quantitative restrictions and the welfare effects of capital inflows abstract this paper explores the welfare effects of capital inflows when some imports are subject to quantitative restrictions it is shown that in a heckscher ohlin model where all imports are restricted by quotas and some fraction of the initial domestic capital stock is foreign owned a capital inflow is welfare improving regardless of the ranking of sectoral factor intensities with sector specific capital stocks and both tariff ridden and quota restricted imports the consequences of direct foreign investment in any sector are uncertain and depend upon whether the two imports are compensated substitutes or complements as well as the characteristics of production

the development of nominal wage rigidity in the late 19th century wage price and output indexes suitable for comparing cyclical movements across decades show a decrease in nominal wage flexibility the change in wage inflation associated with output fluctuations after the 1880s following an increase in strike frequency linked to the spread of large scale manufacturing cross sectional data show that firms in industries experiencing more strikes in the 1880s were less likely to cut nominal wages in the depression of 1893 this and other evidence suggests that the nineteenth century decrease in wage flexibility was caused by an increase in workers bargaining power in the absence of binding wage contracts copyright 1993 by american economic association

tariff and quota reform with international capital mobility in a small open economy with a convex production set international capital mobility raises the cost of tariff protection on one subset of imports if there are irremovable quotas on another given irremovable quotas on one subset of imports free trade is the optimal policy toward all other imports with or without international capital mobility further in the scalar case international capital mobility reduces the optimal implicit excess tariff on the quota constrained import if an irremovable tariff is in place on the other import

changes in the cyclical sensitivity of wages in the united states 1891 1987 the conventional wisdom that nominal wages became less sensitive to the business cycle and more autocorrelated after world war ii is reexamined here by considering whether these properties are artifacts of the methods used to construct prewar wage series a replication based on these methods is more cyclically sensitive and exhibits less autocorrelation than the postwar data aggregation using variable instead of fixed employment weights also greatly exaggerates the cyclicality of prewar wages these biases imply that wages are just as sensitive to the cycle today as one hundred years ago perhaps even more so copyright 1992 by american economic association

tariffs real exchange rates and the trade balance in a two country world abstract an intertemporal model of a two country world in which optimizing agents consume three goods importables exportables and nontradables is developed to investigate a tariffs effects on real interest rates real exchange rates and the trade balance real interest rates and real exchange rates are shown to move asymmetrically across countries in response to a temporary tariff we also show that in contrast to the findings of two tradable good models a temporary tariff may actually worsen the trade balance of both deficit and surplus countries even when there are no cross country differences in tastes

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

domestic distortions and international trade in this paper we develop techniques for measuring the trade policy equivalent of domestic distortions using a distance function approach our measure the trade restrictiveness index is shown to equal the uniform tariff which is welfare equivalent to a given pattern of domestic taxes and subsidies we extend the index to incorporate taxes in markets for nontraded goods and factors of production and illustrate its operationality with an application to liberalisation in mexican agriculture we conclude that our index has considerable potential in empirical work and as an aid to trade negotiators it is widely appreciated that government policies of a purely domestic nature can have major implications for a country s international trade to give just one example such implications were widely discussed in the context of the recent gatt round in which u s negotiators insisted that intra ec agricultural policy should be viewed as trade distorting however analysts and negotiators have not hitherto had access to a conceptual framework which would allow the trade effects of domestic policies to be measured in a consistent way in this paper we propose such a framework and show how it may be implemented empirically of course other attempts have been made to quantify the overall distortionary effects of domestic policies these have involved constructing empirically based indexes such as producer or consumer subsidy equivalents 2 however such measures have no theoretical foundation moreover since they use the shares of different sectors in production or consumption as weights they are likely to be systematically biased for example sectors whose output levels are reduced by high taxation are assigned low weights whereas their true weights should be higher by contrast we show below that our approach is based firmly on welfare economics and correctly uses marginal rather than average production and consumption shares as weights the approach we propose draws on recent work by two of the authors anderson and neary 1990 1992b which dealt with trade distortions only that work developed a scalar index the trade restrictiveness index or tri which equals the equiproportionate rate of trade restriction which is equivalent in welfare terms to

mean reversion in long horizon real exchange rates evidence from latin america abstract this paper examines mean reversion in real effective exchange rates in six leading latin american economies during the xxth century using a new data set a unit root approach is complemented by an error correction model including key fundamentals such as terms of trade trade openness and relative productivities unit root testing shows a very slow process of reversion if any to a constant mean in the original series rejecting the strict ppp hypothesis however mean reversion is found after allowing for trends and structural breaks with a half life average of 1 years for the six countries we also found reversion to a conditional mean defined by the co integrating relationship with an average half life of 2 years our estimates although lower than the 3 5 year range that motivated the rogoff s puzzle still indicate the presence of important obstacles to the adjustment process that need further investigation

export share requirements and unemployment the case of quota trade restrictions such as import tariffs have been a common practice for protecting domestic import competing industries in most less developed countries ldcs foreign firms may however circumvent such protection through direct investment in the host countries this is the well known tariff jumping direct foreign investment which has been examined by brecher and diaz alejandro 7 they show that the foreign capital inflow leads to overproduction of the output of tariff protected sectors and hence results in welfare reduction recently rodrik 17 demonstrates that export share requirements when applied to the output produced by foreign capital may offset the negative effect of foreign direct investment through the contraction of tariffprotected overproduced sectors thus an increase in such a requirement may actually improve welfare this result contradicts the earlier finding of davidson matusz and kreinin 11 which is obtained from a partial equilibrium framework the existing literature on export share requirements remains deficient in two respects first the full employment models have been deployed ignoring the fact that most ldcs suffer from massive unemployment second the analysis has been confined by and large to tariff protection thereby neglecting quantitative trade restrictions e g import quotas it is noteworthy that it is quotas rather than tariffs which constitute a major constraint on imports by developing countries 2 the purpose of this paper is thus to remedy these two shortcomings by developing a sectorspecific unemployment general equilibrium model with quota restrictions on imports as noted by richardson 16 export performance requirements operate in a second best environment import

commercial policy the terms of trade and the real exchange rate revisited abstract we estimate the effects of commercial policy and changes in the external terms of trade on the real exchange rate for four latin american economies using data on internal relative prices we find that the greater the elasticity of the non traded price level with respect to the price of importables the larger is the real exchange rate effect of import restrictions but the smaller is the real exchange rate effect of changes in the external terms of trade

sleeping quotas pre emptive quota bidding and monopoly power abstract we rationalize the puzzling existence of binding quotas that are not fully utilized our model has its roots in bhagwati 1965 in r baldwin et al eds trade growth and the balance of payments essays in honor of g haberler mit press new york on tariffs quotas equivalence and is related to the io literature on preemption we study the conditions that lead a monopolist facing a quota restricted market to buy the quota licenses itself and the conditions under which they may remain unused the divisibility of the quota is crucial for the monopolist to pre emptively buy the quota furthermore we study the implications of use it orlose it clauses commonly imposed on auctioned quotas

globalisation and factor returns in competitive markets abstract the standard competitive trade model extended to include many goods and factors is used to analyze the effect of goods and factor market integration on average international disparities in the real returns of internationally immobile factors it is shown that goods market integration decreases international real return differentials for all factors we derive sufficient conditions for this result to hold for the subgroup of internationally immobile factors as well while there is a presumption for similar results to hold with international factor market integration we show that this is true for international migration but in general not for international investment

the relation between savings and growth cointegration and causality evidence from asia the direction of causality between savings and growth remains unclear even though it is of critical importance for development policy in this paper granger causality analysis is undertaken for seven asian countries using the vecm engle and granger and var procedures we find that in most cases the direction of causality runs primarily from growth or income to savings although in some countries there is also evidence of a feedback effect from savings to income and growth thus development policy should focus less on promoting high savings rates and more on promoting high growth rates estimation of the savings functions are presented using engle and granger s static ols and stock and watson s dynamic ols dols procedures where appropriate the high savings rates in asia are found to be due to the high rate of growth of income per capita declining shares of dependent population and some special institutional features such as the high central provident fund rates in singapore interest rates ar

the determination of the real exchange rate the productivity approach abstract this paper explains deviations of exchange rates from purchasing power parity with the differences between countries of the relative growth rates of labor productivity between traded and nontraded sectors two cases are considered germany and japan versus their respective major trading partners the results show that the time series methodology yields a more favorable confirmation of the productivity differential model than the cross section regressions in the literature

protection and the shadow price of foreign exchange with increasing returns and international capital mobility in an economy with an external increasing returns technology and a convex pro duction set international capital mobility reduces the shadow price of foreign exchange if quotas or vers are in force but leaves this shadow price unaltered if tariffs are in place protection et prix de reference des devises etrangeres quand il y rendements croissants et mobilite internationale du capital dans une economie dot6e d une technologie a rendements croissants et d un ensemble de production convexe la mobilit6 internationale du capital r6duit le prix de ref6rence des devises 6trangeres quand on a des contingentements ou des restrictions volontaires a 1 exportation mais laisse le prix de r6f6rence inchange quand on a des droits de douane

macro policy responses to natural resource windfalls and the crash in commodity prices policy prescriptions for managing natural resource windfalls are based on the permanent income hypothesis none of the windfall is invested at home and saving in an intergenerational swf is dictated by smoothing consumption across different generations furthermore with dutch disease effects the optimal response is to intertemporally smooth the real exchange rate smooth public and private consumption and limit sharp fluctuations in the intersectoral allocation of production factors we show that these prescriptions need to be modified for the following reasons first to cope with volatile commodity prices precautionary buffers should be put in a stabilisation fund second with imperfect access to capital markets the windfall must be used to curb capital scarcity invest domestically and bring consumption forward third with real wage rigidity consumption must also be brought forward to mitigate transient unemployment fourth the real exchange rate has to temporarily appreciate to signal the need to invest in the domestic economy to gradually improve the ability to absorb the extra spending from the windfall fifth with finite lives the timing of handing back the windfall to the private sector matters and consumption and the real exchange rate will be volatile finally with nominal wage rigidity we show that a taylor rule is a better short run response to a crash in commodity prices than a nominal exchange rate peg

commodity currencies and the real exchange rate abstract this paper shows that a change in the terms of trade of a commodity exporting country could cause the relative price of nontraded goods to rise or fall depending on the strength of income and substitution effects

the impact of foreign capital inflows on domestic savings reexamined the case of argentina abstract since the beginning of the 1970 s several economists have argued that there is a negative relationship between foreign capital inflows f and domestic savings s this paper attempts to demonstrate that the framework used by these authors is not appropriate to analyze the impact of f on s the early empirical results may actually be a consequence of exogenous factors such as monetary and fiscal policies

spurious volatility in historical unemployment data this paper shows that the stabilization of the unemployment rate between the pre 1930 and post 1948 eras is an artifact of improvements in data collection procedures prewar methods are used to construct postwar unemployment data that are consistent with the historical data the constructed postwar series is nearly as volatile as the pre 1930 unemployment data the constructed postwar data are systematically more volatile than the actual postwar data because the cyclical behavior of the labor force and productivity are misspecified in the construction procedures the relationship between the actual and constructed postwar unemployment series is used to construct new historical data

cyclical comovements in industrial labor and product markets theory and evidence i introduction cyclical fluctuations among economic variables are at the heart of the study of business cycles the explanations for the real and inflationary effects of business cycles can be classified into equilibrium and new keynesian alternatives the equilibrium explanation of business cycles pioneered by lucas 1973 relies on imperfect information about sources of demand shifts that provide an explanation for the output inflation tradeoff in the face of aggregate demand shifts in contrast the common theme of the new keynesian explanation of business cycles concerns nominal rigidity that interferes with market forces in determining the allocation of cyclical shifts among nominal and real magnitudes the form of rigidity varies between sticky price and sticky wage new keynesian explanations the former see e g ball mankiw and romer 1988 advocates the presence of menu costs that determine the frequency of price adjustment and in turn the output inflation tradeoff in contrast contractual wage rigidity see e g gray 1978 advocates the presence of implicit or explicit agreements that determine the frequency of wage and salary negotiations across the economy wage flexibility determines in turn the output inflation tradeoff during business cycles the detailed treatment of cyclical conditions in the labor market is among the primary differences between the contractual wage rigidity explanation and contending explanations of business cycles conditions in the labor market determine cyclical fluctuations in wages and labor employment the resulting tradeoff between wage inflation and unemployment is crucial in determining the price and quantity effects of cyclical fluctuations in contrast conditions in the labor market are not crucial to competing explanations of business cycles in the context of the lucas imperfect information model agents are assumed to be self employed for simplicity this eliminates the need for an explicit treatment of the cyclical fluctuations of wages in the context of the sticky price new keynesian models wages may vary according to conditions in a walrasian labor market or in the form of installment payments that do not fluctuate with the cycle accordingly conditions in the labor market do not explain the output inflation tradeoff during business cycles because business cycles are inherently complex economic phenomena theories tend to be highly controversial this in turn has stimulated the interest of macroeconometric researchers to establish the empirical validity of business cycle theories 1 efforts have focused on testable hypotheses that establish the empirical validity of the alternative explanations in this investigation we seek to contribute to these efforts more specifically the analysis of the paper will seek to evaluate the validity of the unique implications of the sticky wage explanation of business cycles concerning correlations between labor market conditions and the output inflation tradeoff towards this objective we investigate a sample of 28 private u s industries first we use time series data to estimate the cyclical responses of output inflation nominal and real wages to demand and supply shocks impinging on the stochastic structure of each industry the nominal and real wage responses to the various shocks will serve as a measure of the degree of wage flexibility further according to the contractual wage rigidity theory wage rigidity can be influenced by the duration of wage contracts as well as the presence of wage indexation without wage indexation longer contracts are associated with a larger cyclical response of the real wage to demand and supply shocks thus the labor market is hypothesized to be a primary source that influences the output inflation tradeoff across industries secondly we use our time series estimates indicating the cyclical response of wages output and prices to various shocks as a source of data enabling us to provide a comprehensive cross sectional evaluation of the contractual wage rigidity hypothesis

the effects of import quotas on national welfare does money matter recent evidence shows that there is an increasing use of non tariff barriers to trade ntbs and especially of quantitative restrictions such as import quotas in the world economy to protect import competing industries see table i 1 international trade theory however has traditionally focused on the welfare effects of tariffs as well as on the equivalence between tariffs and quotas with little attention paid to the welfare implications of quotas the latter have basically been restricted within the traditional heckscher ohlin trade model where for the case of a small open economy import quotas always reduce welfare a few recent studies have attempted to fill in this gap in the literature for instance young 19 compares optimal tariffs and quotas for a large country in a stochastic environment neary 14 on the other hand investigates the welfare implications of tariffs quotas and voluntary export restraints under different assumptions on capital mobility finally chao hwang and yu 3 4 examine the welfare effects of import quotas under variable returns to scale although the existing literature has generated important policy implications most of the analysis has been conducted within a barter exchange framework it is well known however that the introduction of money can alter results obtained within a non monetary environment 2 accordingly this paper attempts to re examine the welfare effects of import quotas for a small monetary economy we develop a two sector trade model in which money enters the economy

solving the feldstein horioka puzzle with financial frictions unlike the prediction of a frictionless open economy model long term average savings and investment rates are highly correlated across countries a puzzle first identified by feldstein and horioka 1980 we quantitatively investigate the impact of two types of financial frictions on this correlation one is limited enforcement w here contracts are enforced by the threat of default penalties the other is limited spanning where the only asset available is noncontingent bonds we find that the calibrated model with both frictions produces a savings investment correlation and a volume of capital flows close to the data to solve the puzzle the limited enforcement friction needs low default penalties under which capital flows are much lower than those in the data and the limited spanning friction needs to exogenously restrict capital flows to the observed level when combined the two frictions interact to endogenously restrict capital flows and thereby solve the feldstein horioka puzzle

import restrictions capital taxes and welfare this paper develops a two good small country general equilibrium model with trade restrictions i e a tariff an import quota or a voluntary export restraint ver inter national capital mobility and taxes on the rate of return to capital within this context it examines the price and welfare effects of capital taxes the second best policy towards capital in the presence of such trade restrictions and the welfare implications of trade liberalization in the presence of capital taxes the analysis demonstrates among other things that i the optimal policy towards capital is a zero tax when imports are quota constrained and is a tax under a tariff and a subsidy under a ver when the imported good is capital intensive and that ii an asymmetry exists between trade and capital movements liberalization under the various trade regimes

rationing in an open economy fix price equilibrium and two gap models abstract two gap models have been criticized severely for the lack of realism of their assumptions but are still prominent in development planning and implicitly in discussions of short run policy problems here the model s applicability outside a command economy is considered by comparing it with a rationing model with proper micro foundations it is shown that the two gap model in general violates fix price equilibrium properties but that the fix price model generates quite similar results

on exchange rates nominal and real abstract the paper first develops an australian commodity currency exchange rate model which is extended to deal with real exchange rates as well the nominal and real exchange rate versions are then tested on swiss data for the post bretton woods period while the model tracks the swiss franc nominal exchange rate vis a vis the dollar and the major european currencies very well swiss ppp real exchange rates are found to be heavily contaminated with measurement error as that error explains the large co movements in nominal and ppp real exchange rates those co movements are largely irrelevant to the ppp debate

changes in business cycles evidence and explanations this paper shows that the volatility of annual real macroeconomic indicators for the united states and the average severity of recessions have declined only slightly between the pre world war i and post world war ii eras recessions have however become somewhat less frequent and more uniform it argues that the advent of macroeconomic policy after world war ii can account for both the observed continuity and change countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions at the same time policy induced booms and recessions have led to continued volatility of the postwar economy

the nation in depression t he economic cataclysm of the 1930s was an international phenomenon experienced by countries in all parts of the globe countries as diverse as the united states germany chile and japan all experienced significant depressions in the 1930s thus the title of charles kindleberger s classic book the world in depression 1973 captures an important feature of the great depression these international aspects especially the importance of the gold standard in causing the downturn and transmitting depression from one country to another have been emphasized in recent years in excellent books by peter temin 1989 and barry eichengreen 1992 these books have rightly received widespread attention and have successfully changed the focus of much analysis of the great depression from the united states to the world economy while such a change from american provincialism is surely healthy and warranted adopting an international perspective on the great depression risks losing sight of the many ways in which the u s depression differed in timing and severity from depressions elsewhere more important it may obscure the many uniquely american causes of america s great depression this paper examines the ways in which the u s experience during the 1930s resembled that of other countries in some regards and fundamentally differed in other aspects i also evaluate the evidence on the causes of the great depression in the united states and the sources of the eventual recovery i suggest that the path of american output and unemployment before 1931 can be explained quite well with only domestic factors even after 1931

foreign aid economic structure and dependence abstract an inflow of foreign capital leads to structural changes in the economy by lowering the relative price of tradable to non tradable goods it induces a decline of the relative share of tradables in the country s production the effect on consumption shares is less obvious since price and income effects may tend to be offsetting the existence of foreign aid also establishes a dependence of the economy on the outside world estimates of the degree of such dependence through the use of national accounts aggregates would be biased by the afore mentioned effect on relative prices hence specifically estimates of time tends based on the use of current prices may lead to different conclusions from those which employ constant prices for comparison the inferences of this paper are derived in a simple two sector small country model the concreteness and probable relevance of the main propositions are then demonstrated by empirical illustrations

terms of trade and real exchange rates the canadian evidence abstract this paper presents empirical evidence linking the canada us real exchange rate with the terms of trade using recently developed econometric methods for nondashstationary data we find that the real exchange rate is cointegrated with terms of trade variables and that causality runs from the terms of trade to the exchange rate we then construct a simple exchange rate equation that satisfies several specification tests and performs better than a random walk in post sample forecasting experiments the results suggest that much of the variation in the real exchange rate is attributable to movements in the terms of trade and that the influence of monetary factors is secondary

on the impact of volatility on the real exchange rate terms of trade nexus revisiting commodity currencies abstract the aim of this paper is to study the relationship between terms of trade and real exchange rates in commodity producing countries on both the short and the long run we investigate potential non linearity in the real exchange rate terms of trade nexus according to the level of volatility in commodity and financial markets to this end we consider a panel of 68 commodity exporters split in sub samples of advanced intermediate and low income countries we first show that there is a long run relationship between real exchange rates and terms of trade taking also into account productivity and net foreign assets then we run panel smooth transition regressions to estimate the adjustment process of the real effective exchange rate to its equilibrium value depending on different proxies of volatility our results show that only advanced oil exporters currencies are sensitive to changes in terms of trade in the short run especially when volatility is high on commodity markets

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

trade liberalization in oligopolistic competition with unemployment a general equilibrium analysis this paper examines the short and long run effects of partial trade liberalization through relaxation of quantity restrictions in an oligopolistically competitive economy with unemployment while the short run effects of the liberalization policy are ambiguous its long run impacts are clear the policy dampens the price of the imported goods raises firms output and reduces the number of firms furthermore the policy lowers the unem ployment ratio and hence improves welfare when the economy suffers from sector specific unemployment whereas the policy may aggravate underemployment and thus may lower welfare for a labour surplus economy

the macroeconomic impact of development aid a critical survey the early literature explained aid s macroeconomic impact in the context of the dual gap model showing a clear link between aid and growth many now believe that the empirical evidence shows there to be no such relationship this paper critically reviews the different theoretical perspectives the dual gap model the savings debate recipient fiscal response and aid as dutch disease and the empirical debates on aid savings and growth the basis for denying a relationship between aid and growth is shown to be weak though more recent areas of research offer promising directions for future work

boom goes the price giant resource discoveries and real exchange rate appreciation we estimate the effect of giant oil and gas discoveries on bilateral real exchange rates the size and plausibly exogenous timing of such discoveries make them ideal for identifying the effects of an anticipated resource boom on prices we find that a giant discovery with the value of a country s gdp increases the real exchange rate by 14 within 10 years following the discovery the appreciation is nearly exclusively driven by an appreciation of the prices of non tradable goods we show that these empirical results are qualitatively and quantitatively in line with a calibrated model with forward looking behaviour and dutch disease dynamics

foreign capital inflows and welfare in an economy with imperfect competition abstract this paper examines the resource allocational and welfare effects of exogenous inflows of foreign capital in a general equilibrium model with oligopolistic competition and unemployment although the welfare impact for the short run is ambiguous and dependent upon the strength of excess profits and scale economies relative to unemployment in manufacturing in the long run additional inflows of foreign capital always improve national welfare with capital mobility hence attracting foreign capital remains a sound policy for economies characterized by imperfect competition scale economies and regional unemployment

tariffs quotas and voluntary export restraints with and without internationally mobile capital this paper presents a general framework for comparing the effects of tariffs quotas and vers voluntary export restraints both with and without international capital mobility expressions for the shadow price of foreign exchange and the shadow price of capital under each type of trade restriction are derived and it is shown that although international capital mobility raises the welfare cost of tariff protection it lowers the welfare cost of quantitative restrictions in most cases the effects of exogenous shocks in the presence of quotas are intermediate between those in the presence of tariffs and those in the presence of vers tarifs douaniers contingentements et restrictions volontaires d l exportation quand le capital est ou n est pas mobile internationalement l auteur presente un cadre general d analyse qu il utilise pour comparer les effets de tarifs douaniers de contingentements et de restrictions volontaires a l exportation dans des contextes ofu le capital est ou n est pas mobile internationalement l auteur derive le prix fictif du change etranger et le prix fictif du capital sous l un et l autre types de restrictions au commerce et montre que meme si la mobilite internationale du capital augmente le cofut en terme de bien etre de la protection tarifaire elle reduit le cofut en terme de bien etre des restrictions sur les quantites echangees dans tous les cas les effets de chocs exogenes quand des contingentements existent sont toujours dans la fourchette entre ceux qu on observe quand des tarifs douaniers existent et ceux qui prevalent quand des restrictions volontaires i l exportation existent

external increasing returns and the shadow price of foreign exchange abstract this paper shows that under external increasing returns to scale and a strictly concave production possibilities frontier the shadow price of foreign exchange in the presence of a tariff is the same as that in an economy with purely constant returns to scale however with a quota or a voluntary export restraint this shadow price is in general quite different from that in a purely constant returns to scale economy

does euro or dollar pegging impact the real exchange rate the case of oil and commodity currencies the aim of this paper is to investigate the equilibrium exchange rates for commodity and oil currencies as well as the discrepancies of their observed exchange rates to these equilibriums to this end first we estimate a long term relationship between the real effective exchange rate and economic fundamentals including the commodity terms of trade the estimation relies on panel cointegration techniques and covers annual data from 1980 to 2007 our results show that real exchange rates co move with commodity prices in the long run and respond to oil price somewhat less than to commodity prices second we assess the degree of misalignment of these currencies as the gap between their observed exchange rate and the estimated equilibrium exchange rate we show that these misalignments are not significantly related to the exchange rate regimes adopted by the countries either pegged or floating however for pegged currencies the size of misalignments significantly depends on the anchor currency either the euro or the dollar a comparison of misalignments of pegged commodity and oil currencies across different periods confirms these results during periods of dollar euro overvaluation currencies pegged to the dollar euro tend to be overvalued the reverse being true when the dollar euro is undervalued consequently pegged currencies are often driven away from their equilibria by wild fluctuations in the key currencies on which they are anchored

tariffs quotas and domestic content protection some political economy considerations in this paper we have focused our attention on the relation between the configuration of protection seeking and of rent seeking interests and the choice of the protection instruments in doing so we have abstracted from the problem of nonequivalence of tariffs and quotas recent writings on product differentiation rodriguez 1979 donnenfeld 1984 have thrown new light on this old issue it may well be that the discussion is of key importance to the understanding of industry s predilection for quantitative restraints we also failed to deal with the question on nonequivalence of restrictive measures under conditions of uncertainty finally we touched only peripherally on the interaction among state it is perhaps more realistic to regard trade barrier formation as a game among nations as in baldwin and clarke 1985 every player seeks at once to protect its import substituting industries and to promote its exports by putting up barriers and by demanding that others lower theirs this approach is more suited however to explain the severity of restraints than it is to explain the nature of restraints which is the problem at hand trade restrictions have a protective and a revenue effect in less developed countries with ineffectual internal revenue collecting systems revenue seeking governments may ally themselves with protection seeking emergent industries and institute high tariffs tariffs and quotas may coexist if the trade restriction seeking alliance includes traders voluntary export restraints the newest of the protective devices may be popular because they circumvent international treaties and short circuit cumbersome procedures associated with changes in tariffs or quotas but they also have the virtue of inviting foreign exporters to act like price setters the harm to the foreign exporters is thereby mitigated in fact exporters may be gainers hence the danger of retaliatory action on the part of foreign governments is lessened domestic content legislation is a unique device in that the same domestic factor benefits from protection and also collects the protection created revenue we show the formal identity between the south african situation in which the maximum black white worker ratio is a binding constraint and regulations requiring that a given percentage of the value of the product be domestically produced we also derive formally the maximum permissible foreign content ratio which is optimal from the point of view of the protected interests in our analysis we have said virtually nothing about the victims of protectionism a discussion of the impact of the various measures on those who bear the cost of protection would doubtless deepen our understanding of the problem we should thus consider the magnitude of the deadweight loss and of the income transfer and the concentration or dispersion of the losers last but not least we should consider the question of awareness thus the cost impact of a tariff is easier to perceive than that of a quota with the cost of a ver or of domestic import content rule the most difficult to calculate of all it may be that the principle of the hiding hand is as important to the new political economy as the benthamite principles were to the old

import quotas and vers a comparative analysis in a three country framework abstract because a ver is inherently discriminatory the traditional two country analysis comparing it to a quota is inadequate this paper adopts a general equilibrium three country approach to compare tariffs quotas and vers a quota equivalent ver is defined alternatively in terms of quantity or price the welfare of the importing country is higher under a quota and that of the non restricted exporter is higher under a ver the welfare comparison for the ver restricted country is ambiguous a result which is at variance with conventional wisdom

determinants of the equilibrium real exchange rate n b professor neary was based at university college dublin and queen s university ontario canada when this article was first published the full text of this article is not available in ora at this time citation neary j p 1988 determinants of the equilibrium real exchange rate american economic review 78 1 210 215

protection and the harmful effects of endogenous capital flows abstract assume a country has in place a binding tariff and is a price taker on world markets in which capital is internationally mobile and unimpeded regardless of trade patterns possible specificity of capital or factor intensities an increase in the tariff harms the country if capital is frozen and harms the country even more when capital mobility brings rates of return into line among countries

exports investment efficiency and economic growth in ldc an empirical investigation this study seeks to analyse the relationship between exports and growth for 19 less developed countries it utilizes multivariate causality analysis based on the error correction model to address several important hypotheses the results indicate that when exports have a causal influence in the development process that in general this is the result of their effect on both efficiency and accumulation in addition improvements in output and capital accumulation in an economy seem to have just as much of an influence on exports as exports have on output and capital accumulation finally the growth process in east asia seems to be quite different from that in southeast asia

war and pestilence as labor market shocks u s manufacturing wage growth 1914 1919 there is not a single expert machinist in the labor market today if such a one exists he will be able to command his own wages the arkansas gazette october 22 1918 1 i introduction the possibility of a worldwide influenza pandemic in the near future is of growing concern for many countries around the globe the world bank estimates that a global influenza pandemic would cost the world economy 800 kill tens of millions of people 2 researchers at the u s centers for disease control and prevention calculate that deaths in the united states could reach 207 000 and the initial cost to the economy could approach 166 billion or roughly 1 5 of gdp 3 the u s department of health and human services paints a more dire picture up to 1 9 million dead in the united states and initial economic costs near 200 billion 4 while researchers and public officials can only speculate on the likelihood of a global influenza pandemic many of the worst case scenario predictions for a current pandemic are based on the global influenza pandemic of 1918 this global pandemic often termed the spanish flu killed 675 000 people in the united states nearly 0 8 of the 1910 population and nearly 40 million people worldwide 5 only the black death of 13481351 is estimated to have killed more people roughly 60 million over a similar time period 6 the global magnitude and spread of the 1918 influenza pandemic was exacerbated by world war i which itself is estimated to have killed roughly 10 million civilians and 9 million troops nicolson 1980 not only did the mass movement of troops from around the world lead to the spread of the disease tens of thousands of allied and central power troops died as a result of the influenza rather than combat although combat deaths in world war i did increase the mortality rates for participating countries civilian mortality rates from the 1918 influenza were typically much higher for the united states estimates of combat related troop mortalities are about one tenth that of civilian mortalities from the 1918 influenza given the magnitudes and the concurrence of both the 1918 influenza pandemic and world war i one would expect volumes of research on the economic effects of each event although there does exist a significant literature on the economic consequences of world war i rockoff 2004 the scope of published research on the economic effects of the 1918 influenza pandemic is scant 8 most research that has been done has focused on the health and economic outcomes of decedents of pandemic survivors almond 2006 keyfits and flieger 1968 and mortality differences across socioeconomic classes mamelund 2006 noymer and garenne 2000 this paper contributes to the literature on the economic effects of the 1918 influenza pandemic and world war i by exploring the influence of mortalities from these concurrent events on the growth of manufacturing wages in u s states and cities over the period 1914 1919 9 the general conceptual foundation for the paper is that ceteris paribus both of these events resulted in a large number of deaths which constituted a significant negative shock to manufacturing labor supply and thereby would have increased wages in the manufacturing sector immediately following both events a similar conceptual framework has been used in studies that explored the economic effects of the black death campbell 1997 karakacili 2004 and the effects of immigration on labor markets borjas 1987 card 1990 greenwood and mcdowell 1986 the analysis presented here is the first to separate the potential manufacturing labor market effects of world war i and the 1918 influenza this is an interesting exercise given that mortalities from the 1918 influenza were nearly ten times greater than world war i combat mortalities but world war i combat mortalities were more likely men aged roughly 18 44 prime ages for manufacturing workers

does inequality drive the dutch disease theory and evidence in this paper we show that the dutch disease can arise solely from inequality in the distribution of natural resource rents given two otherwise identical countries that differ only in the ownership shares of the natural resource rents the country with the less equal distribution will have less production of manufacturing goods and less development of learning by doing in this sector as opposed to conventional models where income distribution has no effect on economic outcomes an unequal distribution of the resource wealth can generate the dutch disease dynamics even in countries with an initial comparative advantage in manufacturing we also provide a range of empirical tests of our model including both difference and system gmm estimators in a dynamic panel to disentangle the effects of inequality and institutional quality we purge our inequality measure of any linear or higher order correlations with institutional quality and repeat our system and difference gmm estimations our empirical analysis supports the hypothesis that inequality indeed plays a significant role in whether being resource rich is a blessing or a curse for a country the more unequal is the distribution of natural resource rents the stronger is the disease

welfare gains from capital inflows under import quotas abstract the presence of tariffs was assumed in the literature which examined the effect of additional foreign investment on the welfare of the host country in the small country setting however this paper analyzes the case of import quotas and shows that additional inflows of foreign capital improve the host country s welfare when import quotas are kept constant

explaining service price differences in international comparisons this paper reexamines observed international differences in the price of services and the positive correlation of these with per capita gdp differences using a general trade model with a nontraced sector the authors find that differences in countries factor endowments populations trade policies and trade balances will have ambiguous and sometimes opposite effects on their service prices and real incomes estimating the service price equation using recent data suggests that larger endowments of agricultural land minerals and capital larger trade deficits and higher prices for tradables increase service prices conversely larger populations and labor forces reduce service prices copyright 1991 by american economic association

binding constraint on economic growth under export oriented industrialization and globalization the two gap model of economic growth implies that different constraints on economic growth namely the savings and the foreign exchange availability are binding at different times this article estimates these varying binding constraints in 16 countries in east and southeast asia and latin america and explores their differences across countries regions and periods i show that the east and southeast asian countries which are recognized to be successful in export oriented industrialization are less constrained by the foreign exchange availability with reinforced export capacity than the latin american countries which had carried some inertia of import substituting industrialization policy until the 1980s in addition the economic growth turns out to be more constrained by the domestic savings in recent years which can be a reflection of capital account liberalization policies typically implemented in the late 1980s and 1990s and or a diminishing return to export led growth in either case this mi

increasing returns urban unemployment and international capital mobility a trade policy analysis abstract this paper compares the effects of tariffs quotas and ver both with and without international capital mobility for a small open economy facing urban unemployment of unskilled labor and external increasing returns in the manufacturing sector expressions for the shadow price of foreign exchange and capital are derived under each type of trade restriction it is shown that international capital mobility in such an economy unambiguously lowers the welfare cost of all forms of trade restriction in contrast to the existing literature on full employment crs economy where international capital mobility unambiguously raises the welfare cost of tariff protection

the real exchange rate under various systems of international capital taxation international organizations such as the organization for economic co operation and development oecd and the european community ec have promoted to varying degrees the liberalization of capital movements among their member countries the code of liberalization of capital movements an agreement drawn in 1982 by the oecd sets different degrees of capital liberalization among its member countries depending on the nature of capital transactions e g direct or portfolio investment the treaty of rome 1957 recommended among other things the liberalization of capital movements among the ec countries chapter iv articles 67 72 by and large capital movements in the ec have been liberalized since 1990 the remaining restrictions in the capital markets of some member countries such as greece ireland portugal and spain were to be eliminated by the end of 1992 2 these developments in the world capital markets have prompted a renewed interest among trade theorists regarding the response of key economic variables e g national income employment and welfare to the liberalization of capital movements with capital becoming more mobile internationally capital flows in a country depend among other things on the domestic and the foreign capital tax rate and on the prevailing system of taxing net repatriated capital earnings in the capital exporting countries frequently capitalexporting countries tax the net repatriated capital earnings according to a system i of tax credits under which tax payments by foreign capital invested in a capital importing country are credited toward its tax liability to the source capital exporting country 3 ii of tax deductions under which

the ghost of financing gap testing the growth model used in the international financial institutions abstract the harrod domar growth model supposedly died long ago still today economists in the international financial institutions ifis apply the harrod domar model to calculate short run investment requirements for a target growth rate they then calculate a financing gap between the required investment and available resources and often fill the financing gap with foreign aid the financing gap model has two simple predictions 1 aid will go into investment one for one and 2 there will be a fixed linear relationship between growth and investment in the short run the data soundly reject these two predictions of the financing gap model

welfare effects of quotas under variable returns to scale recently there has been a growing use of quantitative restrictions on imports by countries for protecting their import competing industries it is well known that the quantitative restriction on imports set below the free trade level would result in higher domestic prices smaller quantities of importables available to consumers and hence a reduction in national real income thus import quotas similar to tariffs in a small economy reduce welfare this result has been derived in the traditional heckscher ohlin trade model with production functions subject to constant returns to scale crs while the assumption of crs greatly simplifies the analysis it is not easily justified in view of reality firms usually are exposed to various kinds of externalities which give rise to economies or diseconomies of scale

stuck on gold real exchange rate volatility and the rise and fall of the gold standard 1875 1939 abstract did the gold standard diminish macroeconomic volatility supporters thought so critics thought not and theory offers ambiguous messages hard regimes like the gold standard limit monetary shocks by tying policymakers hands but exchange rate inflexibility compromises shock absorption in a world of real disturbances and nominal stickiness a model shows how lack of flexibility affects the transmission of terms of trade shocks evidence from the late nineteenth and early twentieth century exposes a dramatic change the classical gold standard did absorb shocks but the interwar gold standard did not supporting the view that the interwar gold standard was a poor regime choice

are wholly foreign owned enterprises better than joint ventures abstract this paper provides a general equilibrium model for examining the individual as well as the joint effects of export requirements and local equity controls of multinational firms the results suggest that for a small open economy under tariff protection the desirable policy is 100 foreign ownership of subsidiaries coupled with an export share requirement

is deflation costly after all the perils of erroneous historical classifications i estimate average economic activity during periods of inflation and deflation while accounting for measurement errors in 19th century prices these measurement errors lead to underestimation overestimation of economic activity during periods of inflation deflation by exploiting multiple deflation indicators it is possible to recover the true relationship the shortfall of us industrial production growth during periods of deflation ranges from 4 5 pp to 7 6 pp instead of 2 pp i also find a negative relationship between deflation and real activity in the uk i then examine the cross country variation in the estimates for eleven countries the patterns are consistent with stronger biases for countries with more serious measurement errors in prices

the foreign exchange constraint suppression of the trade deficit and the shadow price of foreign exchange in a fix price economy abstract the foreign exchange gap is analysed as a possible feature of a fix price economy the implications of closing the gap by means of import rationing are then discussed finally a set of shadow rates of exchange is derived these shadow prices are conditional on the prevailing regimes and include the paradoxical possibility of a negative shadow rate of exchange

welfare implications of growth under quotas abstract using the standard trade model it is shown that growth under quotas always improves welfare this result is contrary to johnson s 1967 result on the possibilities of immeserizing growth in the presence of tariffs

reconstructing the pattern of american unemployment before the first world war this paper calculates the distribution of unemployment duration lengths and transition rates for massachusetts workers in the late nineteenth century using data on time spent out of work and assuming that the spell durations followed a weibull distribution i parameterize a model of the timing of transitions from unemployment to employment and vice versa i then simulate the employment experience of representative workers and construct distributionis of completed spell lengths the experience of most out of work workers in a year seems to have been in one rather long spell rather than in shorter multiple ones

effects of quotas under variable returns to scale the large country case the welfare effects of import quotas have been studied by a host of trade theorists see for example dei 8 brecher and bhagwati 3 and neary 20 recently chao hwang and yu 4 have examined the welfare impacts of quotas under variable returns to scale vrs for a small home economy the purpose of this paper is to consider the welfare effects of quotas under vrs in a two country trading world the large country case for both the home as well as the foreign country specifically we will explore the conditions under which a quota can benefit either the home country the foreign country or both countries in addition we will derive and interpret a formula for computing the second best quota in the presence of vrs

why voluntary export restraints are voluntary the paper presents an analysis of the effect upon an oligopolistic equilibrium of introducing a voluntary export restraint ver upon an importing firm a ver set at the free trade level of imports is shown to raise the profits of all firms within the industry the result follows as the imposition of a ver upon a free trade nash price competition forces the domestic firm to become an industry price leader the ver raises industry prices by facilitating collusion and lowers consumer welfare pourquoi les restrictions volontaires d 1 exportation sont volontaires ce memoire presente une analyse des effets de l introduction de restrictions volontaires a l exportation rve sur une entreprise qui importe dans un monde en equilibre oligopolistique on montre que l introduction de rve approximant le niveau des importations en regime de libre echange devrait augmenter les profits de toutes les entreprises dans l industrie cela decoule du fait que l imposition de rve sur un univers de concurrence par les prix a la nash en regime de libre echange force l entreprise domestique a devenir le leader en prix l introduction de rve augmente le niveau des prix de l industrie en facilitant la collusion et de ce fait reduit le niveau de bien etre des consomrnateurs

the estimation of the two gap model abstract two gap and related theoretical models imply that different constraints on growth may be binding at different times this paper develops and applies an econometric methodology suitable for estimating this type of model and determining which constraints hold at different times the empirical results suggest that growth is more often constrained by savings than by foreign exchange and that these models can be used to interpret the behavior of ldcs during the oil crisis

the shadow price of foreign exchange with minimum wages abstract this note derives the shadow price of foreign exchange in a small open economy with minimum wage unemployment under tariffs quotas and voluntary export restraints the analysis is conducted in a dual general equilibrium framework with many goods and factors

response of the equilibrium real exchange rate to real disturbances in developing countries abstract using a simple dependent economy framework this paper outlines the links between the equilibrium real exchange rate and some of its fundamental exogenous determinants mainly terms of trade movements and commercial policy changes drawing on existing studies of trade flows in developing countries it is possible to derive plausible quantitative ranges for the response of the equilibrium real exchange rate to both external and policy induced shocks the results should be particularly relevant in designing real exchange rate targets and rules that allow for movements in the equilibrium real exchange rate in response to various shocks

the relative price of nontraded goods and sectoral total factor productivity an empirical investigation this paper examines the relationship between the relative price of nontraded goods and sectoral total factor productivities tfps in the context of the balassa samuelson model with perfect capita

effects of restraining steel exports from the republic of korea and other countries to the united states and the european economic community in this article a model is developed to evaluate the impact on an exporting country of a restraint imposed on its export by an importing economy in the context of a three region model of world trade in a single product the welfare changes in any of the three regions in the model and in the global economy can be evaluated the model is applied to the restraints imposed on steel exports from the republic of korea to the united states and the european economic community eec the united states and the eec are found to have incurred significant losses as a result of the restraints the largest part of these losses are quota rents transferred to korea and the rest of the world under reasonable parameter assumptions korea and the rest of the world obtain net gains from the quotas because the resource misallocation costs are smaller than the quota rents the model is modified to analyze a tariff barrier rather than a quantitative restraint it is found that an equivalent tariff on steel transforms korea and the rest of the world from net gainers to net losers as a result of a restraint

ec members fighting about surplus vers fdi and japanese cars the distribution of consumer and producer surplus among ec members of three different trade regimes free trade a voluntary export restraint ver and a ver in conjunction with foreign direct inv

export share requirements trade balances and welfare a two period analysis abstract this paper provides a two period three sector general equilibrium model for examining the effects of a temporary increase in export share requirements to foreign owned firms on the trade balance and national welfare the analysis suggests that the policy of a temporary rise in export requirements results in increases in the non tradable prices for both periods as well as intertemporal welfare the policy also leads to an improvement in the first period trade balance

a formalisation and test of the factor productivity explanation of international differences in service prices this paper extends and integrates previous models of the determinants of international differences in the prices of services relative to tradable commodities the authors provide a model capable of identifying the effects of differences in total factor productivity on service price differences separately from the effects of factor endowment differences they propose a method for measuring these factor productivity difference effects and apply this to a sample of sixty countries in 1980 the authors results provide support both for the endowment difference and productivity difference explanations suggesting that in this context at least the two hypotheses are complements rather than competitors copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

cointegration analysis with structural breaks and deterministic trends an application to the canadian dollar this article applies recent developments in cointegration analysis with structural breaks and deterministic trends to analyse the relationship between the real canada us exchange rate and commodity prices previous empirical studies disagree on whether these variables are cointegrated the root of disagreement could be in the handling of deterministic trends and potential structural breaks i find that even after controlling for these matters the question of whether the real exchange rate and commodity prices are cointegrated for canada remains unresolved

a note on the nonequivalence of import barriers and voluntary export restraints abstract this paper uses a general equilibrium approach to analyze the consequences of import barriers and voluntary export restraints with respect to international prices and domestic prices under the assumption of perfect competition in all markets it shows that the final outcome with respect to domestic prices depends on the way in which governments allocate the revenue arising from the restrictions the equivalence result obtained by using partial equilibrium is only one of the possible outcomes

immigration and real wages this paper derives conditions under which immigration may raise nominal and real wages in a small open economy the mechanism for such a paradoxical outcome is a demand induced increase in the prices of labour intensive non traded goods

risk aversion and optimal trade restrictions if the representative consumer of a country is risk averse then the choice of trade controls must take account of their effects on the fluctuations of domestic real income if the world price of the importable is uncertain and risk aversion is high then the optimal policy for achieving a ceiling on expected imports involves a reduction in imports and a rise in the domestic price as the world price falls moreover a quota is superior to a tariff in achieving the ceiling under domestic uncertainty a tariff is superior to a quota but it could be optimal to reduce the domestic price as imports increase economists have long recognized the equivalence of price and quantity controls under certainty the comparison of these control modes and the characterization of the optimal form of control under uncertainty has been undertaken by two groups of authors weitzman 1974 1978 considered a planning authority which faces uncertainty about the costs and benefits of producing a good he showed that the ranking of price and quantity controls depends on the curvature of the cost and benefit functions and that an optimal policy can be considered as a mixture of price and quantity controls his work was developed by laffont 1977 ireland 1977 malcomson 1978 and yohe 1978 in the context of international trade the comparison of tariffs and quotas under uncertainty has been undertaken by fishelson and flatters 1975 pelcovits 1976 dasgupta and stiglitz 1977 young 1979 1980a b and helpman and razin 1980 recently young and anderson 1980 showed that the policy maximizing expected consumer s surplus given a constraint on expected imports expected import expenditure is a specific tariff an ad valorem tariff in contrast to weitzman s planning model the price instrument is superior to the quantity instrument whatever the curvature of the benefits function 2 the conclusion of young and anderson appears to provide a strong argument against using quantity instruments to restrict trade however the expected surplus criterion is a valid welfare measure only if the marginal utility of income is constant in this paper we characterize the optimal form of trade restriction if the representative consumer of the importing country exhibits risk aversion toward income fluctuations the optimal policy can have surprising properties properties which with high risk aversion are better approximated by a quota rather than a tariff hence the second best justification for using quantity controls to restrict trade turns out to depend on

international factor mobility minimum wage rates and factor price equalization a synthesis this paper examines the behavior of a small open economy facing perfectly elastic supply curves for some of its productive factors in particular the paper derives some comparative statics properties of such economies compares them with the properties of otherwise identical economies in which all factor prices are determined endogenously and investigates the relationship between factor price rigidities factor price equalization and the pattern of specialization among the new results which are proved it is shown that as more and more factor price rigidities are imposed on an economy it comes closer to a state of factor price equalization

purchasing power parity and real factors it is acknowledged that purchasing power parity ppp fails in empirical tests the position adopted is that real factors are an omitted variable from the ppp relationship and are the cause of divergences from ppp the real exchange rate as being determined by supply and demand shift factors as in stockman 1987 and neary 1988 is modelled we then empirically estimate a real exchange rate equation and use the fitted value as a generated regressor in tests of ppp it is demonstrated that when changes in the real exchange rate are incorporated into the ppp relationship ppp improves

general equilibrium effects of import constraints under variable labour supply public goods and income taxation we consider a general equilibrium trade model of a small open economy with a representative consumer where labour supply is variable where imports are restricted by a small tariff a quota or a voluntary export restraint ver and where alongside the production of two traded goods one imported and one exported a pure public good is produced and funded through an income tax within this framework we demonstrate among other things that under certain conditions while a small tariff or quota reduces employment and welfare a ver may increase them thus in the context of a small open economy contrary to standard results in certain cases vers may become the welfare and employment dominant instrument over the alternative import restrictions

the shadow price of foreign exchange in a dual economy abstract this paper examines the shadow price of foreign exchange for a dual economy with tariffs quotas or vers we show that the shadow exchange rate is greater than the official rate in the presence of tariffs whereas it is greater or smaller than the official rate in the presence of quotas depending upon whether capital is sector specific or perfectly mobile furthermore the shadow exchange rate is unambiguously smaller than the official rate for the ver case when capital is intersectorally mobile the rate however may be larger than the official rate when capital is sector specific the practical implications of the results for project appraisal are also discussed

savings rates and income distribution further evidence from ldcs a cross country test for the existence of kaldor effects in less developed countries is developed earlier attempts have been inconclusive and have led to a perception that the effect is unimportant it is argued that previous tests may have ben misspecified within a standard life cycle framework a savings rate function that also incorporates two distribution variables one involving measures of income inequalities across income classes and the other a broad measure of inequalities among sectors was specified and estimated the results indicate that regardless of the inequality measure employed some sort of kaldor effect may be at work this suggests that the traditional conflect between growth and equity warrants continued investigation