may the pro poor impacts of trade liberalisation vanish because of imperfect information abstract in this paper we try to evaluate changes in welfare gains and their distribution due to trade liberalisation when imperfect information is considered the results of two versions of a computable general equilibrium cge model using the gtap database and representing goods as well as capital flows are compared in the first version a standard world cge approach is followed in the second version we included risk aversion imperfect information and production lag in the agricultural sector after a brief description of the two versions changes in welfare represented by the income of two types of household middle low and middle high in three regions europe united states rest of the world after agricultural trade liberalisation are presented theoretical and political consequences of the results are discussed

inequality and endogenous trade policy outcomes abstract an enduring puzzle in international economics is why trade interventions are biased in favor of import competing rather than export sectors and therefore restrict trade in this paper we show that if the government s objective reflects a concern for inequality then trade policy generally exhibits an anti trade bias importantly under neutral assumptions the mechanism that we analyze generates the anti trade bias independently of whether factors are specific or mobile across sectors the mechanism also generates an anti trade bias between large countries even after they sign reciprocal trade agreements that eliminate any terms of trade motivation for the use of trade protection

everyone may benefit from subsidising entry to risky occupations this paper shows that in the presence of costly state verification directly or indirectly subsidising entry to risky occupations may benefit everyone the result holds even in the presence of private insurance indeed it may be desirable to prohibit private insurance in favour of subsidies to hazardous activities these findings do not depend on the government having an advantage over the private sector in observing outcomes the explanation is that through its influence on equilibrium price feasible fiscal policy can shift the return distribution so as to create collective insurance more cheaply than is possible through private contracting with its requirement of costly auditing amongst applications is a case for a loss making state bank offering high interest rate loans

stationary multi choice bandit problems this note shows that the optimal choice of k simultaneous experiments in a stationary multi armed bandit problem can be characterized in terms of the gittins index of each arm the index characterization remains equally valid after the introduction of switching costs

international trade policy benevolent dictators and optimizing politicians the claim that sophisticated non operational efficiency based arguments for intervention facilitate obfuscatory policy induced income transfers will meet in some quarters the counterclaim that this is an overly cynical interpretation of politicians policy motives rent seeking can likewise be argued to be an overly cynical conception the theory of rent seeking would impute self interest motives to the offer of payment for a cup of coffee

the theory of domestic content protection and content preference this paper investigates the resource reallocation effected by content protection and content preference schemes under alternative assumptions regarding the definition of domestic content the number of intermediate goods and the market structure of the domestic intermediate good industry content protection is shown to be equivalent to a combination of more familiar commercial policies however the extent of application of these policies is determined endogenously by parameters of the production functions for intermediate and final goods a number of anomalous and undesirable outcomes that may result from content protection and content preference are discussed

implications of agricultural trade liberalization for the developing countries abstract the developing countries as a group could expect to experience only small welfare gains if they chose not to actively participate in agricultural trade liberalization and relied solely on the benefits of partial liberalization in the oecd countries participation along the lines of the dunkel package with the developing countries reducing positive assistance by less than the developed countries would yield gains of the order of us 20 billion more comprehensive participation in trade liberalization involving reductions of both positive and negative protection would almost triple these welfare gains while some developing countries do not gain from trade liberalization even with full participation the number of such countries and the magnitude of their losses are greatly reduced

the economics of development a survey i the subject our definition of the subject will be the use of economic analysis to understand the economies of poor or developing countries this includes in particular how standards of living in the population are determined and how they change over time and further how policy can or should be used in the influence of these processes the definition contains in principle much or most of analytical methods in economics insofar as they can be put to use in the examination of the issues of interest this is as it should be but it poses a problem for a survey in a journal a comprehensive treatment is infeasible so we shall follow a different route the survey will focus on what i take to be the major themes and approaches which characterise the productive aspects of the subject there is therefore no pretence at being exhaustive the purpose is rather to highlight some of the advances many of these have been of real substance there are a number of possible purposes for a survey and it is important to be clear at the outset for whom it is intended what it is and what it is not this survey is addressed to economists and students of economics who know the tools of their trade but not necessarily how they have been applied to and fashioned for the analysis of the economics of developing countries it is a description of the ways in which problems can be productively formulated and approached in terms of examples chosen for their intrinsic importance and interest the vastness of the subject means that we have to be highly selective it does not seek to provide a summary evaluation of the current view of the appropriate response to immediate policy questions it is not a history of thought nor a research manifesto nor an attempt to adjudicate or settle the major debates where they arise naturally from the major purpose some judgements on these subjects will be offered but they do not themselves constitute the primary intent of this survey there are three lines of enquiry or sets of questions which have i suggest been distinctive of the most fruitful work in development economics they will

equilibrium interest rates and financial liberalisation in developing countries it is a central argument of the financial repression literature that interest rates should be determined by the market to reflect the true cost of capital this article suggests that the notion of an equilibrium interest rate may be undefined since the rate required to balance financial markets differs from that required to equilibrate savings and investment thus liberalisation introduces an intrinsic instability into the financial system as a result of portfolio adjustment the article examines the chilean and korean experiences and concludes that a sustainable reform requires positive but low real interest rates and broad regulation of the financial system to ensure macroeconomic stability

on the european responsibility in the agricultural multilateral trade negotiations modelling the impacts of the common agricultural policy the present round of multilateral trade negotiations is still deadlocked over agricultural trade the european union eu is urged by its trading partners to open its agricultural markets economic evaluations of trade liberalisation scenarios unanimously conclude that a substantial opening of agricultural markets is required for a successful welfare improving doha round in this paper we perform new evaluations to identify precisely the contributions of the european farm policy and to examine the robustness of these evaluations in the representation of this complex policy using the same specifications as in major previous studies our first simulations show that the eu has a major responsibility in delivering significant gains to the developing countries on the other hand when we conduct the same experiments with a more relevant calibration and modelling of the european farm policy instruments the gains that these developing countries may reap from the eu liberalisation are considerably reduced accordingly the current charge against the eu is simply inopportune

agricultural tariffs or subsidies which are more important for developing economies this article assesses the impact of the world price depressing effect of agricultural subsidies and border protection in organization for economic co operation and development oecd countries on developing economies exports imports and welfare developing economy exporters are likely to benefit from reductions in such subsidies and trade barriers whereas net importers may lose as world prices rise a simple partial equilibrium model of global trade in commodities that benefit from domestic support or export subsidies is developed to estimate the relevant elasticities simulation results suggest that a 50 percent reduction in border protection will have a much larger positive impact on developing economies exports and welfare than a 50 percent reduction in agricultural subsidies although there is significant heterogeneity across developing economies the results suggest that efforts in the doha round of world trade organization wto negotiations should be directed at substantially reducing border protection

computational analysis of the menu of us japan trade policies we have used the michigan computable general equilibrium cge model of world production and trade to calculate the aggregate welfare and sectoral employment effects of the menu of us japan trade policies the menu of policies encompasses the various preferential us and japan bilateral and regional free trade agreements ftas negotiated and in process unilateral removal of existing trade barriers and global multilateral free trade the welfare impacts of the ftas on the united states and japan are shown to be rather small in absolute and relative terms the sectoral employment effects are also generally small but vary across the individual sectors depending on the patterns of the bilateral liberalisation the welfare effects on the fta partner countries are mostly positive though generally small but there are some indications of potentially disruptive employment shifts in some partner countries there are indications of trade diversion and detrimental welfare effects on non member countries for some of the ftas analysed in comparison to the welfare gains from the us and japan bilateral ftas the gains from both unilateral trade liberalisation by the united states japan and the fta partners and from global multilateral free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system the us and japan ftas are based on hub and spoke arrangements we show that the spokes emanate out in different and often overlapping directions suggesting that the complex of bilateral ftas may create distortions of the global trading system

optimal domestic regulation under asymmetric information and international trade a simple general equilibrium approach we investigate the design of domestic incentive regulations in a small economy opened to trade and its implications for international specialization and for trade openness to remain welfare improving more specifically we append to an otherwise standard 2 2 heckscher ohlin model of a small open economy a continuum of intermediate sectors producing nontradable goods used in tradable sectors those goods are produced by privately informed regulated firms asymmetric information induces distortions with general equilibrium impacts the small economy becomes relatively richer in the informationally sensitive factor so that asymmetric information might reverse trade patterns free trade is pareto dominated by autarky when it exacerbates agency distortions

high interest rates a new conventional wisdom for development policy some conclusions from sri lankan experience abstract the paper is concerned with the general proposition that high interest rates paid to savers can contribute significantly to the long run development of ldcs as well as to stabilization of their economies in the short run by relating this general proposition to some simple theory about the behaviour of imperfect financial markets as well as to specific institutional circumstances in sri lanka it is demonstrated that there are important qualifications that have to be borne in mind in particular in the current institutional circumstances of sri lanka which are closely replicated in other ldcs the instinctive argument of the neoclassical economist that interest rates should reflect the scarcity price of capital is not a great deal of help to policy makers

the interest elasticity of savings in developing countries the existing evidence abstract this paper presents a critical analysis of some of the most recent empirical work on the interest elasticity of savings in developing economies supported by a set of empirical results the paper argues that a the real interest elasticity of savings is not easily detected using the existing empirical models which generally yield insignificant interest rate parameters in the seventies b the existing models suffer from serious defects that make if very difficult to interpret the estimated parameters

an evaluation of the draft final act of the uraguay round this paper presents an evaluation of the proposed draft final act dfa of the uruguay round of multilateral trade negotiations using the computable general equilibrium model used in nguyen perroni and wigle i 9ib section ii gives a very brief overview of the dfa and the following sections explain how we represent the agreement in our model section v then describes the estimated impacts of the dfa with some discussion of the various components of the deal in section vi finally we give some concluding remarks our earlier analysis looked at a more ambitious conclusion of the uruguay round where agricultural liberalisation and textiles liberalisation were more complete in that study we found that the comprehensive uruguay round agreement generated wide spread gains to industrial countries as well as middle and low income countries we also found that the gains were largest for the two parties for whom the round seems most contentious the us and ec our analysis of a uruguay round agreement based on the dfa suggests a similar conclusion although changes since our earlier paper market opening in the economies in transition in particular have meant that the gains to eastern europe are likely to be significantly greater than before the gains to the us are still significant although much smaller than from the comprehensive agreement studied earlier and world wide gains are in the same order of magnitude at over 200 billion some discussion of our results follows in section v

terms of trade uncertainty savings and the production structure abstract this paper studies the response of savings and the production structure tradeables non tradeables to an increase in future terms of trade uncertainty holding expected utility constant there is no international trade in risky assets the impact on the production structure is studied by analyzing the markets for domestic equity the paper shows that the response of both non tradeables production and savings is ambiguous cross country evidence indicates that an increase in terms of trade uncertainty leads to a higher fraction of the labor force in the non tradeables sector

the degree of decoupling of area payments for arable crops in the european union in 1992 the common agricultural policy cap of the european union eu significantly changed direction in the arable crop sector with the so called macsharry reform this reform which reduced cereal intervention prices eliminated output payments for oilseeds and introduced per hectare compensatory payments and a compulsory set aside requirement attached to these payments implied a significant change in the policy incentives to produce in 1999 intervention prices were cut further bringing them closer to world market levels as well as aligning payments of cereals and oilseeds the most recent reform in

on why agriculture declines with economic growth abstract when economic growth is characterised by a slow rise in the demand for food and rapid growth in farm relative to non farm productivity it is understandable that agriculture in a closed economy declines in relative terms as that economy develops but why should agriculture decline in virtually all open growing economies as well including those able to retain a comparative advantage in agricultural products a key part of the answer is that the demand for non tradable goods tends to be income elastic so resources are diverted to their production even in open economies

interest rates saving investment and growth in mexico 1960 90 tests of the financial liberalisation hypothesis the theory of financial liberalisation argues that rising real interest rates induces more saving and investment and therefore acts as a positive stimulus to economic growth this hypothesis is tested for mexico over the period 1960 90 making the important distinction between financial saving and total saving financial saving is found to be positively related to real interest rates partly through capital flows and partly through domestic asset substitution but total saving is invariant with respect to real interest rates investment is positively related to the supply of credit from the banking system but the net effect of interest rates on investment is negative furthermore taking mckinnon s virtuous circle model of economic growth shows no favourable effects of interest rates on economic growth it is concluded that any favourable effect of financial liberalisation and higher real interest rates on economic growth must come through raising the productivity of investment

learning while voting determinants of collective experimentation this paper combines dynamic social choice and strategic experimentation to study the following question how does a society a committee or more generally a group of individuals with potentially heterogeneous preferences experiment with new opportunities each voter recognizes that during experimentation other voters also learn about their preferences as a result pivotal voters today are biased against experimentation because it reduces their likelihood of remaining pivotal this phenomenon reduces equilibrium experimentation below the socially efficient level and may even result in a negative option value of experimentation however one can restore efficiency by designing a voting rule that depends deterministically on time another main result is that even when payoffs of a reform are independently distributed across the population good news about any individual s payoff increases other individuals incentives to experiment with that reform due to a positive voting externality

an assessment of voluntary restraints on hong kong exports to europe and the usa estimates of import tariff equivalents mtes 1981 84 of european and us voluntary export restraints on hong kong are presented with estimates of rent incomes transferred mte rates varied sharply over time and inversely with european tariffs as predicted by the model making national restrictions pointless as protection for small european countries the model points to and uses a new way of estimating non tariff barriers ntbs through derived estimates in principle once one has measured the restrictiveness of country l s ntbs one can derive an estimate of the restrictiveness of country 2 s ntbs

globalization and risk sharing we study the effects of globalization on risk sharing and welfare like the previous literature we assume that governments cannot commit to enforce the repayment of debts owed by their citizens unlike the previous literature we assume that governments cannot discriminate between domestic and foreign creditors when enforcing debt payments this creates novel interactions between domestic and international trade in assets i increases in domestic trade raise the benefits of enforcement and facilitate international trade in fact in our set up countries can obtain international risk sharing even in the absence of default penalties ii increases in foreign trade raise the costs of enforcement and hamper domestic trade as a result globalization may worsen domestic risk sharing and lower welfare we show how these effects depend on various characteristics of tradable goods and explore the roles of borrowing limits debt renegotiations and trade policy

trade and insurance with imperfectly observed outcomes abstractthe following sections are included introductionthe modelunobserved outcomescostly observationconcluding remarksreferences this abstract was borrowed from another version of this item

developing countries and the world trade organization negotiations there are few clearer indications of the widely perceived benefits to developing countries of more open trade than the subtitling of the current doha round of trade negotiations as the development round this claim is not disputed in this paper rather we join a strong consensus among economists that developing countries particularly the poorest have a great deal to gain from trade liberalization development requires growth and greater access to world markets is a powerful necessary condition for more rapid growth therefore poor countries have the most to gain from a more freely functioning world market clear arguments on this point are succinctly summarized in mccalla

two principles for the next round or how to bring developing countries in from the cold t he november 1999 wto ministerial meeting in seattle was expected to usher in a new round of negotiations the ninth in a series that began in geneva in 1947 although wto members proved unable to launch a round efforts will continue in 2000 to develop a negotiating agenda in this paper i want to reinforce the call of the wto s director general mr moore for the next set of negotiations to be a development round basic notions of equity and a sense of fair play require that the next round reflect developing country interests and concerns more than was the case in earlier rounds seattle demonstrated that without greater balance the success of future negotiations will be imperiled dissatisfaction by developing countries regarding the extent to which their interests were reflected was a factor leading to the failure of the ministerial meeting the stakes are high there is a growing gap between the developed and the less developed countries highlighted in this year s world development report world bank 1999 the international community is doing too little to narrow this gap aid per capita to the developing world has fallen by nearly a third in the 1990s too often cuts in aid budgets are accompanied by the slogan trade not aid exhortations for the developing world to participate fully in the global marketplace and lectures about how government subsidies and protectionism distort prices and impede growth all too often there is a hollow ring to these exhortations as developing countries take steps to open their economies and

computable general equilibrium models for development policy analysis in ldcs abstract the use of cge models has gained much popularity among policy analysts in ldcs and there is a fast growing body of literature on this area of economics in this survey the advantages of general equilibrium approach over partial equilibrium approach in analysing a wide range of policy issues are highlighted the evolution of cge modelling is discussed and more than 60 cge applications related to different policy issues in ldcs are surveyed this comprehensive survey shows that the cge models have become quite popular analytical tools among policy analysts in ldcs over the last decade or so the debate in the economic profession regarding the value and appropriateness of using cge models for policy analysis is examined in the final section of this paper some of the criticisms levelled at cge models are discussed and it is argued that despite this criticism such models are capable of providing insight into important policy problems

dynamic r d competition with learning to account for the possibility that firms are unsure about the ease of innovation we formulate a differential game of r d competition with an unknown hazard rate we show as time passes with success firms become more pessimistic about eventual innovation reducing their r d investment and possibly exiting the race an increase in the number of competing firms tends to increase firms r d intensities for given beliefs but because beliefs evolve at different rates depending on the number of firms in the race time paths of r d investment intensity are not unambiguously ordered with respect to the number of competing firms

markets for risk and openness to trade how are they related if protectionist trade policies aim to insure domestic industries against swings in world market prices the development of financial markets could lead to trade liberalization likewise trade lib

the effects of financial liberalization on savings and investment in uruguay the following sections are included introductionfinancial reforms financial deepening and financial crisisstylized outcomes savings investment and growthfinancial liberalization savings and investmentfinancial resource allocation at the micro levelconclusions

negatively correlated bandits we analyse a two player game of strategic experimentation with two armed bandits either player has to decide in continuous time whether to use a safe arm with a known pay off or a risky arm whose expected pay off per unit of time is initially unknown this pay off can be high or low and is negatively correlated across players we characterize the set of all markov perfect equilibria in the benchmark case where the risky arms are known to be of opposite type and construct equilibria in cut off strategies for arbitrary negative correlation all strategies and pay offs are in closed form in marked contrast to the case where both risky arms are of the same type there always exists an equilibrium in cut off strategies and there always exists an equilibrium exhibiting efficient long run patterns of learning these results extend to a three player game with common knowledge that exactly one risky arm is of the high pay off type

public sector banking efficiency and economic growth in india abstract this paper develops a framework that integrates harrod domar growth model and mckinnon shaw hypothesis via molho s dynamic adjustment mechanism the model is used to determine the impact of bank nationalization through aggressive bank branch expansion programs and priority sector credit allocation on india s financial savings investment productivity and gdp the empirical findings indicate that the bank nationalization policy has been a mixed blessing the aggressive bank branch program since 1969 resulted in an increased in savings investment productivity of capital and gdp however the priority sector credit allocation policy did not fully achieve its desired goals

risk bearing and entrepreneurship abstract in the knightian theory of entrepreneurship entrepreneurs provide insurance to workers by paying fixed wages and bear all the risk of production this paper endogenizes entrepreneurial risk by allowing for optimal insurance contracts as well as occupational self selection moral hazard prevents full insurance increases in an agent s wealth then entail increases in risk borne thus even under decreasing risk aversion there are robust instances in which workers are wealthier than entrepreneurs this empirically implausible result suggests that risk based explanations for entrepreneurship are inadequate

do sunk costs matter let bygones be bygones khieu samphan former head of state of the khmer rouge government asking cambodians to forget the more than one million people who died under his government s rule i introduction sunk costs are costs that have already been incurred and cannot be recovered sunk costs do not change regardless of which action is presently chosen therefore an individual should ignore sunk costs to make a rational choice introductory textbooks in economics present this as a basic principle of rational decision making frank and bernanke 2006 10 mankiw 2004 297 nonetheless people are apparently often influenced by sunk costs in their decision making once individuals have made a large sunk investment they have a tendency to invest more in an attempt to prevent their previous investment from being wasted the greater the size of their sunk investment the more they tend to invest further even when the return on additional investment does not seem worthwhile for example some people remain in failing relationships because they have already invested too much to leave others buy expensive gym memberships to commit themselves to exercising still others are swayed by arguments that a war must continue because lives will have been sacrificed in vain unless victory is achieved these types of behavior do not seem to accord with rational choice theory and are often classified as behavioral errors people who commit them are said to be engaging in the sunk cost fallacy students are repeatedly taught in economic classes that sunk costs are irrelevant to decision making so that they may ultimately learn to make better decisions invoking the theory as a normative prescription conditioning on the level of sunk costs is also taken as evidence that people do not always make rational choices thaler 1991 suggesting that the explanatory power of rational choice theory is limited in this article we argue that in a broad range of environments reacting to sunk costs is actually rational agents may rationally react to sunk costs because of informational content reputational concerns or financial and time constraints a informational content consider a project that may take an unknown expenditure to complete the failure to complete the project with a given amount of investment is informative about the expected amount needed to complete it therefore the expected additional investment required for fruition will be correlated with the sunk investment moreover in a world of random returns the realization of a return is informative about the expected value of continuing a project a large loss which leads to a rational inference of a high variance will often lead to a higher option value because option values tend to rise with variance consequently the informativeness of sunk investments is amplified by consideration of the option value b reputational concerns in team relationships each participant s willingness to invest depends on the investments of others in such circumstances a commitment to finishing projects even when they appear ex post unprofitable is valuable because such a commitment induces more efficient ex ante investment thus a reputation for throwing good money after bad the classic sunk cost fallacy can solve a coordination problem in contrast to the desire for commitment people might rationally want to conceal bad choices to appear more talented which may lead them to make further investments hoping to conceal their investments gone bad c financial and time constraints given financial constraints larger past expenditures leave less ability to make future expenditures ceteris paribus thus financial constraints may lead companies or individuals to stick with projects that no longer appear to be the best choice moreover given limited time to invest in projects as the time remaining shrinks individuals have less time over which to amortize their costs of experimenting with new projects and therefore may be rationally less likely to abandon current projects

venture capital financing moral hazard and learning we consider the provision of venture capital in a dynamic agency model the value of the venture project is initially uncertain and more information arrives by developing the project the allocation of the funds and the learning process are subject to moral hazard the optimal contract is a time varying share contract which provides intertemporal risk sharing between venture capitalist and entrepreneur the share of the entrepreneur reflects the value of a real option the option itself is based on the control of the funds the dynamic agency costs may be high and lead to an inefficient early stopping of the project a positive liquidation value explains the adoption of strip financing or convertible securities finally relationship financing including monitoring and the occasional replacement of the management improves the efficiency of the financial contracting

throwing good money after bad nuclear power plant investment decisions and the relevance of sunk costs abstract experimental psychologists and decision theorists suggest that managers are overly reluctant to terminate economically unviable projects and that they fail to ignore sunk costs this study serves two purposes first it shows that the framework of prospect theory allows us to reconcile the sunk cost effect with some older well established ideas in investment decision making secondly the study investigates the external validity of the sunk cost research in the context of the u s nuclear power program the empirical analysis is based on share price movements in reaction to among other events all plant completions and cancellations over 50 million prior to march 1984 the results are mixed however prudency reviews ordered by public service commissions around the nation point to evidence consistent with the sunk cost fallacy

distortions in world food markets in the wake of gatt evidence and policy implications abstract although the principle of trade liberalization has gained wide acceptance in recent years many policy makers in developing countries especially in latin america are exploring temporary import restrictions in the form of additional tariff protection to insulate domestic farmers from the impact of depressed prices until the uruguay round accord leads to higher world market prices for agricultural products the paper argues that there is little reason to believe that current world market prices will rise substantially in real terms even with the uruguay round accord fully implemented this finding suggests that additional tariff protection would not make economic sense

the uruguay round agreements impact on developing countries abstract implementation of the results of uruguay round will bring about significant increases in trade investment income and welfare for developing countries this derives from increased market access to developed countries markets and from enhanced efficiency originating from their own liberalization commitments although the distribution of benefits will be uneven developing countries will also benefit from improved rules for trade and investment coupled with enhanced institutional enforcement of these rules and greater exposure to global competition within a more predictable secure and credible international trading environment to maximize the benefits however developing countries will need to continue with recent unilateral reforms to improve their supply response

keeping your options open in standard models of experimentation the costs of project development consist of i the direct cost of running trials as well as ii the implicit opportunity cost of leaving alternative projects idle another natural type of experimentation cost the cost of holding on to the option of developing a currently inactive project has not been studied in a multi armed bandit model of experimentation in which inactive projects have explicit maintenance costs and can be irreversibly discarded i fully characterise the optimal experimentation policy and show that the decision maker s incentive to actively manage its options has important implications for the order of project development in the model an experimenter searches for a success among a number of projects by choosing both those to develop now and those to maintain for potential future development in the absence of maintenance costs the optimal experimentation policy has a stay with the winner property the projects that are more likely to succeed are developed rst maintenance costs provide incentives to bring the option value of less promising projects forward and under the optimal experimentation policy projects that are less likely to succeed are sometimes developed

why the wto is deadlocked and what can be done about it the gatt was hugely successful yet its successor organisation is to date failing this paper argues that the expansion in both scope and membership make it radically more difficult for a purely bargain based organisation to succeed three factors limit the scope for deals that would be recognised as mutually beneficial many developing countries are accustomed to transfers rather than bargains the poorest countries have no basis for bargaining and even where mutual advantage is possible it requires cross sectoral deals which are only feasible with new rules that are unattractive to many wto members the paper proposes solutions to these new problems it proposes an explicit component of transfer in the form of non reciprocated liberalisation it proposes a plurilateral solution to the tension between rules and sovereignty it links these through a grand bargain that offers transfers in return for plurilateralism for the marginalised countries it proposes time bound preferences in oecd markets along the lines of agoa finally to recreate for the larger developing countries similar incentives for liberalisation to those previously achieved for developed countries it proposes a limited mfn through which they could restrict their liberalisations to include only other developing countries

interest rates and investment in east asia an empirical evaluation of various financial liberalisation hypotheses the article attempts to shed light on the appropriate interest rate policy in the process of economic development to this end we examine whether higher interest rates lead to higher investment and growth in four east asian countries we find that the investment rate went up with real interest rates up to 9 per cent in all four countries but started declining at still higher interest rates in two of the countries further a banking crisis occurred in each of the three countries for which the real interest rates exceeded 9 per cent this evidence rejects the neo structuralist argument nor does it support unbridled financial liberalisation yet it provides only limited support to stiglitz s case for mild financial repression real interest rates near zero since reducing real interest rates from say 6 to 3 or 0 per cent would have reduced investment the optimum policy seems to be closest to mckinnon s restrained financial liberalisation policy that is liberalisation with a moderate upper lim

garment industry in sri lanka and the removal of gsp plus by eu the ready made garment industry plays an important role in sri lanka both in terms of export earnings and poverty alleviation through employment generation following the removal of gsp plus by eu in 2010 on the basis of alleged human right violations by the sri lankan government during the last stage of the civil war in 2009 and after it currently faces serious challenges in exporting to the eu its major market given the important role of the ready made garment industry in poverty alleviation through employment generation the impact of removal of gsp plus on the poor is examined in this paper the empirical results of this study demonstrate that poverty and income inequality are expected to be exacerbated in sri lanka as a result of the removal of gsp plus by the eu using non economic reasons such as human rights violation the results are also relevant for the renewed emphasis on trade preferences as a potential instrument for the millennium development goals and the debate on how trade preferences are to be designed to maximise their effectiveness in stimulating a manufacturing supply response

macroeconomic adjustment and private manufacturing investment in turkey a time series analysis despite the drastic switch to market based policies and outward orientation in turkey during the 1980s private investment in manufacturing industry has still not revived after seventeen years of structural adjustment this paper examines the main determinants of private investment in the manufacturing sector and the impacts of structural adjustment particularly financial liberalisation as an integral part of the reform on it the results show that liberalisation policies in financial markets appear to have positive effects by reducing the stringency of quantity constraints on investment while the high interest rates resulting from financial liberalisation had no significant impact on investment macroeconomic instability proxied by the variability of the inflation rate seems to have discouraged investment in manufacturing

financial liberalisation and private investment evidence from turkey abstract the paper tests for shifts in aggregate private investment functions for turkey as a consequence of financial liberalisation in the early 1980s results for a neoclassical model in error correction form suggest that the short run dynamics of investment were altered by financial liberalisation with reduced sensitivity to the availability of credit but with no evidence of increased sensitivity to the cost of capital estimation of an euler equation model indicates that credit constraints remained binding after liberalisation we interpret this as evidence of significant structural change to private investment functions after financial liberalisation but with credit constraints continuing to operate

investment spending and interest rate policy the case of financial liberalisation in turkey the purpose of the present study is to analyse the impact of interest rate policy on investment spending in turkey over a period which covers years of both financial repression and financial liberalisation the model presented suggests that investment will be positively correlated with below equilibrium interest rates and negatively correlated with above equilibrium rates the model is tested using a switching regime model with an unknown equilibrium rate of interest the results suggest that setting interest rates too high may be as detrimental to economic health as setting them too low moreover there is evidence of an autonomous downward shift in the investment function during the liberalisation period which may have resulted from heightened uncertainty during the period

a meta analysis of general and partial equilibrium simulations of trade liberalisation under the doha development agenda model based simulation of welfare effects is commonly used to make a case for trade liberalisation and to inform participants a nd stakeholders in trade negotiations however the simulated welfare effects of trade liberalisation vary greatly even across studies that model similar liberalisation scenarios this

global effects of developed country trade restrictions on textiles and apparel this paper uses an applied general equilibrium model to analyze the impacts of quota and tariff restrictions used by developed countries against textile and clothing imports from developing countries in the model countries are represented by their actual size in terms of gdp weakening rent transfer effects compared to partial equilibrium analysis results based on 1986 data suggest annual global gains from elimination of quotas and tariffs of around 23 billion in aggregate developing countries gain around 8 billion suggesting that gains to developing countries from improved access more than offset losses from foregone rent transfers as quotas and tariffs are abolished copyright 1990 by royal economic society

processed food trade and developing countries protection and trade liberalization abstract exports of processed foods from developing countries have expanded rapidly in recent times contributing to their economic development recent published research has shown that the export policies and agricultural resource endowment of the developing country offer significant explanations for this export growth but what if developing countries further lowered their tariff barriers against imports what impact would such policy changes have on processed food exports from developing countries alternatively what if processed food trade barriers are lowered in developed countries and if trade in manufactured goods were to be further liberalised what might be the impacts on the processed food sectors of developing countries an applied general equilibrium model is used to shed light on these questions through simulations of trade policy alternatives most developing regions examined had a positive effective protection rate for processed foods in the base year this effective protection was lowered when such countries reduced their agricultural tariffs when tariff cuts were extended to manufactured goods effective protection of food processing in most developing regions increased somewhat but was still less than base period protection for the developing countries it would appear that comprehensive trade policy reforms taken by themselves are about as significant as those of the developed world in terms of contributing to growth in processed food exports from developing countries such reforms allow those developing countries with a comparative advantage in food production to expand exports and to take advantage of increased access to other developing countries with a less favourable agricultural resource endowment as well as to developed country markets

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

a development friendly prioritisation of doha round proposals agriculture looms large on the wto s agenda it was the first substantive item listed in the work programme of the ministerial declaration launching the doha round and it was arguably at the centre of the failure at cancun developing countries made it clear both before and during the cancun meeting that progress on agriculture was their primary objective negotiations in other areas have received less attention and progressed more slowly this paper considers that prioritisation and suggests that the interests of developing countries in the current round of trade negotiations are much broader than is suggested by the narrow range of agricultural issues that have dominated negotiations a true development round would require a significant reprioritisation of many areas of the wto s current agenda

risk and trade regimes another exploration an analysis of a small sample of countries shows that the higher the level of termsof trade risk that a nation faces in international markets the more likely it is to increase barriers the analysis also shows that the greater the availability of social insurance programs mounted by a nation s government the less likely it is to block free trade in comparison with the small open economies of western europe therefore developing countries may remain protectionist because they lack the resources to mount internal programs of transfer payments as a means of coping with risk from international markets

meta analysis of general and partial equilibrium simulations of doha round outcomes quantification of welfare changes due to trade liberalization plays a crucial role for political decision making however significant differences in simulated gains from liberalization do not serve to increase confidence in quantitative assessments based on trade models a meta analysis of trade simulations under the wto doha round is employed to identify model characteristics that influence the magnitude of simulation results findings from a simple regression model are plausible and show that each simulation experiment represents a complex interaction of model characteristics and experimental settings that may not easily be communicated to nonexperts meta analysis proves to be useful for empirically assessing this complexity