note on the open loop von stackelberg equilibrium in the cartel versus fringe model one of the ways to model the supply side of the world oil market is by means of the cartel versus fringe model and to employ the open loop von stackelberg equilibrium concept this note shows that the equilibrium as presented in the literature does not satisfy the optimality conditions for the open loop equilibrium the authors show furthermore that in contrast with the prevailing view the equilibrium can display discontinuous price trajectories copyright 1992 by royal economic society

optimal supply of a depletable resource with a backstop technology heal s theorem revisited heal s theorem states that if the extraction cost of a depletable resource increases with cumulative extraction and if a backstop technology exists the user cost of the depletable resource declines to zero at the date of exhaustion in this paper we first present a simple method for proving this proposition using a social planning model that determines the optimal rates both of extraction of the depletable resource and of production of the backstop technology we then present two examples that show how this method can be used to solve more difficult problems in the theory of resource economics the first example involves learning by doing in the backstop sector that is backstop costs decline with cumulative production the second example involves uncertainty of backstop costs

the pricing of durable exhaustible resources partial or total durability characterizes a large class of exhaustible resources hotelling s r percent rule will apply to a durable resource produced in a competitive market but will not apply if the resource is produced in a monopolistic market however the r percent rule does not mean that price is steadily rising it is shown that in general the competitive market price will fall initially as the stock in circulation increases and later will rise as the stock decreases and eventually depreciates toward zero after production ceases accounting for durability may thus help explain the u shaped long term price profiles observed for many resources 11 references 3 figures

nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

natural resource prices will they ever turn up abstract natural resource theory predicts that natural resource rents should increase over time however technical progress in resource extraction environmental constraints or great natural abundance could result in stagnant or declining product prices thus there is no theoretical reason to believe that product prices will rise in the near future the prediction of product prices by time series methods is shown to depend critically upon whether the series are modeled as difference or trend stationary dickey fuller and lagrange multiplier tests are used to show that the series are difference stationary long and short sample series are tested trend stationary modeling strongly predicts rising resource prices the result from difference stationary modeling is that there is only a weak supposition that natural resource prices will rise

the effects of rent asymmetries in experimental auction markets abstract we report the results of twelve double auction market experiments designed to analyze the effects of asymmetric induced supply and demand configurations on the price convergence path toward a competitive equilibrium the proposition convergence bias that prices tend to approach the competitive equilibrium from above below when consumer surplus is greater less than producer surplus cannot be rejected we do however reject the proposition convergence symmetry that these convergence biases are of equal absolute magnitude excesses of producer over consumer surplus are found to have a more pronounced effect on the sequence of contract prices

reform of the coal sector in an open economy the case of china cheap abundant and easy to transport and store coal has been produced and consumed to meet people s energy needs the last decade s growth in global coal use has been driven mainly by developing economies like china whose phenomenal economic growth has been powered by coal fired electricity and promoted by the export of manufactured goods a recent reform focus in china s coal sector is on coal taxation the paper develops a game theoretic model tailored to the context of china where coal taxation reform takes place against the background of privatisation of coal firms and an open economy it finds that the adoption of special coal taxes is optimal for social welfare under most circumstances but may induce coal firms to commit opportunistic behaviour in the process of privatisation the paper also cautions about potential resistance to the reform from consumers coal firms and government officials

deflating asset price bubbles with leverage constraints and monetary policy abstract we develop an experimental production economy to study the general equilibrium and welfare effects of speculation and stabilization policies participants playing the role of household investors interact in labor output and in some treatments asset markets without the ability to trade assets participants over supply costly labor to acquire saving the presence of asset markets improves welfare by allowing investors to substitute labor income for speculative gains asset prices deviate substantially from fundamental value leverage constraints that prevent investors from borrowing for speculation are ineffective at stabilizing asset prices households often circumvent the constraints by excessively supplying labor and generating increased wealth which can be used for speculation wealth inequality is worsened due to endogenously higher interest accumulated by borrowers and savers an asset inflation targeting policy fuels initial asset price growth but as interest rates rise rapidly effectively deflates asset price deviations with learning the policy stabilizes asset prices and consequently interest rates which enhances welfare and reduces inequality we develop a model of heterogeneous expectations to rationalize our experimental findings

an experimental investigation of the patterns of international trade this study is the first attempt to create and study a laboratory economy with some of the prominent features of an international economic system the concept of multiple countries in which each country has its own technology preferences and resource endowments is introduced and operationalized the questions posed in the study are related to the law of comparative advantage factor price equalization terms of trade efficiency in production and exchange as guided by multiple and interacting markets and the effects of tariffs on international transactions the study builds on previous work in the experimental study of general equilibrium phenomena

foreign investment and spillover efficiency in an underdeveloped economy evidence from the mexican manufacturing industry abstract in this paper we consider the question whether differences in technical efficiency of mexican plants in part derive from spillover efficiency associated with foreign direct investment we use labour productivity as a measure of technical efficiency and relate this to capital intensity labour quality and scale of production we measure the degree of competition by different concentration indices and the final factor determining efficiency is the presence of foreign subsidiaries if there is a positive relation between efficiency of domestic plants and the foreign participation of various industries we conclude that there is a spillover of technical efficiency the empirical evidence from the study indicates that this is the case

forest loss monetary compensation and delayed re planting the effects of unpredictable land tenure in china abstract over the past 65 years forest tenure in china has oscillated unpredictably between private and village property regimes this policy induced uncertainty has distorted the harvesting decisions of individuals granted rights to grow trees and has lowered the value of china s forest output we provide an analytical framework for assessing these effects quantitatively understanding the consequences of this policy induced uncertainty is particularly important since china is currently engaged in an ambitious plan to increase its domestic supply of timber to conduct this analysis we extend the literature on forestry economics when there is a risk of loss due to forest fire or pests we 1 take account of the possibility that replanting can only resume after an interval of uncertain length with immediate replanting as a special case 2 investigate the effects of compensation for such losses based only on the net value of the stand of trees at the time of the loss and 3 compare it to compensation that would leave the wealth and rotation decisions of the farmer unaffected by the presence of uncertainty

reserve and land prices with exploration under uncertainty abstract arrow and chang j econom environ manag 9 1 10 1982 analyze an exploration extraction model with uncertainty about the distribution of deposits reserve prices do not exhibit any rising trend when the unexplored land area is big but in order to know what happens when the unexplored area is smaller a probabilistic analysis not yet performed ibid p 10 is required their conjecture of a rising trend at less than the discount rate is confirmed however land prices can be expected to grow faster than reserve prices which helps discriminate between arrow and chang s and other rationalizations of the failure of resource prices to rise at the discount rate

the hayek hypothesis and long run competitive equilibrium an experimental investigation we report on an experiment investigating whether the hayak hypothesis smith 1982 extends to the long run setting we consider two environments one with a common production technology having a u shaped long run average cost curve and a single competitive equilibrium and another with a common constant returns to scale technology having a constant long run average cost curve and multiple competitive equilibria while there is convergence in both environments to the long run equilibrium it takes longer and is less robust than usually observed in the short run setting we show that price formation is adaptive and quickly converges to realized short run equilibrium but long run investment decisions exhibit very limited rationality we present and estimate an investment choice model that shows that only minimal rationality coupled with repeated decisions is enough to achieve high long run allocative eciency when markets use continuous double auctions jel classication c92 d02

do oil producers act as oil igopolists in this paper the author analyzes an oligopoly model of exhaustible resource extraction and develop predictions about relative extraction patterns of different producers using the open quote oil close quote igopoly model of loury one can show that producers with large stocks produce a larger amount but a smaller percentage of their stocks than producers with small stocks the authors extend loury s model to cases where extraction costs differ among producers and where costs are a function of cumulative extraction an increase in extraction costs for a producer causes it to produce less relative to its rivals when extraction costs rise with cumulative extraction producers with large reserves tend to have lower extraction costs and a smaller ratio of cumulative production to initial reserves than producers with small reserves the authors test the predictions of the model using oil industry data and find that the empirical results are consistent with the predictions of open quotes oil close quotes igopoly theory producers with larger reserves extract a smaller share of their reserves and have lower production costs than producers with smaller reserves this pattern holds for 73 countries with oil reserves during the time period 1970 1989 and for approximately 400 us oil companies in 1983 and 1984 more the observed pattern of production for both opec and non opec producers is consistent with open quote oil close quote igopoly theory opec producers do not appear to restrain production given their level of reserves relative to non opec producers thus viewing the oil market as containing one dominant firm opec with a competitive fringe may be misleading further the pattern of extraction observed in oil markets is inconsistent with the pattern predicted by competitive theory 29 refs 5 figs 6 tabs less

contractual responses to the common pool prorationing of crude oil production this paper examines bargaining among firms to mitigate rent dissipation following the major oil discoveries of 1926 35 because of high bargaining costs firms chose prorationing instead of consolidation and unitization and success varied the analysis also shows that prorationing took the form it did because concession such as per well quotas were required to draw in small operations and the quotas led to predictable responses regarding rent dissipation prorationing despite its costs controlled total field production and costs conserved natural reservoir energies and lengthened field life when private agreements failed the parties successfully appealed for state enforcement since similar heterogeneities influnce regulations elsewhere in the economy detailed analysis of bargaining among firms is essential for insight into the emergence of various institutional forms 33 references 3 tables

oligopoly equilibria in nonrenewable resource markets abstract most nash cournot oligopoly models of nonrenewable resources apply open loop equilibrium concepts and are based on physical resource depletion this paper studies feedback equilibria and economic depletion assuming affine quadratic functional forms the existence uniqueness and explicit solutions for the equilibria are derived for duopoly and n player oligopoly with multiple resource stocks for the cases of nonquadratic criteria we develop a numeric solution scheme for the nash feedback equilibrium this scheme is an application of a discrete time discrete state controlled markov chain approximation method originally developed for solving deterministic and stochastic dynamic optimization problems in our nash cournot equilibrium the degree of concentration in supply declines over time whereas the previous models with physical depletion and open loop equilibrium concepts predict that a nash cournot resource market will develop in the direction of monopoly supply

cross sectional estimation of fdi spillovers when fdi is endogenous ols and iv estimates for mexican manufacturing industries cross sectional estimates of foreign direct investment fdi spillovers are biased when the variable capturing the cross industry variation of foreign participation is endogenous to the estimated regression model in this article i introduce an original instrument for this problematic fdi variable capturing the general fdi intensity of manufacturing industries i use this instrument to estimate fdi externalities in a cross section of mexican manufacturing industries the main findings show that in contrast to the common criticism that ordinary least squares ols estimation produces an upward bias in the estimated fdi externality effect for the sample of mexican manufacturing industries ols estimation causes a downward bias controlling for the tendency among foreign manufacturing firms to gravitate towards low productivity industries the instrumental variable estimations provide robust evidence of significantly larger positive fdi spillover effects

legal restrictions and international currencies an experimental approach abstract this paper integrates theory and experiments to explore how policy rules related to government interventions can affect economic allocations and the international status of a currency using a two country two currency search model we study two types of government interventions 1 legal restrictions impacting a seller s ability to accept a foreign currency and 2 reductions to the cost a seller must pay to accept a foreign currency the first intervention can be viewed as a way to capture a decrease in capital controls while the second can be viewed as a way to explore the impact of reducing information costs associated with using a foreign currency our results indicate that abolishing legal restrictions that impact a seller s ability to accept a foreign currency can increase both quantities traded and the number of trades involving two types of currencies additionally the international status of currencies is significantly enhanced when sellers face very low foreign currency acceptance costs

uncertainty and economic self sufficiency existing formal analysis of international trade under uncertainty has established that it is never optimal to forgo completely the opportunity of trade this paper uses some simple trade models to derive conditions under which zero trade or complete self sufficiency is optimal when uncertainty is present the paper does not advocate extreme policies against international trade and specialization its purpose is to show that under certain circumstances involving uncertainty economic self sufficiency in some goods may be desirable

digging for victory agricultural policy and national security the following sections are included introductionthe economic theory of embargoesthe requirement for foodthe probabilities of an effective embargoagricultural production under embargostrategic stocksconclusionsreferences this abstract was borrowed from another version of this item

optimal management of strategic reserves of nonrenewable natural resources abstract this paper studies the stockpiling issue for an oil importing country that is likely to suffer embargoes the occurrence and duration of which are uncertain i show the existence of a decreasing reserves path that the country wants to attain in order to hedge against these disruptions allowing the importing country to invest in r d in order to free itself from the embargo threat i determine the optimal effort that should be engaged in research the incentive to develop a backstop is shown to increase with the depletion of the reserves

natural resource economics under the rule of hotelling abstract natural resource stocks held in situ are physical assets equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere i discuss a number of factors relating to the evolution of extraction costs to the durability of the resource to market structure and to uncertainty that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks the emphasis is put on how those factors can potentially help bridge the gap between the basic hotelling s rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources i also highlight some theoretical and empirical issues that need further attention

foreign direct investment and economic growth an increasingly endogenous relationship summary this paper investigates whether foreign direct investment fdi affects economic growth based on a panel of data for 84 countries over the period 1970 99 both single equation and simultaneous equation system techniques are applied to examine this relationship a significant endogenous relationship between fdi and economic growth is identified from the mid 1980s onwards fdi not only directly promotes economic growth by itself but also indirectly does so via its interaction terms the interaction of fdi with human capital exerts a strong positive effect on economic growth in developing countries while that of fdi with the technology gap has a significant negative impact

a var approach to the economics of fdi in china using a vector autoregression var approach this study re examines several hypotheses suggested by the economic literature on the economics of fdi applying quarterly time series data from china a country which has recently become the second largest host country for fdi innovation accounting variance decomposition and impulse response function analysis is applied to analyse the various interrelationships between fdi and other economic variables of interest in a var system the empirical research using this method in the case of china is limited the study therefore provides an interesting advance in the literature on the economics of fdi in china

supply management with intermittent trade disruptions when the probabilities are not fully known abstract previous studies of trade disruptions have assumed that the probabilistic transition rates between normal and disrupted markets are known this may be unreasonable if disruptions occur infrequently in this paper a bayesian procedure for estimating the transition rates is derived under the assumption that the transition processes are exogenous and poisson the procedure is applied to the problem of managing emergency reserves in an import dependent economy time consistent plans for consuming and replenishing reserves are derived optimal reserves are found to be generally larger than if the transition rates were known and equal to current expected values

a note on uncertainty and the hotelling rule abstract in this paper we derive the hotelling rule of optimal natural resource depletion modified to account for uncertainty in rates of return it is shown that in the presence of risk aversion the rule implies that the expected equilibrium rate of increase of net resource price must equal the expected rate of interest if and only if there exists a zero covariance between the marginal utility of consumption and the difference between the rate of net price increase and the rate of interest the sign of this covariance is an empirical question as an example illustrates

multinationals and market structure in mexico abstract this paper examines how foreign direct investment influences market concentration in mexican manufacturing industries the results suggest that mnc presence has a positive influence on concentration independently of the industrial variables which are commonly thought to determine it several tentative explanations including the mncs market conduct are offered although no definite conclusions can be drawn other variables that are found to be significant indetermining market concentration are market size economies of scale capital intensity and advertising intensity

rational expectations and the aggregation of diverse information in laboratory security markets the idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization hurwicz 1972 and rational expectations lucas 1972 we report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations in two of the three series one in which participants trade a complete set of arrow debreu securities and a second in which all participants have identical preferences double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium

have large budget deficits caused rising trade deficits for the united states the 1980s have been years of both large and unprecedented trade deficits as well as massive federal budget deficits the trade deficit rose from 25 billion in 1980 to 124 billion in 1985 during this same period federal budget deficits soared from 74 billion in 1980 to more than 212 billion in 1985 it is widely believed that the u s trade deficit rose mainly because of the skyrocketing federal budget deficit presenting such a view are for example hutchison and pigott 25 hutchison and pyle 26 clark 11 modigliani 30 and aschauer 2 besides economists many labor unions i e afl cio and official government documents see the economic report of the president particularly of 1984 have all shared similar views the issues involved have important policy implications suppose that the basic reason for rising trade deficits is indeed the escalating federal budget deficit in this case policy makers may focus on curtailing the budget deficit in order to resolve the trade deficit problem that has adversely affected several sectors such as manufacturing industries and agriculture however if such a view concerning the causal role of the budget deficit is incorrect then reductions in the federal budget deficit may not resolve the trade deficit dilemma and moreover attention will be diverted from more relevant and urgently needed policy options 6 the purpose of this paper is to empirically investigate the conventional argument that high federal budget deficit has been the prime cause of the escalating u s trade deficit finding only partial empirical evidence to support it in section ii i argue that most of previous studies in this area appear flawed by a methodological error rendering their tests unreliable for discriminating between a number of equally plausible hypotheses section iii describes the data and methodology used in the paper section iv presents the empirical results section v summarizes and concludes the paper

how technically efficient are singapore s manufacturing industries this study attempts to understand the technical efficiency performance i e how well resources and given technology are being used in 28 manufacturing industries in singapore from 1975 1994 using an improved version of the stochastic frontier model in addition an analytical model is used to investigate the causes of technical inefficiency in these industries to help policy formulation the efficiency performance of foreign and local dominated industries is also closely examined

causality analysis and multivariate autoregressive modelling with an application to supermarket sales analysis abstract this paper describes a modelling methodology for multivariate stochastic processes the concept of multiple causality is discussed and a procedure to detect multiple causality is suggested the data of a major canadian supermarket is analyzed and a multivariate autoregressive model for this supermarket is constructed and estimated several empirical findings are reported

fiscal deficits and long term interest rates further evidence from annual data much debate has recently centered on the popular view that large u s budget deficits financed by the sale of bonds cause high interest rates if valid this view implies that deficits crowd out efficient private investment and adversely affect economic growth however bailey 2 and barro 3 have challenged this conventional view on theoretical grounds based on the ricardian equivalence proposition bailey and barro contend that rational economic agents interpret government deficits as postponed tax liabilities and thus will have no effects on private wealth or interest rates such theoretical ambiguity in regards to the impact of budget deficits has also been matched by an equally conflicting empirical evidence for example barth iden and russek 4 deleeuw and holloway 8 hutchison and pyle 20 makin 24 makin and tanzi 25 and zahid 35 have found a positive and significant effect of deficits on interest rates on the other hand evans 11 12 13 hoelscher 17 motley 28 and plosser 29 30 have all failed to find any systematic support for a significant positive impact of deficits on interest rates it should be observed that the above empirical studies have employed either monthly or quarterly data however some researchers e g hoelscher 18 have recently charged that monthly or quarterly data bias the results in favor of finding no significant linkage between deficits and interest rates they reasoned that portfolio adjustment lags are too long for monthly or even quarterly observations to reflect the actual correlation between deficits and interest rates to eliminate this problem of periodicity annual data was instead advocated 2 using annual data hoelscher 18 concluded that deficits have caused positive and significant changes in long term interest rates in the united states

marshallian vs walrasian stability in an experimental market the experiments discussed below are an attempt to examine concepts of stability as found in economic textbooks two concepts of stability which stem from two different concepts of market adjustment seem to have dominated thinking whilst these two concepts are typically called walras stability and marshall stability some controversy exists over the extent to which these two models represent their respective thinking no doubt the current formal statements of the theories reflect an evolution of the ideas through the work of many theorists the terminology is retained for convenience regardless of their origins these two concepts lead to competing hypotheses about the conditions under which market instability will be observed so the subject is a natural one for experimental investigation furthermore since this is the first experimental examination of the stability of equilibria the strategy is to inquire about stability in the context of these two classical models and to avoid the temptation to attempt to extend them or integrate them with more modern theory the old models have not been checked they seem to be an appropriate place to start

a theory of oil igopoly cournot equilibrium in exhaustible resource markets with fixed supplies the emergence of an effective and powerful cartel in the international petroleum market has stimulated considerable effort among economists to develop models of pricing and supply behavior for this industry 2 this modeling task poses two basic difficulties first as in the standard oligopoly problem one must characterize the behavior of several sellers in a market aware of each other and of their effect on market price second there is here the added difficulty of treating the explicitly intertemporal nature of suppliers decision wherein a limited stock must be optimally allocated over time this paper studies the implications of the simplest non trivial postulates about these two aspects of the problem it is assumed that suppliers are non cooperative cournot nash players each of whom is imagined to select an optimal supply strategy taking as given the strategies of the others moreover it is hypothesized that the feasible strategies are limited to open loop paths chosen at the initial date to maximize the present value of profits in light of the paths of supply which the others have chosen 3 these basic postulates together with a few technical assumptions concerning the structure of resource demand permit one to demonstrate the existence of at least one non cooperative equilibrium concerning thisequilibrium we show that 1 the average and marginal return on resource stocks is inversely related to the size of a player s initial endowment 2 aggregate production decreases over time until all stocks are exhausted while firms with smaller stocks exhaust their supplies no later than firms with larger stocks do 3 the present value of price net of extraction cost declines over time 4 industry production maximizes a weighted average of intertemporal consumer s surplus and producers profits

monopolistic recycling of oil revenue and intertemporal bias in oil depletion and trade this paper investigates oil depletion and trade when monopolistic oil producers also exercise monopoly power in the capital market a two period model views collusively organized oil producers with an initial trade surplus and a subsequent deficit when monopoly power in the capital market is applied to the disadvantage of borrowers less oil is initially made available to oil importers than if the interest rate had been competitively determined this depletion bias however is reversed if because of incentives for capital accumulation it is to the advantage of the oil producers to subsidize lending to the oil importers in either case the bias in oil depletion due to monopolistic recycling of oil revenue is greater the more vulnerable are oil importer s incomes to a curtailment of oil supplies 25 references

temporary natural resource cartels abstract we analyze the behavior of a nonrenewable resource cartel that anticipates being forced at some date in the future to break up into an oligopolistic market in which its members will then have to compete as rivals under reasonable assumptions about the value function of the individual firms in the oligopolistic equilibrium that follows the breakup we show that the cartel will then produce more over the same interval of time than it would if there were no threat of dissolution and that its rate of extraction is a decreasing function of the cartel s life that there are circumstances under which the cartel will attach a negative marginal value to the resource stocks in which case the rate of depletion will be increasing over time during the cartel phase that for a given date of dissolution the equilibrium stocks allocated to the post cartel phase will increase as a function of the total initial stocks whereas those allocated to the cartel phase will increase at first but begin decreasing beyond some level of the total initial stocks

optimum responses of the current account when income is uncertain abstract how the current and capital accounts in the balance of payments should adjust when there are exogenous shocks has recently been examined in the context of optimal intertemporal choice of consumption and borrowing thus a fall in income will call forth a variety of responses depending on whether it is thought to be permanent or temporary long term or short term and on the form of the discount function in this paper uncertainty is introduced into the timing of the reversal of an income fall this being modelled by a poisson process phase diagrams are derived for the paths of consumption and debt

externalities and technology transfer through multinational corporations a theoretical analysis abstract this paper examines the optimal behavior of a multinational firm s subsidiary in a host country when learning of its production techniques by its native rivals occurs in a dynamic framework it is shown among other things that a it is worthwhile for the subsidiary to import better technology from its parent firm and that b such technology transfer may not benefit the firms of the host country despite their learning while the host country as a whole does benefit

instability of equilibria in experimental markets upward sloping demands externalities and fad like incentives the objective of the paper is to study markets in which the value of the activity to any one person increases with the level with which the activity is undertaken by others the general interpretation could be fads mimicking behavior or some sort of belief formation process in which the beliefs or expectations of agents about some underlying state of nature are influenced by the buying behavior of other agents the result is to create a market that can be modeled as having an upward sloping market demand curve the questions posed are 1 in the fad like environment does the classical concept of equilibrium as an equating of market demand and market supply accurately predict market behavior ii can both stable and unstable equilibria be observed and iii which of the two classical concepts of stability best describes the conditions under which instability is obeserved under the conditions of a fad like demand side externality in a market organized by the multiple unit double auction muda market equilibration occurs at a point where demand equals supply the disequilibrium behavior follows the dynamics of the marshallian model of dynamics as opposed to the walrasian model these results confirm and extend the major findings of plott and george who studied a similar environment with a downward sloping supply

causality between exports and economic growth abstract this paper utilizes granger causality tests in investigating the relationship between exports and national income from a consistent data set for 47 developing countries in africa new empirical results as well as suggestions for future research are presented

the comparative performance of foreign and domestic firms in brazil abstract this paper analyzes data for 282 pairs of foreign owned and private brazilian firms which are matched by sales and by four digit manufacturing industry differences between the two types of firms are surprisingly large and highly significant compared to their local counterparts foreign firms operate fewer plants have higher ratios of value added to output higher levels of advertising and royalty payments greater exports higher labor productivity higher wages and greater capital intensity

nominal shocks in monopolistically competitive markets an experiment abstract a market experiment examines the capacity of price and information frictions to explain real responses to nominal price shocks results indicate that both price and information frictions impede the response to a nominal shock as predicted by the standard dynamic adjustment models observed adjustment delays however far exceed predicted levels results of a pair of subsequent treatments indicate that a combination of announcing the shock privately to all sellers rather than publicly and a failure of many sellers to best respond to their expectations explains the observed adjustment inertia

production trade prices exchange rates and equilibration in large experimental economies we study market equilibration in laboratory economies that are larger and more complex than any that have been studied experimentally to date complexity is derived from the fact that the economies are international in economic structure with multiple input output and foreign exchange markets in operation the economies have twenty one markets and due to the fact that they have roughly fifty agents the economies are characterized by several hundred equations in spite of the complexity and interdependence of the economy the results demonstrate the substantial power of the general equilibrium model of perfect competition to predict the direction of movement of market level variables empirical patterns in the convergence process are explored and described

global instability in experimental general equilibrium the scarf example scarf 1960 proposed a market environment and a model of dynamic adjustment in which the standard tatonnement price adjustment process orbits around rather than converges to the competitive equilibrium hirota 1981 characterized the price paths by the configuration of endowments we explore the predictions of scarf s model in a nontatonnement experimental double auction we find that the average transaction prices in each period do follow the path predicted by the scarf and hirota models when the model predicts prices will converge to the competitive equilibrium our data converge when the model predicts prices will orbit our data orbit the equilibrium and in the direction predicted by the model moreover we observe a weak tendency for prices within a period to follow the path predicted by the model

intertemporal depletion of resource sites by spatially distributed users mineral deposits and other exhaustible resources are scattered around the globe as are their users yet the theory for analyzing depletion of such resources assumes that all resource sites and all users are located in the same place when applying the theory therefore one is forced to disregard what often seems to be an important real world consideration our purpose here is to generalize harold hotelling s 1931 theory of exhaustible resources to accommodate situations in which resource sites and their users are spatially distributed our analysis has many applications it can be applied to a conventional exhaustible resource like oil alternatively it can be applied to an unconventional exhaustible resource like scarce landfill space shipments of solid waste to landfills in other states or countries have become a prominent public policy issue eduardo ley et al 2000 finally our analysis can be applied in situations where the space reflects not geographical location but characteristics of the resource e g the sulfur content hardness and so forth of coal which users find distinctive 2 only two theoretical papers in resource economics have introduced spatial considerations 3 jean jacques laffont and michel moreaux 1986 studied the extraction of resources from sites located along a line segment with all users at one end charles kolstad 1994 was the first to consider spatially distributed users in his formulation consumers are distributed uniformly along a line segment with resource sites at each end kolstad s approach although innovative requires that the set of users be parti

foreign ownership market structure and industrial performance brazil s electrical industry abstract using an industrial organization approach this article tests the hypothesis that the ownership of firms exerts an independent influence on industrial performance we compare the behavior of foreign and domestic firms in brazil s electrical industry in four areas the association of firms with particular types of domestic market structures their technology their trade conduct and their profitability regression analysis shows that tncs tend to produce in tightly organized differentiated oligopolies they generally employ a more capital intensive technology they import more per unit of sales but do not necessarily export more finally reported earnings of tncs are found not to be any higher than domestic firms but reported profits of all firms are positively related to the level of industrial concentration and product differentiation markets which tend to be the domain of tncs rather than domestic enterprises it is concluded that ownership is a strong variable of market structure in brazil s electrical industry and that the systematic effect of foreign ownership on industrial performance is not always helpful in attaining development objectives

the responses of prices at different stages of production to monetary policy shocks this paper examines the responses of prices at different stages of production to monetary policy shocks in aggregate price analysis the var of christiano et al 1996a 1996b is used to identify the policy shock as the federal funds rate innovation and trace out the responses of prices in disaggregate price analysis the adjustment of prices is examined by comparing inflation before and after a recent policy tightening identified by romer and romer 1989 1992 at early stages of production a monetary tightening causes input prices to fall more rapidly and by a larger amount than output prices

the impact of regional and institutional factors on labor productive performance evidence from the township and village enterprise sector in china this paper investigates the determinants of township and village enterprise tve labour productivity in china examining behaviour at both the national and regional levels the results suggest that human capital the real wage level foreign intensity export intensity capital investment and firm size are the most important factors affecting labour productivity at the national level but their relative importance varies significantly between the regions the results also indicate that government privatization reforms had a major impact on labour productivity in the tve sector across the regions

the efficient use of multiple sources of a nonrenewable resource under supply cost uncertainty whereas in a deterministic world leaving a high cost source of a nonrenewable resource untouched as long as a less costly source is available is always efficient this may not be the case in a stochastic world conditions are derived under which it can be efficient to use a risky supply source in order to conserve a cheaper nonrisky source or to use a costly nonrisky source while a less costly risky source is still available a supply embargo can be interpreted as a limiting case the nonrisky source can be reinterpreted as an artificial stockpile

does the wage tax system cause budget deficits a macro economic experiment in this paper we investigate experimentally the economic functioning of a wage tax system for financing unemployment benefits in an international economy in particular in reaction to budget deficits and tax adjustment our results support the hypothesis that due to out of equilibrium price uncertainty producers are reluctant to employ inputs we also observe a downward pressure on wages exacerbated by an over supply of labor by consumers these observations can explain the budget deficits found furthermore we find that tax adjustments in order to facilitate a balancing of the budget has strong adverse effects on unemployment and real gdp

price dynamics in general equilibrium experiments general equilibrium ge theory faces several related challenges classical theories of out of equilibrium adjustment are intuitive but implausibly centralized further standard restrictions on individual preferences place little structure on aggregate excess demand functions amongst other issues this fact implies that economies can be unstable under classical dynamics and thus instability appears to be an unavoidable feature of ge theory this paper recounts laboratory studies of ge environments which reveal that classical theories of dynamics do in fact organize market activity surprisingly well these experiments suggest that the walrasian auctioneer for example appears to be a constructive abstraction and that instability should be accommodated within theory rather than circumscribed laboratory applications of ge theory focused on issues beyond stability and dynamics are also briefly surveyed

dynamic policy coordination stockpiling for energy security abstract this paper looks at the problem of coordinating the use of oil stockpiles during a disruption in the world oil market when an individual country s actions affect the market price we model the problem as a dynamic game between two oil importing nations when the disruption is expected to persist at the same intensity we show that there are no benefits to coordination more generally however the noncooperative equilibrium will differ from the cooperative one we characterize the benefits from cooperation and determine the key parameters on which they depend

competing currencies in the laboratory we investigate competition between two intrinsically worthless currencies as a result of decentralized interactions between human subjects we design a laboratory experiment based on a simple two country two currency search model to study factors that affect circulation patterns and equilibrium selection

causality between foreign investment and spillover efficiency while there is considerable evidence on the observed linkage between foreign investment and technical efficiency of the developing countries the question of causality between them has not been investigated this paper re examines the relationship between foreign direct investment and technical efficiency in mexico brazil chile singapore and zambia using granger causality tests the results suggest that foreign direct investment and labour productivity are causally independent variables however capital formation of the host country is found to exert causal influence on foreign investment

embargo threats and the management of emergency reserves this paper develops a model of a country that can import oil in normal times but is subject to random trade disruptions to mitigate the effects of these disruptions some of the imported oil is stockpiled there are two kinds of uncertainty involved the date at which an embargo will be imposed is not known in advance and given that an embargo has been imposed the date at which it will end is uncertain optimal behavior is analyzed by means of dynamic programming 13 references

resources as a constraint on growth for a considerable part of its history the american economy has functioned as a cowboy economy it has been a cowboy economy in the sense that there have been no important resource constraints on growth this is not to say that land minerals and a clean environment have been freely available rather agricultural land could be obtained at roughly constant costs most essential minerals have been present at fairly high grade in considerable abundance and the environment could be used as a sink without becoming fouled in the last several decades however cropland has stayed almost constant some high grade mineral deposits have been exhausted and the carrying capacity of our environment has been strained the scarcity of resources has led many to argue that the operating rules of our economy must change whereas in the cowboy economy we could afford to use our resources profligately the new view of economic growth is that the closing of all our frontiers means that we are now operating in a spaceship economy in a spaceship economy great attention must be paid to the sources of life and to the dumps where our refuse is piled things which have traditionally been treated as free goods air water quiet natural beauty must now be treated with the same care as other scarce goods it would seem difficult to question the observation that the world economy is progressing toward a closed system many have carried this observation further describing a future imperiled by famine depleted of essential materials running out of energy or choking in its own exhaust fumes behind these pessimistic visions is a deeper skepticism about the very fruits of economic growth economists have for the most part ridiculed the new view of growth arguing that it is merely chicken little run wild i think that the new view of growth must be taken seriously and analyzed carefully what have we learned about the new view the first set of studies relates to theoretical investigations by theoretical i mean propositions based on largely untested assumptions about model structure perhaps hypothetical would be a more accurate term in this category belong the celebrated writings sponsored by the club of rome as well as many offshoots of this work jay forrester dennis h meadows et al these works have demonstrated that under certain conditions involving technology population and resource availability a sustained growth path for consumption is not possible the conclusions of these works have not generally been accepted by economists because of the dubious nature of many of their assumptions in particular the assumptions regarding population growth and technology are quite unsatisfactory several authors have shown that the conclusions of these models are not robust to minor modifications in structure thus r boyd showed that introducing a new factor called technology would drastically alter the model s path my work 1973a showed that any of three changes in model structure ongoing technological progress adequate factor substitution or population decline would lead to opposite and more optimistic results it should be stressed however that all yale university

pricing and depletion of an exhaustible resource when there is anticipation of trade disruption this paper considers pricing and depletion of an exhaustible nonrenewable resource in an economy wherein domestic consumption is provided for by supplementing extraction from the economy s own resource stock with imports the future supply of which is not assured the socially optimal response to threat of trade disruption is a more conservationist depletion program for the domestic resource stock than would be called for if import supplies were assured to persist competitive domestic firms adopt the socially optimal conversationist program however firms anticipating domestic market power after the disruption of import supplies are revealed to overextract the domestic resource stock 33 references 2 figures

regional integration as diplomacy regional integration agreements rias are examples of second best and have an ambiguous impact on welfare contend the authors they build a model in which rias unambiguously raise welfare by correcting for externalities it assumes that trade between neighboring countries increases trust between them and reduces the likelihood of conflict the optimum intervention in that case is a subsidy on imports from the neighbor the authors show that an equivalent solution is for the neighboring countries to tax imports from the rest of the world that is to form an ria together with imposing some domestic taxes in fact security threats have moved neighboring countries to form rias examples include the creation of the european coal and steel community 1951 and the european economic community 1957 to reduce the threat of war in europe as well as various rias among developing countries the authors show among other things that 1 the optimum tariffs on imports from the rest of the world are likely to decline over time 2 deep integration implies lower optimum external tariffs if it is exogenous 3 but if deep integration is endogenous it implies higher optimum external tariffs before it occurs and lower ones thereafter and 4 enlargement of a bloc in terms of symmetric countries has an ambiguous impact on external tariffs but improves welfare and some form of domino effect exists in the sense that enlargement increases the incentive for nonmembers to seek accession although externalities associated with security matters imply that an ria may maximize welfare this model suggests that the ria is a transitory arrangement in the sense that optimum trade preferences are highest at the time the ria is formed when security is low and tend to decline over time in other words the ria s external trade policy becomes increasingly open over time as well as following deep integration

transboundary pollution game with potential shift in damages abstract complex systems exposed to pollution may suddenly and permanently shift to a dangerous regime this paper studies a dynamic game among countries that face the prospect of such a shift each country derives some flow utility from its own emissions which are chosen unilaterally but flow emissions by all countries increase the pollution stock in the world in addition to generating global damages such as global warming the pollution stock may trigger an irreversible and abrupt jump in global damages or catastrophe at an unknown date in the future we ask whether endogenous and exogenous threats of such a jump in damages or catastrophe mitigate the tragedy of the commons and examine their implications on welfare our analysis yields different emission responses to these threats as compared to the related literature that focuses only on the single polluter case for example when the hazard rate is exogenous and countries commit to nonlinear strategies we find that the threat of a possible jump in damages or catastrophe may induce a lower or larger emission level and initial welfare due to multiple equilibria these results are maintained when the hazard rate endogenously depends on emission decisions

experimental labor markets and policy considerations incomplete contracts and macroeconomic aspects this survey focuses on experimental labor markets investigating two aspects that are important for a better understanding of labor market relations and their consequences for labor market policies the first part of the survey is dedicated to papers that assess the prevalence of reciprocal considerations in incomplete labor contracts the second part summarizes the relatively small but growing experimental literature exploring labor market issues in macroeconomics and public finance studying the interaction between taxation and labor market outcomes

the welfare effects of intermittent interruptions of trade consider the problem of a buyer purchasing a costlessly storable good at a fixed price under threat of interruption of trade suppose there are two distinct and exhaustive regimes either one can buy as much as desired at the going price or one can purchase nothing at all and must rely on accumulated stocks for consumption the market moves randomly over time between these two states which will be referred to here as on and off respectively given the stochastic process governing the evolution of market regimes the price faced when the market is on and the intertemporal preferences of the buyer one may inquire as to the optimal acquisition rate for storage and consumption when the market is on and the optimal usage of accumulated stocks when the market is off solutions for these problems could then be used to ascertain the degree to which buyer and seller welfare is affected by the probabilistic curtailment of trading opportunities and the willingness to pay of the buyer for greater security of supply as well the possibility of inferring from purchase and storage behavior the buyer s perception of the likelihood and duration of trade interruptions may be explored this paper presents a general solution to this problem for stationary environments that is assuming intertemporal preferences to be representable by the expected present value of a uniformly discounted time independent flow utility function and taking the stochastic process governing change in regimes to be stationary markov optimal behavior and associated expected discounted utility are derived the method employed adapts to this context the dynamic programming arguments of my 1981 paper and is similar in structure to that employed in the analysis of resource depletion with technological uncertainty in partha dasgupta and geoffrey heal 1974 and dasgupta and joseph stiglitz 1981 there are many industrial markets in which these considerations are important recent events in the world oil market have stimulated much interest in the study of strategic mineral reserves see for example thomas teisberg 1981 in markets where demand fluctuates randomly and prices are inflexible for example the industrial market for natural gas the possibility of stochastic rationing has important implications for firm behavior see dennis carleton 1978 the prospect of strike upstream or lag in the delivery of goods on order has significant implications for inventory holdings in some industries the framework of this paper may even be adapted to the study of labor supply and savings behavior over the life cycle for a worker facing intermittent and uncertain unemployment

the principles of exchange rate determination in an international finance experiment this paper reports the first experiments designed to explore the behavior of economies with prominent features of international finance two countries each with its own currency were created international trade could take place only through the operation of markets for currency the law of one price and the flow of funds theory of exchange rate determination were used to produce general equilibrium models that captured much of the behavior of the economies prices of goods as well as the exchange rate evolve over time toward the predictions of the models however both the law of one price and purchasing power parity can be rejected for reasons that do not appear in the literature patterns of international trade were as predicted by the law of comparative advantage

hotelling confronts capm a test of the theory of exhaustible resources a model of pricing of natural resource commodities that integrates financial and product markets is derived and tested the model unifies two strands of the economic and financial literature one that builds on the hotelling model of pricing of exhaustible resources and the other that extends the capital asset pricing model of pricing risky assets tests of the predictions make use of a cost function that was estimated from a panel of small canadian copper mines young 1992 the authors tests fail to reject the theoretical restrictions that are implied by the hotelling capital asset pricing model

learning forecasting and optimizing an experimental study rational expectations re models have two crucial dimensions i agents on average correctly forecast future prices given all available information and ii given expectations agents solve optimization problems and these solutions in turn determine actual price realizations experimental tests of such models typically focus on only one of these two dimensions in this paper we consider both forecasting and optimization decisions in an experimental cobweb economy we report results from four main experimental treatments 1 subjects form forecasts only 2 subjects determine quantity only solve an optimization problem 3 they do both and 4 they are paired in teams and one member is assigned the forecasting role while the other is assigned the optimization task all treatments converge to rational expectation equilibrium ree but at different speeds we observe that performance is the best in treatment 1 and the worst in treatment 3 we further find that most subjects use adaptive rules to forecast prices given a price forecast subjects are less likely to make conditionally optimal production decisions in treatment 3 where the forecast is made by themselves than in treatment 4 where the forecast is made by the other member of their team which suggests that two heads are better than one in term of the speed of finding the ree

market stability backward bending supply in a laboratory experimental market 1999 presidential address western economic association the paper investigates the stability properties of markets with backward bending supply curves parameters are chosen so that the two classic models of price dynamics the walrasian model and the marshallian model give opposite predictions the results are 1 market instability can be observed 2 in the backward bending case stability is captured by the walrasian model and the marshallian model of dynamics is rejected previous experiments have demonstrated that the marshallian model works in the forward falling case thus which theory of dynamics is appropriate for a market depends upon the underlying reasons for demand and supply shapes

externalities and corrective policies in experimental markets this paper reports on the behaviour of simple laboratory markets which have an externality experiences with these markets provide some help in answering two broad questions 1 do markets with externalities behave in accordance with the law of supply and demand 2 how do the pollution tax pollution standard and pollution licenses compare as methods for correcting the externality