international control of subsidies and countervailing duties the range and number of cases of administered protection in the 1 980s suggests that it has begun to play an important role in shaping international trade flows as most of such cases are brought by the united states against developing country exporters they are also a matter of concern for developing countries in the uruguay round of trade negotiations the internationally negotiated code on subsidies and countervailing duties is ambiguous in its definition of legal subsidies and thus in the appropriate use of countervailing duties because the code is applied at the national level there is considerable pressure by domestic producers on administering agents to increase the use of such protective measures through the adoption of provisional measures while the investigation is being conducted and through the interpretation of criteria for coverage given that the most successful developing countries have been those which adopt the most neutral policies toward imported and domestic goods and between sectors domestically the very biased application of the subsidies and the trade policy distortions common in the countries examined together with the frequency of countervailing actions against the subsidies suggest that developing countries would benefit from abandonment of the subsidies in september of 1986 the world s trading nations agreed to begin a new round of multilateral trade negotiations to be called the uruguay round the previous negotiations the tokyo round ended in 1979 in the six intervening years 1980 85 seven countries and the european community eec initiated 1 155 antidumping cases there were also 425 antisubsidy cases half a hundred safeguards cases and several hundred other trade practice cases resulting from national attempts to interpret and enforce various international agreements table 1 the sheer number of such cases suggests that the terms and conditions on which goods are traded across national boundaries are being affected by the outcomes of such administrative processes as much as by the gradual unrolling of the tariff reductions agreed at the tokyo round the general agreement on tariffs and trade gatt and the codes which

price dumping in intermediate good markets abstract we analyze price dumping and anti dumping duties in the context of a model with a vertical industry structure dumping in the intermediate good market arises from differences in country specific final good production costs the price differential or dumping margin is shown to increase as the productivity difference increases an anti dumping duty designed to reduce the equilibrium price differential has two effects on welfare a welfare loss from reduced final good production and a contrasting gain achieved by producing the lower output level more efficiently

nonstationarity cointegration and structural breaks in the australian term structure of interest rates this article examines the unit root property of the australian short and long term interest rates using unit root tests that accommodate a single or two breaks under the null and or alternative hypothesis two breaks in interest rates are found to coincide with the 1982 83 and 1990 91 recessions or the 1993 inflation targeting period we further investigate the implications of these structural breaks on the cointegrating relationship implied by the single linear expectations hypothesis of the term structure of interest rates while there is evidence that the data are consistent with the expectations hypothesis at the shorter end of the term structure breaks in interest rates generate a shift in the cointegrating relationship thus altering the information content of the term structure failing to account for a regime shift in the cointegration regression the data erroneously supports the expectations hypothesis at the longer end of the term structure these results have profound implications for polic

tests for parameter instability in regressions with i 1 processes this article derives the large sample distributions of lagrange multiplier lm tests for parameter instability against several alternatives of interest in the context of cointegrated regression models the fully modified estimator of phillips and hansen is extended to cover general models with stochastic and deterministic trends the test statistics considered include the supf test of quandt as well as the lm tests of nyblom and of nabeya and tanaka it is found that the asymptotic distributions depend on the nature of the regressor processes that is if the regressors are stochastic or deterministic trends the distributions are noticeably different from the distributions when the data are weakly dependent it is also found that the lack of cointegration is a special case of the alternative hypothesis considered an unstable intercept so the tests proposed here may also be viewed as a test of the null of cointegration against the alternative of no cointegration the tests are applied to three data se

the yield factor and the learning curve in semiconductor production the role of the yield factor and the learning curve is estimated at the firm level the estimated learning curves for the different generations of semiconductor memory chips are clustered around the 72 per cent type the results are consistent with the persistence of leadership hypothesis an incumbent firm has an advantage over a new entrant in adopting a new technology because it can move quicker down the learning curve

the role of export subsisies when product quality is unknown abstract we explore the role of export subsidies when foreign goods are initially of unknown quality to domestic consumers absent export subsidies entry of high quality firms may be blocked by their inability to sell at prices reflecting their true quality export subsidies can break this entry barrier and increase welfare moreover even when high quality firms find it possible to signal their quality to consumers through an introductory pricing strategy a rolefor government policy can arise the signal low introductory price transfers surplus from foreign producers to domestic consumers and can be avoided with an appropriate export tax subsidy policy

exit with vertical product differentiation abstract this paper presents a duopoly model of exit from a declining industry with vertical product differentiation it extends previous io models on exit that have so far ignored demand effects the model shows how the interplay between demand and technological factors determine the order of exit therefore demand factors are relevant and should be taken into account thus the firm with a longer tenure as a profitable monopolist does not necessarily outlast its rival in addition this paper argues that the low quality firm may find it optimal to stay in the market despite making temporary losses to outlast its rival

endogenous trade policy under foreign direct investment abstract using bernheim and whinston 1986 common agency game we endogenize trade policy in a duopoly composed of a domestic firm and a foreign firm where both firms influence the domestic government s trade policy via their contributions the foreign firm can jump over trade restrictions by undertaking foreign direct investment fdi in the domestic market the government prefers a voluntary export restraint ver to a tariff for two reasons first a ver leads to higher contributions from the foreign firm than a tariff second a ver provides a higher level of protection to the domestic firm without generating fdi by the foreign firm

why can t countervailing duties deter export subsidization abstract this paper shows that in a duopoly model of international market competition threatened imposition of countervailing duties by a domestic country generally deters a foreign country from subsidizing its exports to the former to explain the coexistence of export subsidization and the gatt conform countervailing duty measures factors such as delay in retaliation the gatt constraint on the amount of countervailing duties and voluntary export restraints must be considered we find that these factors lessen the efficacy of countervailing duty retaliation and therefore fail to deter export subsidization

endogenous probability of protection and firm behavior abstract this paper studies the strategic reactions of firms to protectionist policies that are enforced with endogenous probability this probability is a function of firms actions firms in the country that may adopt the protectionist measures try to increase the probability of sanctions while foreign firms try to reduce this probability a simple framework is used to derive general results for uncertain protection this framework is used to analyze the responses to specific protectionist policies such as antidumping legislation and restrictions on the import market share finally the paper studies the welfare implications of the model

assisting domestic industries under international oligopoly the relevance of the nature of competition to optimal policies optimal trade and industrial policies are derived for a home market that is supplied by a domestic firm and a foreign firm the optimal policy combination can be quite sensitive to the nature of the duopoly s competition for example for some cost and demand s tructures the optimal policy under cournot competition consists of a domestic production tax and a tariff but that under bertrand compet ition consists of a production subsidy and free trade copyright 1988 by american economic association

on the simultaneous elimination of export subsidies under oligopoly this article extends the model of brander and spencer 1985 to study whether the simultaneous elimination of export subsidies is feasible it is shown that the incentive for subsidizing exports to reoccur will exist when all subsidizing countries are forced to withdraw their subsidies on exports simultaneously

sequential product innovation and industry revolution a certain sequence of innovations in a vertically differentiated good is considered two firms are engaged in a series of bidding games to acquire the infinitely lived patents to these managerial diseconomies restrict firms to producing a single good which is chosen optimally from the set of patents owned by the firm product market equilibrium is bertrand two theorems provide 1 a sufficient condition for the current leader to be overthrown action reaction and 2 a necessary and sufficient condition for persistent dominance an illustrative example shows that sequences satisfying these conditions can always be constructed copyright 1987 by royal economic society

strategic trade policy when firms can invest abroad when are tariffs and quotas equivalent abstract this paper investigates the equivalence of tariffs and quotas when the market in question is imperfectly competitive and open to direct foreign investment the absence of a foreign supply response under a quota so critical to the analysis of the differential impact of tariffs and quotas under imperfect competition is called into question by the potential occurence of direct foreign investment the paper proves the equivalence of optimal tariffs and quotas when the markets are oligopolistic and open to direct foreign investment

domestic politics foreign interests and international trade policy reply this paper incorporates the foreign interest in the determination of a country s international trade policy into a model of political competition between candidates contesting elective office we envisage foreign and domestic producer interests as expressing political support for a candidate via campaign contributions and candidates as making trade policy pronouncements to maximize political support from producer interests tariffs are divisive but vers are consistent with conciliatory policy positions yielding mutual gain to foreign and domestic interests no candidate has an interest in formulating a trade policy position using a tariff if a ver is a policy option protection in the developed countries has in recent years often taken the form of bilaterally negotiated voluntary export restraints vers rather than the more traditional unilaterally imposed import restrictions the use of voluntary export restraints has been paralleled by interest in the theoretical literature the effects of vers have been compared with tariffs and quotas and vers have been examined in a political economy framework with a view to identifying the gainers and losers from this form of restric

trade restrictions as facilitating practices abstract the effect of quantitative restrictions in oligopolistic markets is shown to depend on whether imports are substitutes or complements for domestic products in the former case they have profound effects even when set at free trade levels because they impede the ability of the foreign firm to compete in the domestic market thereby acting to facilitate collusion and raise prices and profits for this reason tariffs and quotas are fundamentally non equivalent with substitute goods when goods are complements a voluntary export restriction ver at the free trade level has no effect and tariffs and quotas are equivalent

the politicisation of ec anti dumping policy member states their votes and the european commission this paper examines one political economy aspect of the european communities ec anti dumping policy that has tended to be overlooked in prior studies namely the role that member states play in deciding whether to impose definitive duties on imports that have been found to be dumped and that are deemed to have injured a european industry we find that in the late 1990s numerous disagreements between member states occurred over the merits of imposing anti dumping duties these disagreements may well have been partly responsible for the strong decline in the number of european anti dumping investigations initiated after 1999

the evolution of market structure when there is a sequence of innovations the paper explores the question of how market structure evolves when there is a sequence of opportunities to innovate does one firm extend its technological superiority to become increasingly dominant or does technological leadership constantly change hands in a process of actionreaction a simple duopoly model is proposed in which the answer to this question depends upon the nature of product market behaviour in that model highly competitive product market behaviour leads to increasing dominance whereas cournot behaviour may lead to action reaction

searching for a break in gnp it has been suggested that existing estimates of the long run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in postwar u s gross national product data this article shows that the statistical evidence does not warrant abandoning the no trend break null hypothesis a key part of the argument is that conventionally computed p values overstate the likelihood of the trend break alternative hypothesis this is because they do not take into account that in practice the date is chosen based on pretest examination of the data

persistence of leadership in product innovation in a firm model of vertical product differentiation three distinct patterns of market shares emerge as an equilibrium outcome reflecting three distinct strategies in respect of timing of the introduction of new products the main novelty relative to the existing literature on vertical product differentiation lies in the incorporation of learning by doing this assumption generates stability of market share patterns over a sequence of product innovations copyright 1992 by blackwell publishing ltd

on the persistence of leadership or leapfrogging in international trade when two countries starting from different quality levels reflecting different conditions on domestic market demands open to trade two possible equilibria arise in the first the quality leader maintains its position in the second leapfrogging occurs however the latter is possible only if the initial quality gap is not too wide further when the risk dominance criterion is used only the former equilibrium is selected these results suggest that initial conditions such as domestic market size or home demand preferences are important factors in determining relative competitiveness of firms in international markets

trade policy and learning by doing the case of semiconductors abstract the study examines the role of learning by doing for production of different types of semiconductors and how this affects the dynamics of market structure for erasable programmable read only memories eproms the learning curve determines aggregate market dynamics whereas for dynamic random access memories drams economies of scale seem to be more important these results are compared with some stylised facts for eproms persistence of leadership in product innovation could be observed whereas for drams there was leap frogging in product innovation moreover scope for vertical product differentiation is more enhanced for eproms and price competition is less intense these findings are then related to the problem of identifying the appropriate trade policies in oligopolistic industries the analysis concerns the antidumping actions undertaken by the european commission it is shown how markets enjoying similar patterns of protection have a completely different evolution of market shares for european producers the conclusion for strategic trade policy is that industry specific features matter crucially

capital subsidies and countervailing duties in oligopolistic industries abstract under gatt countries are allowed to impose countervailing duties to offset foreign subsidies however gatt rules limit the amount of duty to the amount of the subsidy this paper examines a generalized model of imperfect competition with capital subsidies and shows the conditions under which a countervailing duty will offset the effect of the subsidy on exports also conditions are specified under which exports will increase despite the imposition of the maximum tariff under gatt in addition the paper considers whether profit shifting motives for a subsidy still exist even when this maximum duty is anticipated

the learning curve in the production of semiconductor memory chips the relevance of the learning curve in the production of semiconductor memory chips is examined it is shown that the learning curve differs across quite similar products such as distinct types of memory chips on the other hand the learning curve does not show significant variation over successive generations of the same type of memory chip it is then shown thatthe interpretation given to the heterogeneity of learning by the effects across chip types and especially the importance of economies of scale is consistent with some stylized facts from the industry

the ambiguous consequences of anti dumping laws the anti dumping law is most often applied in oligopolistic industries while most analyses focus on the monopoly model i analyze a duopoly model where a foreign firm engages in price based dumping under cournot behavior the anti dumping law has ambiguous price and welfare effects when the home firm is a stackleberg leader two disquieting effects emerge first the home firm can use the anti dumping law to curtail competition even when the foreign firm does not initially engage in dumping second the anti dumping law can increase profits of both firms at the expense of domestic consumers

market structure innovation and vertical product differentiation abstract we reassess arrow s 1962 economic welfare and the allocation of resources for invention in nber the rate and direction of innovative activity princeton university press princeton nj results concerning the effect of market structure on the returns from process innovation here we consider product innovations that are vertically differentiated from older products in the sense of shaked and sutton 1982 relaxing price competition through product differentiation review of economic studies 49 3 13 shaked and sutton 1983 natural oligopolies econometrica 51 1469 1484 competition and monopoly in the old product market provide identical returns to innovation when i the monopolist is protected from new product entry and ii innovation is non drastic in the sense that the monopolist supplies positive quantities of both old and new products if the monopolist can be threatened with entry monopoly provides strictly greater incentives welfare may be greater under monopoly when innovation is valuable

anti dumping and countervailing duties under oligopoly abstract this paper constructs a conjectural variations model of international oligopoly in which the home country s optimal policy responses to the foreign government s subsidies and foreign firms dumping can be calculated some theoretical support is found for tariffs that countervail part of the foreign export subsidy the optimal fraction depends on the size of own and cross effects in demand and on the extent of market competition however no normative case is found for anti dumping duties

lobbying multisector trade and sustainability of free trade agreements this paper is concerned with the sustainability of free trade agreements fta fta sustainability is influenced by governments valuations of political contributions discount factors the lobbying position of the specific interest groups in the intra industry trade sectors and the sectoral coverage of the fta i find that i under certain conditions the fta under protectionist lobbying could be more sustainable than the fta under no political pressure ii the lobby supported fta is more sustainable than the lobby opposed fta and the fta under no political pressure and iii multisector trade enhances fta sustainability jel classification f12 f13 f15 lobbying commerce multisectoriel et durabilite des accords de libre echange ce memoire examine la durabilite des arrangements de libre echange ale celle ci est influencee par les evaluations par les gouvernements des contributions politiques les facteurs d escompte la position de lobbying des groupes d interet specifiques dans les secteurs de commerce intra industriel et la couverture sectorielle de l accord de libre echange l auteur trouve que i sous certaines conditions l ale pourrait etre plus durable s il y a lobbying protectionniste que si pression politique il n y a pas ii l ale supporte par du lobbying est plus durable que l ale oppose au lobbying et sans pression de lobbying et iii le commerce multisectoriel ameliore la durabilite de l ale

the effect of domestic antidumping law in the presence of foreign monopoly abstract we analyze the effects of antidumping law when utilized by competitive domestic petitioners against a foreign monopolist the monopolist reduces the cost of holding excess capacity in periods of slack foreign demand by dumping on the domestic market antidumping law reduces trade volume both directly under successful petitions and indirectly when no petition is filed by causing the monopolist to alter its capacity and the allocation of that capacity between markets finally we consider the effects of self enforcing agreements in which the domestic industry agrees not to file in exchange for a promise that the foreign monopolist limit exports

the evolution of market structure in semiconductors the role of product standards abstract this paper looks at the role of product standards in determining the evolution of market structure in semiconductors theory suggests that product standards along with learning by doing effects lead to market concentration and persistence of leadership in product innovation empirical evidence supports this with some qualifications the market concentration hypothesis is confirmed for all submarkets of the semiconductor industry persistence of leadership is obtained for markets based on proprietary product standards in the market for microprocessors we have persistence of leadership in product innovation that is accompanied with overall market dominance for microcontrollers we observe persistence of leadership in product innovation but not concomitant overall market dominance whereas learning by doing effects seem to be strong in the small market for microprocessors they are weaker in the much larger market for microcontrollers

the value of intellectual property rights to firms and society economists view intellectual property rights iprs as policy tools for encouraging innovation but they recognize that they can also inhibit competition there are many types of iprs and institutions concerned with their administration we begin by outlining how these complex and varied rights are supposed to work and how they interact with other characteristics of firms and markets we then survey the available literature on patents trade marks and copyright to assess the value of these iprs to firms and the costs to firms of acquiring and defending their rights the paper concludes with suggestions for topics requiring further research to inform public policy better

strategic investment with asymmetric spillovers this paper investigates the implications of asymmetric spillovers on noncooperative strategic investments in a duopoly with quadratic pay offs a unique equilibrium in the announcement of the leader follower role exists in the case where one firm absorbs large spillovers while the other at most is able to receive only small spillovers the leader in this equilibrium is the firm that absorbs the large spillovers other asymmetries in initial costs or efficiency in research and development do not affect this outcome

domino dumping ii anti dumping abstract domino dumping anderson american economic review 1992 82 65 83 arises when exporting firms dump to obtain more export licenses in the future when there is a positive probability of a future ver anti dumping policy may then be in the public interest for the importing country via lowering the probability of a ver increased enforcement may perversely lead to a rise in dumping also it may increase the probability of a ver and may reduce the probability of free trade it is possible for the public interest to require some enforcement however it is normally in the public interest to permit some dumping

cointegration and changes in regime the japanese consumption function in this paper we examine a model of cointegration where long run parameters are subject to switching between several different cointegrating regimes these shifts are allowed to be governed by the outcome of an unobserved markov chain with unknown transition probabilities we illustrate this approach using japanese data on consumption and disposable income and find that the data favour a markov switching long run relationship over a standard temporally stable formulation 1997 by john wiley sons ltd

the evolution of new industries and the determinants of market structure several empirical regularities concerning firm growth rates and industry firm size distributions have been developed by studying primarily mature industries the primary purpose of this article is to bring together and extend empirical regularities on the evolution of new industries and to use these regularities to gain further insight into the forces governing industry evolution to explain these regularities a model is constructed which emphasizes how factors governing the early evolution of industries may shape their market structure at maturity it stresses how chance events and exogenous factors that influence the number of potential entrants to the industry the growth rate of incumbents and the ease of imitation of industry leaders will influence the ultimate number and size distribution of firms in the industry

subsidy induced dumping more than two thirds of all anti subsidy investigations in the eu are paired with an anti dumping investigation against the same non eu producers the outcome may be a two component duty where one duty addresses the unfairness of the subsidy and the other the dumping behaviour the philosophy behind this practice is that at least to some extent the observed dumping has been induced by the subsidy and as the gatt treaty article vi commits the claimant not to impose double remedies for the same misbehaviour it is necessary to make an assessment of the hypothetical dumping without the subsidy the eu quantification of the hypothetical dumping margin assumes that an export subsidy translates fully to the dumping margin while a domestic subsidy leaves the dumping margin unchanged using an oligopoly model we show in this paper that in case of an export subsidy the eu anti dumping duty is lower than the predicted hypothetical dumping margin from the oligopoly model for a domestic subsidy the results are ambiguous and the difference between the size of the duty following the eu procedure and the model predictions is relatively small

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

regime non stationarity in the us uk real exchange rate abstract using a markov switching extension of the adf regression we find evidence that the us uk real exchange rate is stationary in periods when it is in a low volatility regime and nonstationary when it is in a high volatility regime

the eu anti dumping policy towards russia and china product quality and the choice of an analogue country this paper uses the theory of international trade in vertically differentiated products in order to assess whether the eu has calculated disproportionately high dumping margins in its anti dumping policy towards the two non market economies nmes russia and china since 1992 specifically the investigation concerns cases in which the level of economic development in and the quality of the products from the chosen analogue country are higher than in the two nmes the conclusion drawn here is that even when the eu chooses analogue countries at a higher level of economic development than russia and china the differences in product quality and in the levels of economic development between the dumpers and the analogue countries provide no systematic explanation of the size of dumping margins

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

export subsidies and countervailing tariffs this paper analyses how retaliation affects the profit shifting argument for export subsidies at the first stage the foreign country sets its export subsidy and then at the second stage the domestic country sets its tariff and or production subsidy it is shown that if the domestic country pursues an optimal trade policy then it will always gain from a foreign export subsidy when the domestic country uses a tariff and a production subsidy the optimal foreign policy is an export subsidy but if the domestic country only uses a tariff then an export tax is usually the optimal policy

what does the term structure tell us about future inflation abstract this empirical analysis indicates that for maturities of six months or less the term structure of nominal interest rates provides almost no information about the future path of inflation but does provide information about the term structure of real interest rates however as maturities lengthen to nine and twelve months the nominal term structure begins to contain information about future inflation but ceases to provide information about the real term structure these results are explained by differences in the relative variability of expected future inflation changes and real term structure slopes at different points in the term structure

a model of substitution of non tariff barriers for tariffs in this paper some coherent explanations are suggested for tariff reductions and substitution of non tariff barriers for tariffs taking into account both organized special interests and unorganized consumer interests the focus is on how the presence of informed consumers affects the political equilibrium choice of trade policy three effects are identified that interact with each other as an incumbent government substitutes a ntb for a tariff and among other things it is found that an increase in foreign competition will not cause the government to substitute ntbs for tariffs but a rise in the government s valuation of political contribution might do so jel classification f13 d72 ce memoire propose des explications coherentes de la reduction des droits de douane et de la substitution de barrieres non tarifaires bnt pour les droits de douane dans un cadre d analyse qui tient compte des groupes d interet organises et de la desorganisation des groupes de consommateurs l analyse insiste sur l impact de consommateurs informes sur les choix politiques qui sous tendent la politique commerciale le memoire identifie trois effets effet de bienetre social effet de lobbying effet d information qui jouent au moment ou un gouvernement substitue une barriere non tarifaire a un droit de douane on montre entre autres choses qu un accroissement de la concurrence etrangere n engendre pas de substitution de bnt pour un droit de douane mais qu un accroissement de la valeur accordee aux contributions electorales peut fort bien avoir cet effet

antidumping duties undertakings and foreign direct investment in the eu we study the effects of eu antidumping policy when foreign firms can jump antidumping duties through foreign direct investment fdi in the eu we show that duty jumping or duty pre empting fdi occurs if the eu administration has broader objectives than protecting eu industry s profitability and if cost advantages of foreign firms are transferable abroad the expectation of price undertakings reduces the incentives to engage in fdi and may even discourage fdi as long as products are not too differentiated the results are consistent with recent empirical findings on antidumping jumping fdi