trading arrangements and industrial development how do different trading arrangements influence the industrialization process of developing countries can preferential trading arrangements ptas be superior to multilateral liberalization or at least an alternative when multilateral liberalization proceeds slowly if so what form should the ptas take are developing countries better advised to seek ptas with industrial countries or among themselves traditional analysis of these issues has been based on the idea of trade creation and trade diversion the problem with this analysis is that it starts from assuming a pattern of comparative advantage of newly industrialized countries the experience of these countries suggests the need for an analysis in which the pattern of comparative advantage is not set in stone but is potentially flexible and in which less developed countries can develop and converge in both income and economic structure to industrial economies the authors outline an alternative approach for analyzing the role of trade in promoting industrial development there are few fundamental differences between countries that generate immutable patterns of comparative advantage instead the pattern of trade and development in the world economy is determined mainly by history cumulative causation has created concentrations of industrial activity in particular locations industrial countries and left other areas more dependent on primary activities economic development can be thought of as the spread of these concentrations from country to country different trading arrangements may have a major impact on this development process by changing the attractiveness of countries as a base for manufacturing production they can potentially trigger or postpone industrial development this approach explains why firms are reluctant to move to economies that have lower wages and labor costs and shows how trade liberalization can change the incentives to become established in developing countries it provides a mechanism through which import liberalization can have a powerful effect in promoting industrialization and it suggests that import liberalization may create or amplify differences between liberalizing countries with the possible political tensions this may create while these features are consistent with the world economy they fall short of providing convincing empirical support for the approach using the approach the authors derive number of conclusions about the effects of trade liberalization first that unilaterally liberalizing imports of manufactures can promote development of the local manufacturing industry the mechanism is forward linkages from imported intermediates but this may be interpreted as part of a wider package of linkages coming from these imports second the gains from liberalization through pta membership are likely to exceed those obtained from unilateral action south south ptas will be sensitive to the market size of member states and north south ptas seem to offer better prospects for participating southern economies if not for north and excluded countries third the effects of particular schemes such as the division of benefits between southern economies will depend on the characteristics of the countries and cross country differences in these characteristics

stochastic stability in a double auction abstract in a k double auction a buyer and a seller must simultaneously announce a bid and an ask price respectively exchange of the indivisible good takes place if and only if the bid is at least as high as the ask the trading price being the bid price with probability k and the ask price with probability 1 k we show that the stable equilibria of a complete information k double approximate an asymmetric nash bargaining solution with the seller s bargaining power decreasing in k note that ceteris paribus the payoffs of the seller of the one shot game increase in k nevertheless as the stochastically stable equilibrium price decreases in k choosing the seller s favorite price with a relatively higher probability in individual encounters makes him worse off in the long run

no bubble condition model free tests in housing markets we test for the existence of housing bubbles associated with a failure of the transversality condition that requires the present value of payments occurring infinitely far in the future to be zero the most prominent such bubble is the classic rational bubble we study housing markets in the united kingdom and singapore where residential property ownership takes the form of either leaseholds or freeholds leaseholds are finite maturity pre paid and tradeable ownership contracts with maturities often exceeding 700 years freeholds are infinite maturity ownership contracts the price difference between leaseholds with extremely long maturities and freeholds reflects the present value of a claim to the freehold after leasehold expiry and is thus a direct empirical measure of the transversality condition we estimate this price difference and find no evidence of failures of the transversality condition in housing markets in the u k and singapore even during periods when a sizable bubble was regularly thought to be present

competitive behavior in market games evidence and theory we explore whether competitive outcomes arise in an experimental implementation of a market game introduced by shubik 1972 market games obtain pareto inferior strict nash equilibria in which some markets are closed we find that subjects do not coordinate on autarkic nash equilibria but favor more efficient nash equilibria in which all markets are open as the number of subjects participating in the market game increases the nash equilibrium they achieve approximates the associated walrasian equilibrium of the underlying economy motivated by these findings we investigate theoretically whether evolutionary forces lead to walrasian outcomes in market games we introduce a strong version of evolutionary stable strategies sess f orfinite populations our concept requires stability against deviations by coalitions of agents a small coalition of trading agents is sufficient for pareto improving trade to be generated in addition provided that agents lack market power nash equilibria corresponding to approximate competitive outcomes constitute the only approximate sess

arrested development theory and evidence of supply side speculation in the housing market this paper incorporates speculation into the standard supply and demand framework used to analyze housing booms and busts speculation reverses the common intuition that elastic housing supply attenuates housing booms housing market frictions make land a more attractive speculative investment than housing as a result undeveloped land both facilitates construction and intensies

an evolutionary model of bargaining abstract individuals from two populations of bargainers are randomly matched to play the nash demand game they make their demands by choosing best replies based on an incomplete knowledge of the precedents and occasionally they choose randomly there is no common knowledge over the long run typically one division will be observed almost all of the time this stochastically stable division is close to the nash solution when all agents in the same population are alike when the populations are heterogeneous a generalization of the nash solution results if there is some mixing between the two populations the stable division is fifty fifty journal of economic literature classification number c78

the role of price spillovers in the american housing boom abstract one of the striking features of the last u s housing boom was the heterogeneity in the timing of its onset across local markets in this paper we exploit this heterogeneity to estimate the extent to which the boom was spread via spatial spillovers from one market to another our analysis focuses on spillovers that occur around the time that a local market enters its boom which we identify using sharp structural breaks in house price growth rates on the extensive margin there is evidence that the likelihood of a market booming increases substantially if nearby neighbors boom on the intensive margin we also find statistically significant but economically modest effects of the size of a neighbor s boom on subsequent price growth in nearby markets these affects appear to be unrelated to local market fundamentals suggesting a potential role for non rational factors

tipping and the dynamics of segregation schelling dynamic models of segregation journal of mathematical sociology 1 1971 143 186 showed that extreme segregation can arise from social interactions in white preferences once the minority share in a neighborhood exceeds a tipping point all the whites leave we use regression discontinuity methods and census tract data from 1970 through 2000 to test for discontinuities in the dynamics of neighborhood racial composition we find strong evidence that white population flows exhibit tipping like behavior in most cities with a distribution of tipping points ranging from 5 to 20 minority share tipping is prevalent both in the suburbs and near existing minority enclaves in contrast to white population flows there is little evidence of nonlinearities in rents or housing prices around the tipping point tipping points are higher in cities where whites have more tolerant racial attitudes

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

perturbed adaptive dynamics in coalition form games abstract players adaptively learn how to bargain a characteristic function describes the available surplus the underlying bargaining game extends the nash demand game by allowing subcoalitions to reach an agreement players demands must be multiples of a money unit we show that stochastically stable allocations ssa i e allocations that are most stable to unlikely errors are a subset of the core uniqueness does not obtain even when the money unit becomes arbitrarily small nonetheless every ssa is related to the allocation that maximizes the product of players utilities over the core i e constrained egalitarian solution for tu games journal of economic literature classification numbers c71 c72 c78

winners and losers from regional integration agreements how are the benefits and costs of a customs union divided between member countries outcomes depend on the comparative advantage of members relative to each other and relative to the rest of the world countries with a comparative advantage between that of their partners and the rest of the world do better than countries with an extreme comparative advantage consequently integration between low income countries tends to lead to divergence of member country incomes while agreements between high income countries cause convergence results suggest that developing countries are likely to be better served by north south than by south south agreements

housing booms and busts labor market opportunities and college attendance we study how the recent housing boom and bust affected college enrollment during the 2000s we exploit cross city variation in local housing booms which improved labor market opportunities for young men and women we find that the boom lowered college enrollment with effects concentrated at two year colleges the decline in enrollment during the boom was generally reversed during the bust however attainment remains persistently low for particular cohorts suggesting that reduced educational attainment is an enduring effect of the recent housing cycle the housing boom can account for approximately 25 percent of the recent slowdown in college attainment

agglomeration and economic development import substitution vs trade liberalisation this paper analyses a model of economic development in which international differences in industrial structure and income are caused by the agglomeration of industry in a subset of countries economic development may not be a gradual process of convergence by all countries but instead involve countries moving sequentially from the group of poor countries to the group of rich countries the role of trade policy in promoting industrialisation is studied while both import substitution and unilateral trade liberalisation may be successful in attracting industry they attract different sectors and welfare levels are higher under trade liberalisation

housing dynamics an urban approach abstract a dynamic linear rational equilibrium model in the tradition of alonso rosen and roback is consistent with many outstanding stylized facts of housing markets these include a that the markets are local in nature b that construction persistence is fully compatible with mean reversion in prices and c that price changes are predictable calibration exercises to match moments of the real data have notable successes and failures the volatility in local income processes as reflected in hmda mortgage applicant data can account for much of the observed price and construction volatility except for the most inelastically supplied local markets the model s biggest failure lies in its inability to match the strong persistence in high frequency price changes from year to year

estimating the poverty impacts of a prospective doha development agenda this paper summarises the findings from a major international research project on the poverty impacts of a potential doha development agenda it draws on an intensive analysis of the dda framework agreement and associated scenarios the implications for world markets are established using a global modelling framework the outputs of which form the basis for a dozen country case studies of the national poverty impacts of the dda scenarios liberalisation targets under the dda have to be quite ambitious if the round is to have a measurable impact on poverty we expect the near term poverty impacts to be mixed some countries experience small poverty increases and others more substantial poverty declines on balance poverty is reduced under the core dda scenario and this reduction is more pronounced in the longer run deeper cuts in developing country tariffs are found to make the dda more poverty friendly it is also clear that in order to generate significant poverty reductions in the near term complementary domestic reforms are required to enable households to take advantage of the new market opportunities over the long run sustained poverty reduction depends on stimulating economic growth which suggests that trade reforms must go beyond tariffs and subsidies also addressing barriers to services trade and investment

learning to be fair abstract we study the process of equilibrium selection in games when players have social preferences of the type discussed among others by rabin 1993 and segal and sobel 2007 to this end we employ a standard noisy version of the best response dynamics we obtain several results concerning some popular games such as the prisoner s dilemma and the battle of the sexes we show that reciprocity may have a negative effect on the equilibrium selection process when players are sufficiently concerned with reciprocity the stochastically stable equilibrium in the battle of the sexes is inefficient at the same time the cooperative equilibrium in the prisoner s dilemma is never stochastically stable

a south south survival strategy the potential for trade among developing countries trade between developing countries or south south trade has been growing rapidly in recent years following significant reductions in tariff barriers however significant barriers remain and there is currently reluctance among many developing countries to undertake further reductions instead preferring to focus on opening up access to developed country markets or to maintain the status quo given that multilateral liberalisation may results in the erosion of preferential access enjoyed by some developing countries this emphasis on northern markets represents a missed opportunity for developing countries to assess this we compare the potential effects of the removal of barriers on south south trade with the gains from developed country liberalisation and from regional free trade areas within africa asia and latin america a general equilibrium model gtap containing information on preferential bilateral tariffs is used to estimate the impacts the results indicate that the opening up of northern markets would provide annual welfare gains benefits to developing countries of 24 billion however the removal of south south barriers has the potential to generate gains 60 larger by contrast the potential gains from further regional agreements on a continental basis are limited in africa and asia although scope remains in latin america the results imply that giving greater emphasis to removing barriers between as well as within continents could prove a successful southern survival strategy and more

some contagion some interdependence more pitfalls in tests of financial contagion this paper develops a test of contagion in financial markets based on bivariate correlation analysis which generalizes existing tests and applies it to the international effects of the hong kong stock market crisis of october 1997 contagion is defined as a structural break in the international transmission of financial shocks for plausible values of the variance of country specific shocks in hong kong our test finds evidence of contagion for 5 countries out of a sample of 17 this is in sharp contrast with the findings of recent literature according to which there is no contagion only interdependence we show that this strong result in the literature is due to arbitrary and unrealistic restrictions on the variance of country specific shocks

the economics of convention c onventions regulate much of economic and social life yet they have received surprisingly little attention from economists by a convention we mean a pattern of behavior that is customary expected and self enforcing everyone conforms everyone expects others to conform and everyone has good reason to conform because conforming is in each person s best interest when everyone else plans to conform lewis 1969 familiar examples include following rules of the road adhering to conventional codes of dress and using words with their conventional meanings conventions with direct economic implications include species of money and credit industrial and technological standards accounting rules and forms of economic contracts indeed it would scarcely be an exaggeration to say that almost all economic and social institutions are governed to some extent by convention the main feature of a convention is that out of a host of conceivable choices only one is actually used this fact also explains why conventions are needed they resolve problems of indeterminacy in interactions that have multiple equilibria indeed from a formal point of view we may define a convention as an equilibrium that everyone expects in interactions that have more than one equilibrium the economic significance of conventions is that they reduce transaction costs imagine the inconvenience if whenever two vehicles approached one another the important exceptions are sugden 1986 and ullman margalit 1977 the interested reader might also refer to the symposium on social norms that appeared in the fall 1989 issue of this journal with articles by sugden 1989 and elster 1989

the development trinity how regional integration impacts growth inequality and poverty developing countries today have become more active participants in regional trade agreements this raises questions about how the benefits of integration are distributed and the extent to which lower income countries are able to capture development gains historically such impacts have been difficult to identify with precision this paper seeks to address this gap by empirically analysing the impact of regional integration on development particularly the effects on growth and welfare using both bilateral and regional integration measures we show that the ability to capture gains from integration varies across developing country regional groups with developing asia benefiting on par with developed countries the findings in the paper indicate that trade and trade policy play an important role in reducing inequality and poverty in developing countries it also shows that regionalism can function as a channel to make multilateralism a more adept way of addressing national challenges