exchange rate pass through in u s manufacturing industries this paper studies exchange rate pass through in u s manufacturing industries and its cross sectional variation through an adapted dixit stiglitz model of product differentiation the paper predicts that pass through is positively related to the degree of product differentiation and inversely related to the elasticity of marginal cost with respect to output empirical estimates of the pass through elasticities show that pass through is incomplete and varies across industries the degree of pass through is found to be positively correlated to different proxies for product differentiation and negatively to a proxy for the elasticity of marginal cost

the growth potential of startups over the business cycle this paper shows that employment in cohorts of us firms is strongly influenced by aggregate conditions at the time of their entry employment fluctuations of startups are procyclical they persist into later years and cohort level employment variations are largely driven by differences in firm size rather than the number of firms an estimated general equilibrium firm dynamics model reveals that aggregate conditions at birth rather than post entry choices drive the majority of cohort level employment variation by affecting the share of startups with high growth potential in the aggregate changes in startup conditions result in large slow moving fluctuations in employment

import penetration and the politics of trade protection abstract in this paper we reconsider a key empirical prediction generated by an important class of political economy models of trade policy namely that trade protection should be higher in sectors characterized by lower import penetration we call this the standard prediction the existing empirical evidence offers little support for this prediction in this paper we argue that the standard prediction depends critically on the assumptions that trade taxes are the only policy instruments and that the government has access to non distortionary taxation we analyze a model in which the government can use quotas and vers in addition to trade taxes and raising public funds may be costly under a simple sufficient condition our model predicts that the protection level increases with import penetration both in sectors that are protected with tariffs and in sectors that are protected with quantitative restrictions

real exchange rate overvaluation and wto dispute initiation in developing countries why and when do developing countries file trade disputes at the world trade organization wto although financial conditions have long been considered an important driver of trade policy they have been largely absent from the literature on trade disputes we argue that developing country governments bring more trade dispute to the wto when overvalued real exchange rates put exporters at a competitive disadvantage this dynamic is most prevalent in countries where large foreign currency debt burdens discourage nominal currency devaluations that would otherwise serve exporters interests our findings provide an explanation for differences in dispute participation rates among developing countries and also suggest a new link between exchange rate regimes and trade policy

exchange rates and industry demands for trade protection the recent confrontation between china and the united states over currency policy illustrates a broader phenomenon exchange rate misalignments tend to spill over into trade policy although previous studies have shown that aggregate protectionist activity is positively related to the level of the real effective exchange rate we explore this relationship at the industry level several industry specific characteristics determine the protectionist response to exchange rate changes including the degree of exchange rate pass through the level of import penetration and the share of imported intermediate inputs in total industry inputs we find that the marginal effect of currency appreciation on the number of industry level antidumping petitions is positive and significant only for industries with high pass through therefore exchange rates appear to induce demands for trade barriers only in industries where competitiveness is directly harmed by currency appreciation

violence and risk preference experimental evidence from afghanistan we investigate the relationship between violence and economic risk preferences in afghanistan combining i a two part experimental procedure identifying risk preferences violations of expected utility and specific preferences for certainty ii controlled recollection of fear based on established methods from psychology and iii administrative violence data from precisely geocoded military records we document a specific preference for certainty in violation of expected utility the preference for certainty which we term a certainty premium is exacerbated by the combination of violent exposure and controlled fearful recollections the results have implications for risk taking and are potentially actionable for policymakers and marketers

modeling risk aversion in economics to capture the risk aversion intuition the standard approach in economics has been to utilize the model of expected utility in which risk aversion derives from diminishing marginal utility for wealth or diminishing marginal utility for aggregate consumption the expected utility model for risk aversion has been used to derive many important insights but over the years economists and psychologists have identified various problematic issues with expected utility as a descriptive model of choice in this article we urge economists to take seriously the research agenda of developing and assessing different ways to model risk aversion we proceed in three main steps first we highlight that the basic intuition of risk aversion that drives many results in economics is not intimately tied to expected utility second we describe a few alternative models that can also capture the basic intuition of risk aversion finally we discuss that while expected utility and the alternative models might all capture the basic intuition of risk aversion the alternative models can generate additional more nuanced implications not shared with expected utility that in some cases seem to be borne out by data we emphasize that these alternative models also are not perfect and further research is needed to identify even better approaches

entrepreneurial success and occupational inheritance among proprietors roughly 50 percent of self employed proprietors are second generation proprietors these individuals acquire informal business experience while growing up in the context of a family business since some of this informal experience substitutes for more formally acquired schooling measured rates of return to the latter will not be as high as for wage salary workers early acquisition of managerial human capital that can be acquired only through experience implies differentially greater proprietary success for second generation proprietors compared with first generation proprietors the authors present evidence in favor of both hypotheses

how endogenous risk preferences and sample selection affect analysis of firm survival the roles of selection and endogeneity in measured risk preferences are illustrated using the correlation between risk attitudes and firm survival selection bias occurs when risk attitudes are elicited only from current entrepreneurs so that the risk attitudes of unsuccessful entrepreneurs are excluded from the analysis risk attitudes measured after agents enter entrepreneurship will endogenously reflect business success data on entrepreneurs from the national longitudinal survey of youth 1979 and the panel study of income dynamics shows that when risk attitudes are measured subject to selection and endogeneity mixed or even positive correlations between risk acceptance and the probability of firm exit occur however firm exits fall monotonically with willingness to accept risk when risk preference measures are not subject to selection or endogeneity related to business success

macroeconomic factors and antidumping filings evidence from four countries abstract this paper examines the relationship between antidumping filings and macroeconomic factors real exchange rate fluctuations affect the two criteria for dumping in opposite ways making the overall effect on filings ambiguous in theory examining the filing patterns of the four major users of ad law during the 1980 98 period we find that real exchange rates and domestic real gdp growth both have statistically significant impacts on filings bilateral filing data indicate that a one standard deviation real appreciation of the domestic currency increases filings by 33 we also find one standard deviation fall in domestic real gdp increases filings by 23

exchange rate exposure and industry characteristics evidence from canada japan and the usa abstract this paper examines industry level exchange rate exposures for canada japan and the usa measuring exposure by adding the change in the exchange rate to the domestic market model of industry portfolio returns some industries in all three countries display significant exposures moreover for each country the exchange rate is important for explaining industry returns at the economy wide level to explore whether exchange rate exposures are systematically linked to the activities of the industries we model exposure as a function of industry characteristics for all three countries the relation between exposure and industry characteristics is broadly consistent with economic theory jel f3

who is behavioral cognitive ability and anomalous preferences in this paper we ask whether variation in preference anomalies is related to variation in cognitive ability evidence from a new laboratory study of chilean high school students with similar schooling backgrounds shows that small stakes risk aversion and short run discounting are less common among those with higher standardized test scores the relationship with test scores survives controls for parental education and wealth we find some evidence that elementary school gpa is predictive of preferences measured at the end of high school two laboratory interventions provide suggestive evidence of a possible causal impact of cognitive resources on expressed preferences jel j24 d14 c91

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

the political economy of the tariff cycle how can protectionism and free trade succeed one another our answer focuses on the changing balance of private actors political demands these actors acquire interests in tariff policies because their assets are spatially concentrated and trade in these assets is subject to various limitations actors in regions experiencing no new investment in an established industry old regions have interests that sometimes differ from those in regions where there is new investment we show that old regions have no reason to be involved in tariff politics at business cycle peaks during troughs whether a state becomes more or less protectionist depends ceteris paribus on the relative political strength of old import competing and old exporting interests if old import competing industries outweigh the old exporters then protection will tend to increase at the trough and decrease at the peak of a business cycle the opposite result occurs when old exporters are more influential

are risk aversion and impatience related to cognitive ability is the way that people make risky choices or tradeoffs over time related to cognitive ability this paper investigates whether there is a link between cognitive ability risk aversion and impatience using a representative sample of the population and incentive compatible measures we conduct choice experiments measuring risk aversion and impatience over an annual time horizon for a randomly drawn sample of roughly 1 000 german adults subjects also take part in two different tests of cognitive ability which correspond to sub modules of one of the most widely used iq tests interviews are conducted in subjects own homes we find that lower cognitive ability is associated with greater risk aversion and more pronounced impatience these relationships are significant and robust to controlling for personal characteristics educational attainment income and measures of credit constraints we perform a series of additional robustness checks which help rule out other possible confounds

iq and stock market participation stock market participation is monotonically related to iq controlling for wealth income age and other demographic and occupational information the high correlation between iq and participation exists even among the affluent supplemental data from siblings studied with an instrumental variables approach and regressions that control for family effects demonstrate that iq s influence on participation extends to females and does not arise from omitted familial and nonfamilial variables high iq investors are more likely to hold mutual funds and larger numbers of stocks experience lower risk and earn higher sharpe ratios we discuss implications for policy and finance research

new firm survival new results using a hazard function a limitation of audretsch s 1991 study of new firm survival was the level of aggregation to industries this precluded linking establishment specific characteristics such as organizational structure and size to post entry performance the purpose of this paper is to relate the post entry performance of individual establishments not only to their technological and market structure environments but also to establishment specific characteristics we do this by estimating a hazard duration function for more than 12 000 individual establishments in u s manufacturing started in 1976 by tracking their subsequent performance over a ten year period we conclude that establishment specific characteristics which audretsch was not able to capture in his earlier study play an important role in shaping the exposure to risk confronting new establishments copyright 1995 by mit press

investment pass through and exchange rates a cross country comparison using detailed data from the united states canada the united kingdom and japan we examine the implications of exchange rates for time series of sectoral investment both theoretically and empirically we show that investment responsiveness to exchange rates varies over time positively in relation to sectoral reliance on export share and negatively with respect to the share of imported inputs in production important differences exist in investment endogeneity across high and low price over cost markup sectors with investment in low markup sectors often significantly more responsive to exchange rates cross country differences in investment response are only partially explained by industrial organization arguments

toward a business cycle model of tariffs a modified interest group model links movements in tariffs to changes in the level of economic activity within nations this model is introduced and tested for tariff behavior in the 19th and early 20th centuries in three nations the united states great britain and germany empirical analysis lends strong support to the model s central thesis that tariffs are sensitive to movements within a business cycle tariff changes occurring in the three nations with the exception of british tariff increases generally conform to the expectations of the model furthermore business cycle sensitivity provides an explanation of the behavior of tariffs superior to two prominent alternatives those based on ideology and on hegemonic stability

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination

the kennedy round evidence on the regulation of international trade in the united states the purpose of this paper is to analyze and provide empirical evidence regarding the regulation of international trade flows our goal is to provide an explanation of the changes in the interindustry pattern of trade restrictions which emerged from the kennedy round of tariff negotiations the principal conclusion of the analysis is that the pattern of protection which resulted from the kennedy round was shaped to minimize the domestic political disruption resulting from liberalization industries which faced significant import threats and whose characteristics enhanced their potential political influence were able to maintain tariff protection in the face of overall liberalization the potential impact of the agreed upon tariff reductions was partially undermined by the introduction of offsetting nontariff trade barriers ntbs in addition ntbs were introduced systematically in industries that were becom

the origins of persistent current account imbalances in the post bretton woods era why do some countries run persistent current account surpluses why do others run deficits often over decades leading to enduring global imbalances such persistent imbalances are the root cause of many financial crises and a major source of international economic conflict we propose that differences in wage bargaining institutions explain a large share of imbalances through their effect on the trade balance in countries with coordinated wage bargaining wage growth in export industries can be restrained to ensure competitiveness leading to persistent trade surpluses we estimate the contribution of these institutions to trade balances in organisation for economic co operation and development oecd member countries since 1977 and find ample support for our hypothesis contrary to much of the literature the choice of fixed or floating exchange rate regimes has only a small effect on trade or current account balances in other words internal adjustment in surplus countries via wage bargaining institutions trumps external adjustment by deficit countries

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

free trade fair trade strategic trade and protectionism in the u s congress 1987 88 what conditions led the one hundredth congress of the united states to enact fair trade and strategic trade policies into law during 1987 88 political partisanship is an important force with democrats supporting and republicans opposing all types of trade intervention otherwise the coalitions of support for and opposition to the various trade policies differ particularly in the senate in that body international business is associated with support for fair trade policies and with opposition to classical protectionism while domestic u s business is associated with support for classical protectionism liberalism is strongly associated with support for fair and strategic trade policies but is not associated with classical protectionism in the house of representatives the long standing protectionist coalition remains an influence few forces in support of free trade remain in u s politics changing international market conditions rapidly affect the making of u s trade policy

taxation and the political economy of the tariff traditional accounts of u s tariff policy emphasize trade strategies and interest group politics this article makes a departure it opens with an observation up until world war i the tariff was the largest single source of federal government revenues it then explores the significance of tariffs as taxes theoretically and empirically in its first part the article develops a theory of taxation politics and applies it to the tariff in its second part it submits the theory to an empirical test modeling changes in u s tariff rates from 1829 to 1940 the politics of tariff revision it argues followed from two characteristics of the tariff as tax from the extent of the treasury s dependence upon it and from the distributive pattern of its burdens and benefits taken together the article concludes revenue dependence and distributive incidence account for several diverse aspects of american tariff policy including the structure of its coalitions the shifts in its objectives and the timing of its innovations

the rise of us anti dumping activity in historical perspective empirical studies of anti dumping activity focus almost exclusively on the period since 1980 this paper puts recent us anti dumping experience in historical context by studying the determinants of annual case filings over the past half century the conventional view that few anti dumping cases existed prior to 1980 is not correct although most did not result in the imposition of duties the increased number of cases in recent decades largely reflects petitions that target multiple source countries the number of imported products involved has actually fallen since the mid 1980s the annual number of anti dumping cases is influenced by the unemployment rate the exchange rate import penetration closely related to the decline in average tariffs and changes in the anti dumping law and its enforcement in the early 1980s

are risk preferences stable it is ultimately an empirical question whether risk preferences are stable over time the evidence comes from diverse strands of literature covering the stability of risk preferences in panel data over shorter periods of time life cycle dynamics in risk preferences the possibly long lasting effects of exogenous shocks on risk preferences as well as temporary variations in risk preferences individual risk preferences appear to be persistent and moderately stable over time but their degree of stability is too low to be reconciled with the assumption of perfect stability in neoclassical economic theory we offer an alternative conceptual framework for preference stability that builds on research regarding the stability of personality traits in psychology the definition of stability used in psychology implies high levels of rank order stability across individuals and not that the individual will maintain the same level of a trait over time preference parameters are considered as distributions with a mean that is significantly but less than perfectly stable plus some systematic variance this framework accommodates evidence on systematic changes in risk preferences over the life cycle due to exogenous shocks such as economic crises or natural catastrophes and due to temporary changes in self control resources emotions or stress we note that research on the stability of risk preferences is conceptually at the heart of microeconomics and systematic changes in risk preferences have vital real world consequences

prior consequences and subsequent risk taking new field evidence from the taiwan futures exchange we use a data set from market participants in the taiwan stock exchange capitalization weighted stock index options markets to demonstrate a strong positive relationship between prior trading outcomes and subsequent risk taking in particular investors in this market take above average risks in afternoon trading after morning gains the phenomenon is prevalent in all three types of market makers accounts and across different types of market participants our findings are consistent with the argument that prior outcomes affect subsequent risk taking through a relationship that is sensitive to the model parameters i e expected return trading period and curvature of the value function because prospect theory can predict both increased and decreased levels of subsequent risk taking we provide possible explanations behind the phenomenon and discuss reasons for the variety of findings in the existing literature

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

optimal dynamic information provision abstract we study a dynamic model of information provision a state of nature evolves according to a markov chain an advisor with commitment power decides how much information to provide to an uninformed decision maker so as to influence his short term decisions we deal with a stylized class of situations in which the decision maker has a risky action and a safe action and the payoff to the advisor only depends on the action chosen by the decision maker the greedy disclosure policy is the policy which at each stage minimizes the amount of information being disclosed in that stage under the constraint that it maximizes the current payoff of the advisor we prove that the greedy policy is optimal in many cases but not always

international comparisons of pricing to market behavior this paper measures the degree of price discrimination across export destinations that is associated with exchange rate changes using u s u k german and japanese industry level data given the industries sampled more price discrimination across destinations is observed in the u k german and japanese data for industries that match across source countries however behavior is very similar across source countries furthermore destination specific price adjustment on exports to the united states from germany and japan is similar to price adjustment observed on shipments to other destinations most variation in the data appears to be related to industry copyright 1993 by american economic association