intake namely the so called globesity hypothesis our results suggest a robust association between globalization and both obesity and caloric intake a one standard deviation increase in globalization is associated with a 23 8 percent increase in obese population and a 4 3 percent rise in calorie intake the effect remains statistically significant even after using an instrumental variable strategy to correct for some possible reverse causality and ommited variable bias a lagged structure and corrections for panel standard errors however we find that the primary driver of the globesity phenomenon is the social rather than the economic dimension of globalization and specifically the effect of changes in information flows and social proximity on obesity a one standard deviation increase in social globalization increased the percentage of obese population by 13 7 percent

longitude matters time zones and the location of foreign direct investment abstract using bilateral foreign direct investment fdi data we find that differences in time zones have a negative and significant effect on the location of fdi we show that this finding is robust across different specifications estimation methods and proxies for time zone differences time zones also have a negative effect on trade but this effect is smaller than that on fdi finally the impact of the time zone effect has increased over time suggesting that it is not likely to vanish with the introduction of new information technologies

the welfare cost of lawlessness evidence from somali piracy in spite of general agreement that establishing the rule of law is central to properly functioning economies little is known about the cost of law and order breakdowns this paper studies a specific context of this by estimating the effect of somali piracy attacks on shipping costs using data on shipping contracts in the dry bulk market to estimate the effect of piracy we look at shipping routes whose shortest path exposes them to piracy and find that the increase in attacks in 2008 led to around an 8 to 12 increase in costs from this we calculate the welfare loss imposed by piracy we estimate that generating around 120 usd million of revenue for somali pirates led to a welfare loss in excess of 630 usd million making piracy an expensive way of making transfers

hedging price volatility using fast transport abstract purchasing goods from distant locations introduces a significant lag between when a product is shipped and when it arrives these transit lags are trade barriers for firms facing volatile demand who must place orders before knowing the resolution of demand uncertainty we provide a model in which airplanes bring producers and consumers together in time fast transport allows firms to respond quickly to favorable demand realizations and to limit the risk of unprofitably large quantities during low demand periods the model predicts that the likelihood and extent to which firms employ air shipments is increasing in the volatility of demand they face decreasing in the air premium they must pay and increasing in the contemporaneous realization of demand we confirm all three conjectures using detailed us import data fast transport thus provides firms with a real option to smooth demand volatility on international markets and we provide simple calculations of that option value this enables us to identify how the option value relates to goods characteristics and to changes in air transport premia associated with technological and policy change including the introduction of jet engines and liberalization of trade in air services

globalisation and the spatial concentration of production new trade theory models predict that freer trade increases the spatial concentration of industrial production across countries while nations with large home markets and central geographical location become increasingly attractive business locations small peripheral countries gradually deindustrialize using data for 26 industries 20 oecd countries and 20 years we investigate the empirical validity of this claim separating out the role of home market size from geographical factors and using various panel methods we find robust evidence in line with theory freer trade has indeed magnified the importance of domestic demand and geographical location for the pattern of industrial production across the globeand has therefore exacerbated spatial disparities

rising trade costs agglomeration and trade with endogenous transaction costs while transport costs have fallen the empirical evidence also points at rising total trade costs in a model of industry location with endogenous transaction costs that seeks to replicate features from the machinery industry we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade the subtle relationship between endogenous transport costs and the sensitivity of trade

imperfect information monopolistic competition and public policy introduction ever since the pioneering work of george stigler 1961 and the provocative survey by michael rothschild 1973 economists have recognized that general equilibrium models yield competitive equilibria only by making strong assumptions about the information available to market participants in response to this difficulty theorists in recent years have developed a family of search equilibrium models that presuppose homogeneity and the absence of price discrimination and which also assume that information acquisition costs are positive for at least a subset of buyers on the basis of these and other assumptions the models attempt to show how price dispersion equilibria can arise solely as a result of the strategies that firms and consumers pursue one author summarized the results if information is costly each small firm obtains market power so that the relevant market structure with imperfect information is not per ect competition but rather monopolistic competition steven salop 1976 p 240

monopolistic competition when price and quality are imperfectly observable consider the symmetric equilibrium of a monopolistically competitive industry in which manufacturers select price and quality to maximize expected profit and consumers maximize utility by conducting costly search among sellers using an optimal sequential search rule consumers search among sellers because i each consumer idiosyncratically evaluates each seller s quality and ii a retailing sector generates variation in the prices consumers pay consumers are handicapped in their search because their observations of firms price and quality levels are noisy an improvement in price information is represented by an increase in the precision with which consumers observe sellers prices similarly an improvement in quality information is represented by an increase in precision with which consumers observe sellers quality levels an improvement of either type of information may increase or decrease welfare the perverse case in which improved price information decreases welfare occurs when price competition among firms becomes so intense relative to quality competition that firms select severely suboptimal levels of quality a consumer searching among monopolistically competitive sellers may have difficulty accurately observing the price and quality of each seller s product he must infer from his prior beliefs and noisy observations the true values of the product s price and quality attributes we show that increasing the precision with which consumers observe an attribute of a product makes the inference problem easier and causes the demand the seller faces with respect to that attribute to become more elastic the equilibrium level of that attribute changes accordingly and since the equilibrium levels of price and quality interact the equilibrium level of the other attribute changes as well these equilibrium effects can be perverse in two ways first if the precision of quality observation is fixed then improvement in the precision of price observation can reduce welfare the chain of causation is this increasing the precision of price observation causes price to fall the resulting smaller price cost margin induces sellers to reduce quality de

shipping the good horses out this paper formalizes the alchian allen 1964 theorem within a vertically differentiated goods general equilibrium model in contrast to the existing literature equilibrium prices depends on the transportation cost it shows that the eect of a xed transportation cost regardless of quality tilts the importing region s demand towards the consumption of higher quality goods the model extends the alchian allen theorem by showing that the strength of this eect depends on the importing region s endowment specically if the importing region is endowed with the imported goods of similar quality mix the eect is even stronger we also show that the importing region s market size and preferences matter to the strength of the eect using auction data of australian thoroughbred yearlings we conrm that better horses are shipped out further furthermore consistent with the model s prediction the strength of the alchian allen eect depends on the endowment of the importing regions

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

commodity storage and the market effects of biofuel policies the author 2016 legislation passed in 2007 by the u s congress increased by about 1 3 billion bushels the net amount of corn required to be processed annually into ethanol for motor fuel use we estimate that corn prices were about 30 higher from 2006 to 2014 than they would have been without this demand increase we develop a partially identified structural vector autoregression model our identification strategy is unique in the literature because it enables us to estimate the effects of transitory shocks such as weather separately from the effects of persistent shocks such as the increased ethanol mandate moreover by only partially identifying our model we show how to generate robust conclusions without strong identifying assumptions

cabotage sabotage the curious case of the jones act abstract this paper examines the economic implications of the jones act which restricts domestic waterborne shipments to american vessels since the passage of this cabotage law a century ago a plausibly exogenous rise in foreign competition has contributed to the closure of most american shipyards and to a decline in american built ships thus the jones act requirements have become more onerous over time the results show that domestic shipments are less likely to be transported via water than imports of the same good into the same state exploiting the decline in jones act eligible vessels over time additional results show that this cabotage law has disproportionately decreased domestic water trade especially in coastal states these findings support common but to date unverified claims that the jones act impedes domestic trade

the multiple unit double auction the note outlines institutional features of an open outcry market that permit multiple unit or block trades the purpose of the note is to introduce the process as a tool to be used in economics experiments the detailed rules governing the multiple unit double auction muda are stated for the case where offers are tendered by voice as opposed to through a computer the results of markets that use the rules are reported as a demonstration that convergence to equilibrium price traditionally observed in experimental markets remains with the use of the muda process

what goes around comes around export enhancing effects of import tariff reductions abstract in international trade transportation requires a round trip for which a transport firm has to commit to shipping capacity that is sufficient to meet the maximum shipping volume this may cause the backhaul problem trade theory suggests that facing the problem transport firms with market power adjust their freight rates strategically when import tariffs change as a consequence a country reducing its import tariffs may experience an increase in exports as well as imports using worldwide data covering 1995 2007 we find evidence that supports these predictions a 1 reduction in an importer s tariffs increases the import freight rates by around 0 8 decreases the export freight rates by around 1 1 and increases the export quantity by 0 6 to 1 these findings indicate a new mechanism through which import tariff reductions lead to export expansions

distance time and specialization lean retailing in general equilibrium transport time increases with distance traveled and time is valuable we show the implications of these facts for global specialization and trade products where timely delivery is important will be produced near the source of final demand where wages will be higher as a result in the model timely delivery is important because it allows retailers to respond to final demand fluctuations without holding costly inventories and timely delivery is possible only from nearby locations using a unique dataset that allows us to measure the retail demand for timely delivery we show that the sources of u s apparel imports have shifted in the way predicted by the model with products for which timeliness matters increasingly imported from nearby countries jel f1 transporting goods and people costs time and money and both transport fees and time in transit generally increase with the distance traveled these facts imply an incentive to economize on distance and the equilibrium effects

a binary conflict ascending price bicap mechanism for the decentralized allocation of the right to use railroad tracks the questions posed for study are motivated by controversies over how sweden might change from a centralized system of railroad management to a decentralized system the central rail administration banverket will retain ownership and maintenance responsibility of the tracks but will sell access to the tracks to private firms the questions are about the mechanism that might accomplish this task parties to the controversy have claimed that the technical aspects of networks will as a matter of principle preclude the operation of any decentralized method this paper explores the properties of a mechanism developed as a challenge to that claim the mechanism is examined in the context of a testbed experimental environment that contains many potential problem causing elements in the tests performed the mechanism operated to efficiently allocate access to the network and it did so for behavioral reasons that are understandable in terms of theory the paper closes with suggestions for further study of environments that might present additional challenges to a mechanism

trade and climate policies do emissions from international transport matter this paper provides orders of magnitude of the importance of co2 emissions from international transport freight activities under a variety of scenarios regarding trade and climate policies it is based on a stylized multi region multi sector cge model that includes the four modes of international transport air water road and rail and where choices regarding the energy mix and transport mode have been endogeneized a separate decomposition of emission changes into the well known scale composition and technique effects is provided scale effects turn out to be roughly double in international transport than in exports while technique effects are weaker due to less substitutability between energy inputs as a result international transport represents half of the world increase in global emissions when trade liberalization is considered isolately when trade liberalization is coupled with a carbon tax limited to rich countries international transport represents roughly one eigth of the carbon leakage effect

rules of origin and the profitability of trade deflection abstract when a country grants preferential tariffs to another either reciprocally in a free trade agreement fta or unilaterally rules of origin roos are defined to determine whether a product is eligible for preferential treatment roos exist to avoid that exports from third countries enter through the member with the lowest tariff trade deflection however roos distort exporters sourcing decisions and burden them with red tape using a global data set we show that for 86 of all bilateral product level comparisons within ftas trade deflection is not profitable because external tariffs are rather similar and transportation costs are non negligible in the case of unilateral trade preferences extended by rich countries to poor ones that ratio is a striking 98 the pervasive and unconditional use of roos is therefore hard to rationalize

price quality and timing of moves in markets with incomplete information an experimental analysis this paper reports the results of theoretical and experimental analyses of search models of shopping behavior earlier work which dealt with markets for homogeneous goods in which sellers first determined their prices and buyers then decided upon their information acquisition shopping strategies conditional upon the distribution of prices showed that nash equilibria for these markets were good predictions of outcomes of laboratory experiments the authors extend the analysis to markets with heterogeneous goods and allow buyers and sellers to move simultaneously the results of a series of laboratory experiments indicate that the nash equilibria continue to be good predictions in these more realistic settings copyright 1992 by royal economic society

commodity trade and the carry trade a tale of two countries persistent interest rate differentials account for much of the currency carry trade profitability commodity currencies offer high interest rates on average while countries that export finished goods tend to have low interest rates we develop a general equilibrium model of international trade and currency pricing where countries have an advantage in producing either basic inputs or final goods in the model domestic production insulates commodity producing countries from global productivity shocks forcing final good producers to absorb them commodity currency exchange rates and risk premia increase with productivity differentials and trade frictions these predictions are strongly supported in the data this article is protected by copyright all rights reserved

estimating the effects of the container revolution on world trade many historical accounts have asserted that containerization triggered complementary technological and organizational changes that revolutionized global freight transport we are the first to suggest an identification strategy for estimating the effects of the container revolution on world trade our empirical strategy exploits time and cross sectional variation in countries first adoption of container facilities and combines it with product level variation in containerizability and container usage applying our container variables on a large panel of product level trade flows for the period 1962 1990 our estimates suggest economically large concurrent and cumulative effects of containerization and lend support for the view of containerization being a driver of 20th century economic globalization

a copula garch approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate product price arbitrage and crude oil price abstract global liquefied petroleum gas lpg trade shows an increasing trend but is under researched this paper focuses on the lpg market and aims to model the dependence dynamics among lpg freight rates crude oil price and propane location arbitrage conditional copula garch model is applied to estimate dependencies different types of copulas with both time invariant and time varying dependence structures are fitted and their suitability has been compared the findings suggest that firstly baltic lpg blpg freight rate and the arbitrage between propane far east and middle east prices have conditional time varying dependence and the dependence is higher in market downturns furthermore blpg and the arbitrage between far east and us propane prices have symmetric dependence and such a relationship has strengthened since 2013 secondly middle east propane price is found to have the strongest correlation with crude oil prices compared to far east and us propane prices indicating higher sensitivity to crude oil price changes last but not least the relationship between crude oil and blpg is relatively weak and mostly positive

market architectures and institutional testbedding an experiment with space station pricing policies by the year 2000 the national aeronautics and space administration nasa plans to launch and operate an earth orbiting space station for decades into the future the station is expected to play a dominant role in u s space research and in the commercialization of space if the expectations are correct then the station will be a complex of potentially valuable resources and services much sentiment exists within the government that the allocation of those resources should be based on some sort of market oriented policy a more business like approach this paper is part of a larger project that is intended to ascertain what that policy might be

long range growth economic development in the global network of air links we study the impact of international long distance flights on the global spatial allocation of economic activity to identify causal effects we exploit variation due to regulatory and technological constraints which give rise to a discontinuity in connectedness between cities at a distance of 6000 miles we show that these air links have a positive effect on local economic activity as captured by satellite measured night lights to shed light on how air links shape economic outcomes we first present evidence of positive externalities in the global network of air links connections induce further connections we then find that air links increase business links showing that the movement of people fosters the movement of capital in particular this is driven mostly by capital flowing from high income to middle income but not low income countries taken together our results suggest that increasing interconnectedness generates economic activity at the local level by inducing links between businesses but also gives rise to increased spatial inequality locally and potentially globally

using game theory to model competition the article is an exposition of the basic concepts of noncooperative game theory and their application to advertising product and price competition

global value chains a survey of drivers and measures global value chains gvcs emerged as the paradigm for the international organisation of production for most goods and services production is nowadays vertically fragmented across different countries and this reality gave rise to a significant new strand of research in in ternational trade this article starts by discussing the major driving forces of gvcs in recent decades next it surveys the main measures of gvcs accounting for their different scopes and required datasets the artic le highlights the timing of the contributions to the literature signalling their sequential nature and the trend towards more accurate and data demanding indicators

the decoupling of emerging economies theoretical and empirical puzzle with the growing importance of the emerging economies ees in the international scene a lively debate has begun on whether the national economic cycles are converging or the cycles of ees and advanced economies aes are becoming disconnected the so called hypothesis of decoupling of ees from the aes given the important practical implications that decoupling could have for example on the definition of national and international economic policies and on business strategies aimed at investment diversification and risk management the question kindles not only the interest of academics but also policymakers and practitioners are very interested in the issue the decoupling question has been long debated in different circles and from different points of view this survey aims to retrace the steps of this debate and to provide some suggestions for future empirical researches

the international effects of china s growth trade and education booms china s international trade flows have increased by 500 since 1992 far outstripping gdp growth likewise tertiary education enrollments have increased by 300 we simulate these changes using a multi sector growth model of the chinese and usa economies a decade of trade biased growth in china is found to have a large effect on the usa economy raising gdp approximately 3 4 5 percentage points we also show that the trade bias in china s growth accounts for more than half of the observed growth in tertiary enrolments in china in contrast neutral growth has practically no effect on usa incomes or china s stock of skilled labour finally the simulations reveal that china s education boom per se has practically no long run impact on the usa economy the results thus indicate that the pattern of productivity growth in exports sectors as might be caused by falling trade costs has been critical in transmitting benefits of chinese growth to the world economy they also point to an important link between falling trade costs and human capital formation

uncertainty and shopping behaviour an experimental analysis this paper reports experimental tests of three search equilibrium models these models which differ only in the search strategies available to the buyers have qualitatively different predictions that is equilibria price distributions single price equilibria at the competitive price and at the monopoly price and two price equilibria the experimental outcomes generally were consistent with the models predictions this suggests that debate on the utility of this class of models should shift to the realism of the models assumptions rather than focus on their ability to characterize market outcomes also since the basic models have been validated the project of analyzing experimentally the results of relaxing some of their assumptions seems worthwhile

the shrinking advantage of market potential abstract how does a country s economic geography evolve along the development path this paper documents recent employment growth in 18 961 regions in eight of the world s main economies overall market potential is losing importance as a correlate of local growth while local employment density is gaining importance in mature economies growth is strongest in low market potential areas in emerging economies the opposite is true though the association with market potential is also weakening there structural transformation away from agriculture can account for some of the observed changes the part left unexplained by structural transformation is consistent with a standard economic geography model that yields a bell shaped relation between trade costs and the growth of centrally located regions

quality competition and pricing to market a unified framework for the analysis of bilateral unit values author affiliation michael j ferrantino michael ferrantino usitc govrobert m feinberg feinber american edulauren deason l deason cgiar org acknowledgment this article represents solely the views of the authors and does not represent the views of the u s international trade commission or any of its commissioners we thank john pepper and two anonymous referees for helpful comments on an earlier draft the timely assistance of ronald jansen and his team at the united nations statistical division with various puzzles involving the comtrade data is gratefully acknowledged as is the thorough editorial assistance of peg hausman 1 introductionthe abundance of data on unit values in trade has generated a large number of explorations into the stylized facts generating them unit values defined as value of imports divided by import quantities are traditionally used as the best proxy for price data in international trade at relatively disaggregated trade categories the present article presents a unified framework for identifying systematic variation in unit values using multilateral data at the harmonized system hs 6 level this compares to research on unit values that is motivated either by supply side considerations relating to product quality associating higher unit values with exporters per capita income or demand side considerations of pricing to market associating higher unit values with importers per capita income the former work includes schott 2008 focusing on china and fontagne gaulier and zignago 2008 which use a unit value classification to motivate an extended gravity model of trade flows the latter is exemplified by alessandria and kaboski 2007 and co 2007 1most of this work except for fontagne gaulier and zignago et al tends to focus on a single exporter or importer rather than on the multilateral trade data we employ or on a particular motivation for variation in unit values in trade while fontagne gaulier and zignago do employ multilateral data in examining importer and exporter income effects on unit value they do not allow these effects to vary by product and focus mainly on results generated by restricting the set of products considered to include only manufactured goods our findings are largely consistent with those of fontagne gaulier and zignago however our analysis at the product level for a more diverse set of goods allows us to explore how importer and exporter income effects vary across products we find that both exporter income effects and importer income effects are important in determining trade prices but that exporter income effects are more prevalent and tend to be larger in magnitude the variation in the size of these effects across industries is indicative of the relative degree of product homogeneity table 1 illustrates the type of variation one finds in the unit value data for a particular hs 6 subheading watches excluding wristwatches with cases of or clad with precious metal electrically operated 2 the example which reflects the largest trade flows for this subheading in quantity terms 3 illustrates several features which are frequently observed for a wide variety of products first the range in unit values is very broad amounting to three or four orders of magnitude exports from switzerland to great britain have a unit value of 1001 68 while exports from china to japan sell for 0 56 apiece these are highly unlikely to represent the same product second higher income countries tend to sell a higher priced product in this sample swiss watches are always higher priced than chinese watches third higher income countries tend to pay more for products in this category compare imports of great britain and the netherlands versus imports of bulgaria south africa and mexico fourth there are observations that are exceptions to both the second and third rules

the nature of outsourcing relationships evidence from oap prices i introduction the dramatic growth in international outsourcing has fueled the expansion of international trade and deepened international integration 1 developments in outsourcing attract public attention due to concern that improvements in information technologies enable companies to relocate production or assembly activities to lower cost overseas locations 2 however while international outsourcing allows firms to take advantage of factor price differences grossman and helpman 2005 demonstrate that country cost differences are not sufficient by themselves to guarantee outsourcing as international outsourcing decisions are based on many factors including the costs of search and customization more generally new research in international trade recognizes information as a key element in the globalization process however informational improvements such as reduced communication costs or increasingly sophisticated bar code transmission and management tools may not affect all producers uniformly as ranch and trindade 2003 show product differentiation in consumption or production when combined with informational uncertainty produces a degree of natural protection for this reason information technology improvements are likely to deliver the greatest increases in global integration for those markets where the matching of differentiated partners is critical to the formation of new international partnerships similarly as noted by antras 2003 and bernard et al 2010 the organization of a firm s global operations depends further on factors including the importance of headquarters investments and the degree of product contractibility 3 a key goal of this paper is to study whether outsourcing decisions are consistent with outsourcing models that feature search and adaptation costs to this end this paper studies u s outsourcing conducted under the auspices of the overseas assembly program or oap the oap program was designed to allow firms to avoid tariffs on u s origin inputs that they utilized in final goods they assembled overseas thus while the oap does not include all u s outsourcing activities it does not capture u s assembly of foreign parts or overseas contract manufacturing that is based on u s designs and specifications oap imports provide insight into a wide swath of u s outsourcing and represented 8 5 of u s import value during the sample period since the oap provides tariff benefits to manufacturers who use u s inputs in their overseas production it is administered by u s customs consequently while the oap provides insights into manufacturing outsourcing decisions it does not provide information on developments in services outsourcing since oap exempts u s inputs from tariffs the program requires participating firms to provide detailed information on the u s and foreign content of their outsourcing imports thus oap data records facilitate the precise measurement of cost shocks and trade frictions at the country product level in particular heterogeneity in input choices both across countries and products can be exploited to identify cost pass through and general price responses for outsourcing imports for example year by year pass through can be estimated by regressing yearly oap price changes at the product country level on product country cost changes plots of the year by year coefficients in figure 1 show that the raw rate of oap pass through ranged from 6 to 23 4 however accurate outsourcing pass through estimation requires a theory based estimation framework that controls for economic factors that also influence price decisions this paper adopts feenstra s 1989 passthrough model which is modified to account for the cost structure and tariff treatment facing outsourcing firms who produced products for import under the oap this framework which is based on a bertrand model of competition in internationally differentiated goods focuses its attention on cost pass through and on the degree to which producers emulate the price changes of their competitors

allocating uncertain and unresponsive resources an experimental approach we identify an important class of economic problems that arise naturally in several applications the allocation of multiple resources when there are uncertainties in demand or supply unresponsive supplies no inventories and fixed capacities and significant demand indivisibilities rigidities examples of such problems include scheduling job shops airports or supercomputers zero inventory planning and the allocation and pricing of nasa s planned space station using experimental methods we show that the two most common organizations used to deal with this problem markets and administrative procedures can perform at very low efficiencies 60 65 efficiency in a seemingly robust example thus there is a need to design new mechanisms that more efficiently allocate resources in these environments we develop and analyze two mechanisms that arise naturally from auctions used to allocate single dimensional goods these new mechanisms involve computer assisted coordination made possible by the existence of networked computers both mechanisms significantly improve on the performance of administrative and market procedures

declining distance effects in international trade some country level evidence technical progress can be expected to reduce transport costs over time yet most studies of bilateral trade based on the gravity model find distance effects to be increasing rather than decreasing we investigate countries openness to international trade the ratio of exports plus imports to gdp we find that trade decreases with geographical remoteness land area and lack of access to the sea all of which are likely to be correlated with transport costs in contrast to the results obtained with log linear models of bilateral trade distance effects remoteness and land area have declined over time trade decreases with population density and increases with improvements in the terms of trade investment and a more liberal trade policy

the trade reducing effects of market power in international shipping abstract developing countries pay substantially higher transportation costs than developed nations which leads to less trade and perhaps lower incomes this paper investigates price discrimination in the shipping industry and the role it plays in determining transportation costs in the presence of market power shipping prices depend on the demand characteristics of goods being traded we show theoretically and estimate empirically that ocean cargo carriers charge higher prices when transporting goods with higher product prices lower import demand elasticities and higher tariffs and when facing fewer competitors on a trade route these characteristics explain more variation in shipping prices than do conventional proxies such as distance and significantly contribute to the higher shipping prices facing the developing world a simple back of the envelope calculation suggests that eliminating market power in shipping would boost trade volumes by 5 9 for the us to 15 2 for latin america our findings are also important for evaluating the impact of tariff liberalization cargo carriers decrease shipping prices by 1 2 for every 1 reduction in tariffs

implications of comtrade compilation practices for trade barrier analyses and negotiations u n commodity trade comtrade statistics have major shortcomings for many analyses relating to tariffs and other trade barriers the use of a cost insurance freight valuation base for these data results in an upward sometimes severe bias in the implied dutiable value of imports for countries that utilize free on board tariffs this problem can be greatly exacerbated by the general trade system procedure used to compile the u n statistics as opposed to the special trade practice used for the world trade organization integrated database u s international trade commission statistics show that the combined effects of these biases can reach magnitudes that preclude the legitimate use of comtrade for many tariff trade simulations or related trade negotiations

causes of world trade growth in agricultural and food products 1951 2000 a demand function approach the objective of the present study is to analyse the causes of the growth of international agricultural and food trade in volume terms from 1951 to 2000 the results suggest that income growth has been the principal reason for this expansion while exchange rate stability and the real price of agricultural products played only a minor role multilateral trade liberalization and trade costs given their long term stability are not elements that could have stimulated their growth finally the intensive liberalization of trade which took place in various economic regions especially in europe became a key factor in promoting agricultural trade among the countries participating in regional trade agreements the study results also indicate that the determinants of trade growth for these goods were different to those for other goods and other periods

revisiting the role of tourism and globalization in environmental degradation in china fresh insights from the quantile ardl approach abstract ascertaining sustainable development is a major issue across the globe and the economic growth pattern achieved is a predominant reason behind this the globalization led economic growth achieved by the emerging economies might not be ecologically sustainable as globalization might not have been utilized as a policy tool moreover a sound policy calls for considering the entire data spectrum for the analysis which is largely ignored in the literature this research contributes to the literature by proffering a policy framework for the emerging economies by analyzing the impact of globalization and tourism on environmental degradation by considering the chinese context as a sample following the quantile autoregressive distributed lag model the impact of economic growth globalization and tourism on greenhouse gas emissions carbon dioxide emissions and the ecological footprint in china over 1978q1 2017q4 are analyzed the results demonstrate that economic growth stimulates environmental degradation while the presence of environmental kuznets curve is also validated moreover tourism has been found to exert positive environmental externalities while globalization exerts negative environmental externalities based on the outcomes of the research a comprehensive policy framework has been suggested following which the chinese economy might be able to attain the objectives of sustainable development goals 7 8 and 13

the international reorganisation of auto production this paper analyzes the patterns of bilateral trade flows of auto components over the last decade by applying network analysis results show the rise of a number of emerging economies in asia and central and eastern europe as important parts suppliers but their role is still largely peripheral in fact there was a strengthening of the world s leading producers with a more hierarchical division of labor within their regions especially in europe regionalization of production declined in all of the groups of auto parts examined with the exception of electrical parts where a regional production network is emerging in asia

openness and income the roles of trade and migration abstract this paper explores the relationship between openness to trade immigration and income per person across countries to address endogeneity concerns we extend the instrumental variables strategy introduced by frankel and romer 1999 we build predictors of openness to immigration and to trade for each country by using information on bilateral geographical and cultural distance while controlling for country size since geography may affect income through other channels we also control for climate disease environment natural resources and colonial origins most importantly we also account for the roles of institutions and early development our instrumental variables estimates provide evidence of a robust positive effect of openness to immigration on long run income per capita in contrast we are unable to establish an effect of trade openness on income we also show that the effect of migration operates through an increase in total factor productivity which appears to reflect increased diversity in productive skills and to some extent a higher rate of innovation

fair trades by trade fairs information providing institutions under monopolistic competition it is a standard result of search theory that the optimal reservation supply price e g wage is negatively correlated to search costs this paper applies the inverse relationship between demand prices and limit prices to the analysis of an hitherto unexplored topic trade fairs trade fairs bloomed during the middle ages and early trade based capitalism and survived for centuries in last decades their growth became sustained they attract every year hundreds of thousands of exhibitors and tens of millions of visitors

factor proportions and the growth of world trade abstract most of the expansion of global trade since 1980 has been of the north south kind between capital abundant developed and labour abundant developing countries based on this observation i argue that the recent growth of world trade is best understood from a factor proportions perspective using data on trade barriers and estimates of capital labour ratios for a group of 45 economies between 1980 and 2008 i find that a calibrated factor proportions model can generate significant trade growth during this period amounting to 90 of the observed rise in north south trade the opening up of china alone accounts for three quarters of the predicted increase in line with the model i present evidence that china s liberalisation has raised the exports and imports of capital abundant countries relative to more labour abundant economies overall my findings suggest that factor proportions theory may be useful for interpreting several quantitative and qualitative aspects of growing world trade in a period during which the group of large open economies has become significantly less homogenous

the role of airports in city employment growth 1950 2010 abstract this study considers the effects of commercial airports on local economies over the post world war ii period specifically 1950 2010 to overcome endogeneity concerns a pooled synthetic control event study strategy is employed on newly digitized historical aviation data to estimate treatment effects on a variety of employment population and wage outcomes i find that airports have led to on average 3 9 percent growth in total employment and 3 4 growth in population per decade over the 30 year period for which wage and air traffic data are available earnings per worker increased by 2 and per capita personal income increased by 3 corresponding to growth rates of up to 1 2 percent per decade respectively

is german domestic social policy politically controversial this paper investigates empirically the influence of government ideology on social policy using german data examining the funding and the benefits of social security and public healthcare policy my results suggest that policies implemented by governments dominated by left and rightwing parties were similar over the 1951 2007 period leftwing governments however spent more in the 1970s and rightwing governments did so after german reunification in 1990 since policy convergence encourages new parties to enter the political arena and party platforms on social policy matters are likely to undergo further changes in light of demographic change the observed pattern may thus be a transitory phenomenon

airplanes and comparative advantage abstract airplanes are a fast but expensive means of shipping goods a fact which has implications for comparative advantage the paper develops a ricardian model with a continuum of goods which vary by weight and hence transport cost comparative advantage depends on relative air and surface transport costs across countries and goods as well as stochastic productivity a key testable implication is that the u s should import heavier goods from nearby countries and lighter goods from faraway counties this implication is tested using detailed data on u s imports from 1990 to 2003 looking across goods the u s imports nearby exporters have lower market share in goods that the rest of the world ships by air looking across exporters for individual goods distance from the us is associated with much higher import unit values these effects are large which establish that the model identifies an important influence on specialization and trade

global production sharing exploring australia s competitive edge cross border dispersion of production processes within vertically integrated global industries global production sharing has been an increasingly important structural feature of economic globalisation in the recent decades this paper examines patterns and determinants of global production sharing with an emphasis on how australian manufacturing fits into global production networks gpns though australia is a minor player in gpns there is evidence that australian manufacturing has a distinct competitive edge in specialised skill intensive tasks in several industries such as aircraft medical devices machine tools measuring and scientific equipment and photographic equipment specialisation in high value to weight components and final goods within gpns which are suitable for air transport helps australian manufacturing to overcome the tyranny of distance in world trade being predominantly relationship specific australian gpn exports are not significantly susceptible to real exchange rate appreciation

international financial integration and economic growth abstract this paper uses new data and new econometric techniques to investigate the impact of international financial integration on economic growth and also to assess whether this relationship depends on the level of economic development financial development legal system development government corruption and macroeconomic policies using a wide array of measures of international financial integration for 57 countries and an assortment of statistical methodologies we are unable to reject the null hypothesis that international financial integration does not accelerate economic growth even when controlling for particular economic financial institutional and policy characteristics

transportation costs and international trade in the second era of globalization while the precise causes of postwar trade growth are not well understood declines in transport costs top the lists of usual suspects however there is remarkably little systematic evidence documenting the decline this paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time series pattern of shipping costs the ad valorem impact of ocean shipping costs is not much lower today than in the 1950s with technological advances largely trumped by adverse cost shocks in contrast air shipping costs have dropped an order of magnitude and airborne trade has grown rapidly as a result as a result international trade has also experienced a significant rise in speed

the place premium bounding the price equivalent of migration barriers large international differences in the price of labor can be sustained by differences between workers or by natural and policy barriers to worker mobility we use migrant selection theory and evide

trade costs 1870 2000 what has driven trade booms and trade busts in the past century and a half was it changes in global output or in the costs of international trade to address this question we derive a micro founded measure of aggregate bilateral trade costs based on a standard model of trade in differentiated goods these trade costs gauge the difference between observed bilateral trade and frictionless trade in terms of an implied markup on retail prices of foreign goods thus we are able to estimate the combined magnitude of tariffs transportation costs and all other macroeconomic frictions that impede interna tional trade but that are inherently difficult to observe we use this measure to examine the growth of global trade between 1870 and 1913 its retreat from 1921 to 1939 and its subsequent rise from 1950 to 2000 we find that trade cost declines explain roughly 55 percent of the pre world war i trade boom and 33 percent of the post world war ii trade boom while a precipi tous rise in trade costs explains the entire inter

allocation decisions in network industries abstract in this paper i want to propagate a new analytical tool the usage of menu auctions for modelling complicated auctions negotiations rent seeking etc is advocated because contrary to normal auctions and bargaining models an arbitrary number of additional aspects can be taken into account after concentrating on truthful equilibria bernheim b d whinston m d 1986 menu auctions resource allocation and economic influence quarterly journal of economics 1 31 a certain broad class of menu auctions show unique and efficient allocations under an additional concavity condition even the equilibrium bids are unique two examples are discussed the privatisation of a state owned industry and the buying of wholesale electricity concluding contracts with a number of producers by a utility these examples also serve to trace the sources of non concavities which can prevent the uniqueness of bids and can provide the auctioneer with incentives to exclude bidders from the competition

airline traffic and urban economic development this paper provides new evidence on the link between airline traffic and employment in us metropolitan areas the evidence confirms the common view that good airline service is an important factor in urban economic development frequent service to a variety of destinations reflected in a high level of passenger enplanements facilitates easy face to face contact with businesses in other cities attracting new firms to the metro area and stimulating employment at established enterprises the empirical results show that a 10 per cent increase in passenger enplanements in a metro area leads approximately to a 1 per cent increase in employment in service related industries however airline traffic has no effect on manufacturing and other goods related employment suggesting that air travel is less important for such firms than for service related businesses these estimates are generated controlling for reverse causality between employment and traffic the results imply that expansion of chicago s o hare ai

the nature of oil shocks and the global economy abstract this paper identifies the main driving force behind oil price shocks in 1970 2006 by applying a simple identification strategy of supply driven and demand driven price shocks the identification hypothesis states that supply driven oil price shocks have a negative impact on the macroeconomic activity of countries which are net consumers of oil while demand driven oil price shocks do not have negative effects in order to identify global demand driven shocks a weighted aggregate gdp series of countries which are net consumers of oil is constructed over 1970 2006 the key result is that the main driving force behind oil price shocks has changed from supply driven shocks in 1970 1992 to demand driven shocks in 1992 2006

heterogeneous trade costs and wage inequality a model of two globalizations abstract we develop a model for analyzing the distributional effects of two globalizations and their interdependence we distinguish between two trade cost reductions i trade liberalizations in the 1980s which increased trade in low skill intensive goods denoted l globalization and ii reductions in communication costs due to the it revolution which raised trade in middle skill intensive goods during the 1990s denoted c globalization we consider a north south trade economy in which the north is skill abundant a freely traded final good is produced using high skill services and a bundle of inputs inputs differ on the intensity of middle and low skill workers required to be produced and are subject to heterogeneous trade costs in the north we find that wage inequality increases in the l globalization during the c globalization wage polarization emerges the relative wage of high to middle skill workers increases while the relative wage of middle to low skill workers is hump shaped we find a complementarity between the two globalizations wage polarization is delayed by the extent of trade in the l globalization in the south we find that wage inequality increases in both globalizations finally we show how asymmetric participation in the c globalization of two southern countries generates a discontinuous pattern of specialization the southern country participating in the c globalization specializes in the least and most skill intensive traded inputs

spatial linkages and export processing location in china this paper provides empirical evidence that spatial linkages matter for the localisation of global value chain activities relying on processing trade data for chinese provinces during the period 1997 2008 we investigate whether a chinese province s proximity to international suppliers and international buyers within an industry chain affects its attractiveness as an export processing location we find that the upstream and downstream spatial linkages both have a strong and independent explanatory power we also explore what factors explain the influence of these spatial linkages

rethinking economic development i provide a summary reflection and assessment of the current state of economic development in both the policy and academic worlds in terms of development policy currently the primary focus is on policy interventions namely foreign aid aimed at fixing the deficiencies of developing countries academic research also has a similar focus except with an emphasis in rigorous evaluation of interventions to estimate causal effects a standard set of versatile quantitative tools is used e g experimental and quasi experimental methods which can be easily applied in a range of settings to estimate the causal effects of policies which are typically presumed to be similar across contexts in this article i take a step back and ask whether the current practices are the best that we can do are foreign aid and policy interventions the best options we have for poverty alleviation what else can be done is our current research strategy characterized by rigorous but a lack of context specific analysis the best method of analysis is there a role for other research methods for a deeper understanding of the local context and for more collaboration with local scholars repenser le developpement economiquee dans cet article je propose un apercu une reflexion et une evaluation de l etat actuel du developpement economique a la fois dans les spheres politiques et universitaires en matiere de developpement economique l attention est principalement portee sur l intervention politique c est a dire l aide exterieure visant a corriger les defaillances des pays en developpement les recherches universitaires y portent une attention similaire mais en mettant davantage l accent sur l evaluation rigoureuse de ces memes interventions pour en mesurer les effets de causalite a cette fin un ensemble d outils quantitatifs et modulables standard sont utilises notamment par l entremise de methodes experimentales et quasi experimentales pouvant facilement s appliquer a une vaste gamme de situations et ce aux fins d evaluations des liens de causalite engendres par ces politiques liens habituellement consideres comme similaires d un contexte a l autre dans cet article je prends un peu de recul pour m interroger sur la pertinence des pratiques actuelles les interventions politiques et l aide exterieure offrent elles les meilleures options pour reduire la pauvrete que pouvons nous faire d autre notre strategie de recherche actuelle caracterisee par des analyses rigoureuses mais peu adaptees a des contextes specifiques est elle la meilleure d autres methodes de recherche peuvent elles permettre de mieux comprendre les contextes regionaux et favoriser une meilleure collaboration avec les intellectuels locaux

laboratory experimentation in economics six points of view 1 introduction and overview alvin e roth 2 bargaining phenomena and bargaining theory alvin e roth 3 equity and coalition bargaining in experimental three person games reinhard selten 4 the psychology of choice and the assumptions of economics richard thaler 5 hypothetical valuations and preference reversals in the context of asset trading marc knez and vernon l smith 6 economics according to the rats and pigeons too what have we learned and what can we hope to learn john h kagel 7 dimensions of parallelism some policy applications of experimental methods charles r plott

the quality income effect and the selection of location we analyze a location choice model with two vertically differentiated firms and two regions with different consumer income we find that the high quality producer settles in the poor region and the low quality one in the rich region when income disparities are sufficiently high and goods are differentiated enough this apparently counter intuitive result is not determined by technology or size issues rather it relies on the relationship between regional income disparities and product quality which we call the quality income effect

the structure of inequality and the politics of redistribution against the current consensus among comparative political economists we argue that inequality matters for redistributive politics in advanced capitalist societies but it is the structure of inequality not the level of inequality that matters our theory posits that middle income voters will be inclined to ally with low income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich we test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the dispersion of earnings in the lower half of the distribution in addition we present survey evidence on preferences for redistribution among middle income voters that is consistent with our theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew

how do the trans pacific economies affect the usa an industrial sector approach this paper studies how the trans pacific region affects the us economy in terms of business cycle transmission we use a large data set consisting of disaggregated sectoral industrial production indexes from selected countries in the region and employ a factor augmented vector autoregression favar approach to analyse the transmission of shocks in different industries we find that a positive output shock in the entire trans pacific region has positive effects on the majority of us manufacturing sectors we also find that sectoral shocks in five sectors of the trans pacific region have a large impact on the overall us economy three of the five sectors displayed strong same sector responses relative to the overall response suggesting that vertical production linkages might play a key role in the transmission of shocks our results highlight the importance of examining industrial sectors in studying the transmission of shocks in the trans pacific region

capital flight to germany two alternative measures abstract we use two measures to study two capital flight channels for germany one measure is based on the concept of trade misinvoicing and one on net claims and liabilities in the eurosystem of central banks for both measures we propose refinements to enhance the assessment of capital flight we find that capital flight towards germany via these two channels has been quite sizable in the recent decade and can tally to about 2 of gdp annually regarding their determinants we show that the two capital flight measures are driven by both common and measure specific factors traditional determinants such as covered interest differentials only play a limited role while crisis specific factors such as economic policy uncertainty the ecb collateral policy as well as currency misalignment are driving factors of the investors apparent flight to safety behavior

endogenous pricing to market and financing costs abstract this paper explains why relative ppp should hold more tightly in emerging markets and why pricing to market would be observed more frequently in the oecd countries it studies the endogenous determination of pricing to market in a real option model with time dependent transportation costs where the future terms of trade are random allowing time dependent transportation costs adds a dimension of investment to the pre buying of imports implying that financial considerations determine the frequency of pricing to market and the deviations from relative ppp if the expected discounted cost of last minute delivery is higher than pre buying one exercises the option of spot market imports if the realized terms of trade are favorable enough pricing to market is observed in countries characterized by low terms of trade volatility and low financing costs in these circumstances imports are pre bought and the spot market for imports is inactive in countries where the financing costs and the terms of trade volatility are high few imports are pre bought the price of imports is determined by the realized real exchange rate and a version of relative ppp holds with an intermediate level of terms of trade volatility and of financing costs a mixed regime is observed if the realized real exchange rate is weak pricing to market would prevail increasing consumers welfare by shielding them from the adverse purchasing power consequences of weak terms of trade if the realized real exchange rate is favorable enough more imports are purchased in the spot market and the relative ppp would hold higher financing costs increase the cost of pre buying imports reducing thereby the frequency of pricing to market increasing the expected relative price of imports reducing the expected deviations from relative ppp and reducing welfare

measuring international trade costs the costs of international trade have become an increasingly important item in trade negotiations under the heading trade facilitation and element of trade theory but definition and measurement of trade costs remain in their infancy this paper argues that the most conceptually appropriate measure is the gap between cost insurance freight cif and free on board fob values of traded goods but that this must be measured on a consistent volume of trade such data are only available for a few countries we calculate cif fob gap values for the three largest trading nations that report such data australia brazil and the usa these values provide plausible estimates of ad valorem trade costs for the three importing countries and for all countries exports the estimates indicate that although trade costs have fallen over the last two decades average trade costs now exceed the average tariff rate on imports into the usa and australia country rankings by the cif fob gap values differ significantly from those by commonly used proxies for trade costs such as the indicators of time and cost in the world bank s doing business database and analysis based on such proxies is likely to produce misleading results