tariff retaliation versus financial compensation in the enforcement of international trade agreements the authors analyze whether financial compensation is preferable to the current system of dispute settlement in the world trade organization that permits member countries to impose retaliatory tariffs in response to trade violations committed by other members they show that monetary fines are more efficient than tariffs in terms of granting compensation to injured parties when there are violations in equilibrium however fines suffer from an enforcement problem since they must be paid by the violating country if fines must ultimately be supported by the threat of retaliatory tariffs they fail to yield a more cooperative outcome than the current system the authors also consider the use of bonds as a means of settling disputes if bonds can be posted with a third party they do not have to be supported by retaliatory tariffs and can improve the negotiating position of countries that are too small to threaten tariff retaliation

two part models are robust to endogenous selection abstract this note shows that the two part model tpm can be used to estimate conditional and population averaged effects of exogenous covariates when there is endogenous selection between the two parts much like estimating an average treatment effect on the treated the tpm estimator only needs estimates of parameters that are recoverable from the observable data to estimate covariate effects the tpm estimator is consistent for the counter factual of interest when selection between the parts is endogenous because the unobservable parameter is multiplied by zero

preference erosion government revenues and non tariff trade barriers developing countries benefiting from developed country unilateral trade preferences fear that doha round tariff cuts will erode the value of those preferences that these programmes confer significant benefits however is not clear studies indicate that the impact of preference erosion would be minimal for most developing countries but for a small subset of middle income and least developed countries concern may be warranted wto members should address affected countries concerns perhaps by tailoring wto tariff negotiations to lessen adjustment pressures and providing development assistance developing countries also are anxious that lower tariffs will reduce government revenues dependence on tariff revenue is diminishing and trade liberalisation need not result in lower total tax revenues or even lower customs revenues much depends on a country s current tariff and trade regime its tax structure and its overall economic structure at some point a country does need to broaden its tax base and look to other revenue sources to offset declining tariff revenues tax reform therefore complements trade reform a third area of developing country concern is non tariff barriers ntbs which may limit market access even after tariffs are reduced despite prior wto work in this area ntbs remain a thorny issue for all wto members

technology is changing lending implications for research abstract costello down and mehta 2020 trace their slider intervention to deviations from the credit line amount recommended by a credit scoring model the deviations are followed by larger delinquency declines and bigger sales orders and costello et al interpret these results using discretion based theories however incremental deviations are concentrated on newer clients rather than those the lender has accumulated soft information about deviations also appear larger for public than private borrowers my discussion evaluates whether these results align with discretion based theories and explores alternative interpretations based on salience and unique aspects of the trade credit setting differences in interpretation aside the evidence is informative about technological advances in commercial lending i conclude with an overview of several recent advances and discuss the implications for lending research

a computational analysis of japan s generalized system of preferences abstract in this paper we employ a general equilibrium computational model of world trade to evaluate the generalized system of preferences gsp of japan we conclude that the japanese gsp is strongly trade creating because preferential treatment is offered primarily on products for which japan is a major world exporter however tariff concessions result in a deterioration in japan s terms of trade which lowers welfare in japan and improves the welfare of japan s major trading partners among the ldcs the gain from preferential treatment accrues primarily to the asian nics hong kong south korea singapore and taiwan

the clash of liberalizations preferential versus multilateral trade liberalization in the european union there has been an explosion in the number of preferential trade agreements in the past decade preferential trade agreements are characterized by liberalization with respect to only a few partners and thus they can potentially clash with and retard multilateral trade liberalization despite this important concern with preferential trade agreements there is almost no systematic evidence on whether they actually affect multilateral trade liberalization the authors model the effect of preferential trade agreements on multilateral trade liberalization and show that preferential trade agreements slow down multilateral trade liberalization unless they have a common external tariff and allow for internal transfers next they use detailed data on product level tariffs negotiated by the european union in the past two multilateral trade rounds to structurally estimate their model the authors confirm the main prediction the european union s preferential trade agreements have clashed with its multilateral trade liberalization and find that the effect is quantitatively significant moreover they also confirm several auxiliary predictions of the model and provide new evidence on the political economy determinants of multilateral liberalization in the european union

the effect of financial liberalization on capital flight in african economies summary in this paper we assess the effects of financial liberalization on capital flight in african economies a portfolio model in which capital flight is one of the assets is estimated on a sample of nine african countries for 1970 91 the estimation results suggest that financial liberalization induces a reduction in capital flight after augmenting the model with submodels for the banking sector the government sector and the external sector we conduct simulation experiments involving an interest rate deregulation a decrease in reserve requirements and a change in exchange rate policy the simulation results show that capital flight is reduced by all the three financial liberalization measures the effects however are very small considering both the estimation and simulation results we conclude that financial liberalization policies are useful in attempts to reduce capital flight in african economies but per se the policies may not be the panacea

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

bilateralism multilateralism and the quest for global free trade abstract we develop an equilibrium theory of trade agreements in which both the degree and the nature bilateral or multilateral of trade liberalization are endogenously determined to determine whether and how bilateralism matters we also analyze a scenario where countries pursue trade liberalization on only a multilateral basis we find that when countries have asymmetric endowments or when governments value producer interests more than tariff revenue and consumer surplus there exist circumstances where global free trade is a stable equilibrium only if countries are free to pursue bilateral trade agreements by contrast under symmetry both bilateralism and multilateralism yield global free trade

earnings quality in uk private firms comparative loss recognition timeliness abstract uk private and public companies face substantially equivalent regulation on auditing accounting standards and taxes we hypothesize that private company financial reporting nevertheless is of lower quality due to different market demand regulation notwithstanding a large uk sample supports this hypothesis quality is operationalized using basu s 1997 time series measure of timely loss recognition and a new accruals based method the result is not affected by controls for size leverage industry membership and auditor size or by allowing endogenous listing choice the result enhances understanding of private companies which are predominant in the economy it also provides insight into the economics of accounting standards

agency problems auditing and the theory of the firm some evidence agency problems auditing and the theory of the firm some evidenceauthor s ross l watts and jerold l zimmermansource journal of law and economics vol 26 no 3 oct 1983 pp 613 633published by the university of chicago pressstable url http www jstor org stable 725039accessed 29 06 2008 23 14

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

a measurement approach to conservatism and earnings management this paper formalizes a two step representation of accounting measurement and uses it to formalize a general rationale for conservatism as a measurement principle a transaction s economic substance manifests itself in characteristics of the transaction and an accounting rule is a mapping from transaction characteristics to an accounting report managers who have stakes in the accounting report are able to influence transaction characteristics such earnings management is ex post rational for managers but ex ante inefficient to safeguard against such ex post opportunism the optimal ex ante accounting rule is conservative in the sense that it requires more verification of the transaction characteristics favorable to managers thus this rationale for conservatism is as general as the managers ability and incentive to inflate transaction characteristics by opening the black box of accounting measurement the two step representation also formalizes some classic accounting concepts such as relevance reliability verifiability verification and accounting motivated transactions

what makes a landlord ownership of real estate by us households households supply about three quarters of us rental housing the paper examines the real estate investment decision and the proportion of wealth invested in real estate hypotheses drawn primarily from the real estate finance literature about the role of wealth expected inflation human capital income tax rates race health risk aversion and inheritance are tested against data from the health and retirement study wealth has a powerful non linear effect on ownership of real estate but ownership is negatively associated with human capital marginal tax rates race and property gifts affect real estate investment poor health risk aversion and expected inflation do not seem to

much ado about two reconsidering retransformation and the two part model in health econometrics in health economics applications involving outcomes y and covariates x it is often the case that the central inferential problems of interest involve e y x and its associated partial effects or elasticities many such outcomes have two fundamental statistical properties y 0 and the outcome y 0 is observed with sufficient frequency that the zeros cannot be ignored econometrically this paper 1 describes circumstances where the standard two part model with homoskedastic retransformation will fail to provide consistent inferences about important policy parameters and 2 demonstrates some alternative approaches that are likely to prove helpful in applications

market and political regulatory perspectives on the recent accounting scandals not surprisingly the recent accounting scandals look different when viewed from the perspectives of the political regulatory process and of the market for corporate governance and financial reporting we do not have the opportunity to observe a world in which either market or political regulatory processes operate independently and the events are recent and not well researched so untangling their separate effects is somewhat conjectural this paper offers conjectures on issues such as what caused the scandalous behavior why was there such a rash of accounting scandals at one time who killed arthur andersen the securities and exchange commission or the market did fraudulent accounting kill enron or just keep it alive for too long what is the social cost of financial reporting fraud does the united states in fact operate a principles based or a rules based accounting system was there market failure or was there regulatory failure or both was the sarbanes oxley act a political and regulatory overreaction does the united states follow an ineffective regulatory model

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

the role of importers and exporters in the determination of the u s tariff preferences granted to latin america abstract this paper investigates the role played by domestic importers and foreign exporters in improving preferential access to the domestic market to this end the framework used in this paper extends the protection for sale analysis to explicitly model the role of domestic importers and foreign exporters in the determination of preferential trade treatment the predictions of the model are tested using data on preferential trade between the united states and latin american countries the results suggest that latin american exporters and us importers lobbying efforts have a significant and important role in determining the extent of preferential access granted by the united states more interestingly these findings also show that u s importers capture a very substantial share of the rents generated by tariff preferences these results therefore shed a pessimistic view on preferential trade schemes as a reliable source of gains for developing countries

auditor gender and stock price crash risk evidence from china stock price crash risk is attributed to agency problems and information asymmetry auditors generally play a more important governance function in countries with weak legal institutions previous s

why should trade negotiators negotiate about in recent years there have been growing demands to make trade liberalization contingent on adoption of common labor and environmental standards the straightforward economic answer is that this makes little sense neither the gains from trade nor the gains from appropriate regulation are compromised if other countries impose standards that are weaker than your own it is possible to offer second bet economic rationales for harmonization but these are empirically unconvincing the only serious argument in favor or regulation is political that regulation which is in the national interest may not be politically feasible unless other countries do the same

ordinary least squares and sample selection models of health care demand monte carlo comparison this article examines alternative econometric models for health care demand estimation the analysis compares the rand health insurance study two part model with sample selection model estimators in a monte carlo simulation experiment designed to approximate individual level health care demand conditions the underlying variable distributions are taken from cross sectional data for a swiss 1981 population survey three sets of error distribution assumptions are examined bivariate normal normal logistic and cauchy despite theoretical concerns with the two part model it outperforms the sample selection model in terms of mean squared error of parameter estimate

a two part model of treatment for benign prostatic hyperplasia and the impact of innovation benign prostatic hyperplasia bphs affects more than half of men who are at least 60 years old transurethral resection of the prostate turp is the most common treatment this article estimates the average costs of providing a turp to a patient that chooses the procedure and the expected cost of a turp irrespective of the actual treatment decision it utilizes a modified two part model it first estimates the likelihood of receiving the turp given a bph diagnosis using a logit regression the second step is to estimate the log of turp cost for the population that actually received the procedure for the turp decision data were extracted from the national health interview survey nhis 1986 1994 on 502 men with a diagnosis of bph for the cost model hcia discharge abstract data were used from five states on 26640 men who actually received a turp in 1994 turp was identified via cpt codes in the nhis data the cost of turp was constructed using patient hospital charges and hospital specific cost to c

auditor reputation the impact of critical reports issued by government inspectors in recent years u k department of trade investigations into the affairs of a specific company have sometimes been critical of the work done by its auditors and reporting accountants this article assesses the impact of this criticism on the auditor s reputation in particular it examines the stock price performance of the auditor s listed clients the results show a small wealth loss for the audit clients the article also examines the impact of the department of trade criticism on an audit firm s number of listed clients and its future audit fees compared to a control group the criticized auditors appear to suffer a small loss in market share based on number of listed clients and on audit fees the evidence suggests that criticized auditors incurred economic losses from the damage to their reputations this is consistent with models of reputation advanced in the industrial organization literature

accounting information in financial contracting the incomplete contract theory perspective this paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research we argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved by discussing its rich theoretical implications we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency

trade wars and trade talks when governments meet in the international arena their actions reflect the political situations at home previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest here we introduce domestic politics into the analysis of international economic relations we study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups our analysis sheds light on the determinants of the structure of protection in non cooperative and cooperative policy equilibria

auctioning countermeasures in the wto we offer a first formal analysis of auctioning retaliation rights within the wto we show that the auctions exhibit externalities among bidders and we characterize equilibrium bidder behavior under alternative auction formats if the violating country is prevented from bidding to retire the right of retaliation against it then the possibility of auction failure arises whereby no bids are made despite positive valuation by bidders if the violating country is instead permitted to bid then auction failure is precluded and indeed the right of retaliation is always retired we evaluate these different auction formats from normative revenue compliance efficiency standpoints

are preferential trade agreements with non trade objectives a stumbling block for multilateral liberalization in many preferential trade agreements ptas countries exchange not only reductions in trade barriers but also cooperation in non trade issues such as labor and environmental standards intellectual property etc we provide a model of ptas motivated by cooperation in non trade issues and analyze its implications for global free trade and welfare we find that such ptas increase the cost of multilateral tariff reductions and thus cause a stumbling block to global free trade this occurs because multilateral tariff reductions decrease the threat that can be used in ptas and thus the surplus that can be extracted from them by explicitly modeling the interaction between preferential and multilateral negotiations we derive a testable prediction and provide novel econometric evidence that supports the model s key prediction the welfare analysis shows that the current wto rules allowing this type of ptas may be optimal for economically large countries thus the model can predict the rules we observe we also analyze alternative rules that constitute a pareto improvement

trade preferences to small developing countries and the welfare costs of lost multilateral liberalization the proliferation of preferential trade liberalization over the past 20 years has raised the question of whether it slows down multilateral trade liberalization recent theoretical and empirical evidence indicates this is the case even for unilateral preferences that industrial countries provide to small and poor countries but there is no estimate of the resulting welfare costs to avoid this stumbling block effect the authors suggest replacing unilateral preferences by a fixed import subsidy they argue that this scheme would reduce the drag of preferences on multilateral liberalization and generate a pareto improvement more important the authors provide the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization by combining recent estimates of the stumbling block effect of preferences with data for 170 countries and over 5 000 products they calculate the welfare effects of the united states european union and japan switching from unilateral preferences to the developing countries to the import subsidy scheme even in a model with no dynamic gains to trade the authors find that the switch produces an annual net welfare gain for the 170 countries 4 354 million and for each group the united states european union and japan 2 934 million the developing countries 520 million and the rest of the world 900 million

international trade agreements between countries of asymmetric size abstract this paper analyzes how changes in the structure and environment of trade agreements between a small and a large country affect the efficient frontier of those self enforcing agreements and hence negotiation outcomes using the autarky punishment instead of the interior nash punishment may provide the small country with greater bargaining power negotiating direct transfers under free trade instead of reciprocal tariff reductions improves the worst possible negotiation outcome for the small country the existence of irreversible investment may strengthen weaken the small country s bargaining power under the interior nash autarky punishment scheme

the implications of wto and gats for the banking sector in africa in this paper we assess the implications of the world trade organisation wto and the general agreement on trade in services gats for the banking sector in african signatory countries with emphasis on the free trade element we first review the relevant provisions of the gats for banking services and the main exemptions held by african countries we then analyse the main efficiency indicators for a sample of the top banks in 18 african economies for the period 1997 1998 we also use univariate statistics to analyse the dispersion of the key bank pricing and liquidity indicators in these economies for the period 1994 1998 the main findings imply that although full liberalization implicit in the wto and gats protocols will lead to a substantial shake up of the african banking industry however provided they have an appropriate regulatory framework and allow sufficient lead time most african countries have little to fear from liberalization at least in terms of the continuing existence of a locally owned banking industry and indeed these countries could reasonably expect to be able to restructure and compete at the very least in african wide or regional markets

trade benefits under the eec generalized system of preferences the purpose of the paper is to test for the existence of a statistically significant effect of the eec generalized system of preferences on actual trade flows between developing countries and the eec using a gravity type model we estimate the gross trade creation effect of the eec generalized system of preferences on the eec imports from 10 major developing countries estimation on a yearly basis for the period 1967 1978 indicates the presence of a statistically significant effect it would appear that gross trade creation amounted to about s2 billion for these 10 countries in 1978 in addition to these calculations the paper reviews the eec generalized system of preferences in detail and offers comments on its future impact on exports from developing countries

optimal remedies in international trade agreements abstract this paper takes a mechanism design approach to characterize a politically optimal trade agreement under the assumption that governments have private information about the fluctuating political pressure they face from domestic interest groups to restrict trade the optimal mechanism under these changing circumstances involves a remedy system for breach of trade agreements that specifies less than proportional retaliations against deviating parties this result is in contrast to the conventional wisdom in the literature regarding the efficiency of the reciprocity principle as a rule of renegotiation in trade agreements i also consider an institutional structure in which only commensurate retaliations are practical but governments can employ a public randomizing device to authorize retaliations i show that it is optimal to authorize retaliations only randomly this suggests a role for the wto dispute settlement process as a public randomizing device

food prices and the multiplier effect of trade policy this work studies the relationship between trade policy and food prices we show that when individuals are loss averse governments may use trade policy to shield the domestic economy from large food price shocks this creates a complementarity between the price of food in international markets and trade policy specifically unilateral actions give rise to a multiplier effect when a shock drives up the price of food exporters respond by imposing restrictions while importers wind down protection thus exacerbating the initial shock and soliciting further trade policy activism we test the key prediction of the theory with a new dataset that comprises monthly information on trade measures across 77 countries and 32 food products for the period 2008 11 finding evidence of a multiplier effect in food trade policy these findings contribute to inform the broader debate on the proper regulation of food trade policy within the multilateral trading system

contractual flexibility rent seeking and renegotiation design an empirical analysis of information technology outsourcing contracts this paper examines renegotiation design in contracts for outsourced information technology it services whereas prior literature in information systems has highlighted the likelihood of ex post rent seeking engendered by renegotiation we build upon literature on incomplete contracts to posit that renegotiation can be pareto improving by incorporating contingencies revealed ex post research on contract renegotiation has been hampered by two sets of challenges the lack of appropriate data and empirical challenges in identification we circumvent this problem both by appropriate data collection and by employing an identification strategy to address alternate causal explanations we propose a measure pareto improving amendments to assess renegotiation outcomes that enhance the value from outsourcing by hazard equilibration and by incorporating learning using a unique sample of 141 it outsourcing contracts we examine the role of decision rights delineated ex ante in enabling pareto improving amendments and in resolving the trade off between adaptation and rent seeking we find that flexibility provisions termination for convenience rights and contractual rights whereby vendors are granted rights to reuse know how are associated with pareto improving amendments the results are robust to potential endogeneity of contractual provisions when parties have feasible foresight and to the possibility of adverse selection in the sample we also examine alternate explanations from the literature on contractual breach implications for practitioners and researchers are discussed this paper was accepted by sandra slaughter information systems

on the link between urban form and automobile use evidence from german survey data this study investigates the influence of urban form on automobile travel using household survey data from germany two dimensions of car use are considered the discrete decision to own a car and the continuous decision of distance traveled because these decisions are likely influenced by factors unobservable to the researcher the authors apply censored regression models to evaluate the role of biases emerging from sample selectivity unlike much of the literature it is found that urban form variables are a significant determinant of both automobile ownership and use a finding that holds even after using instrumental variables to control for endogeneity

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

size inequality coordination externalities and international trade agreements abstract developing countries now account for a significant fraction of world trade and two thirds of the membership of the world trade organization wto however many are still individually small and thus have a limited ability to bilaterally extract and enforce trade concessions from larger developed economies even though as a group they would be able to do so we show that this coordination externality generates asymmetric outcomes under agreements that rely on bilateral threats of trade retaliation such as the wto but not under agreements extended to include certain financial instruments in particular we find that an extended agreement generates improvements in global efficiency and equity if it includes the exchange of bonds prior to trading but not if it relies solely on ex post fines moreover a combination of bonds and fines generates similar improvements even if small countries are subject to financial constraints that prevent them from posting bonds

does auditor reputation matter the case of kpmg germany and comroad ag we study the stock and audit market effects associated with a widely publicized accounting scandal involving a public company comroad ag and a large reputable audit firm kpmg in a country germany that has long provided auditors with substantial protection from shareholder legal liability we use this event to study whether an auditor s reputation helps to ensure audit quality a rationale for which recent literature and events provide scant support given the absence of a strong insurance rationale for audit quality germany permits a relatively clean test of whether auditor reputation matters we find that kpmg s clients sustain negative abnormal returns of 3 at events pertaining to comroad and that these returns are more negative for companies that are likely to have higher demands for audit quality we also find an increase in the number of clients that drop kpmg in the year of the comroad scandal mostly smaller recently public companies that are similar to comroad overall our results provide support for the reputation rationale for audit quality

special and differential treatment of developing countries in the wto moving forward after cancun the issue of special and differential treatment sdt for developing countries in the wto has become a source of tension in north south trade relations the absence of an effective sdt regime clearly contributed to the failure of the cancun ministerial meeting of the wto this paper argues for a new approach that puts the emphasis on efforts to improve the development relevance of wto rules and create mechanisms which allow greater differentiation across wto members in determining the applicability of wto disciplines complemented by non discriminatory liberalisation of trade in goods and services in which developing countries have an export interest the former is key in allowing the wto to expand its reach to new behind the border policies and the latter is important to establishing a development dimension in multilateral trade negotiations

the discriminatory nature of specific tariffs this paper quantifies the distortions from specific tariffs levied by the european union eu the most favored nation mfn specific tariffs levied by the eu translate into higher tariff barriers for poor countries exporting low price goods the author shows that for poor countries these higher tariff barriers from specific tariffs offset the gains from preferential tariffs the author apply a two stage analysis to show that the specific tariffs levied by the eu on its agricultural imports wash away more than half of the welfare benefits enjoyed by the sub saharan african countries from eu preferential tariffs the results provide the first quantitative estimate of the distortions associated with specific tariffs

demand elasticities in international trade are they really low the authors analyze the u s demand for bangladeshi imports for products restricted under the multifiber arrangement because bangladesh is only a small supplier of these products and latin american and asian countries can supply close substitutes the authors expected a high elasticity of demand for bangladeshi imports and they found consistently high estimates based on statistically significant coefficients their finding accords with trade theorists prejudice that small countries can essentially behave as price takers but conflicts with the empirical literature view that demand elasticities are low rarely exceeding 3 and generally between 1 and 2 the authors analysis differs from the existing literature in three ways they derive a set of estimation equations from an explicit utility maximization model and use the estimated parameters of the utility function to obtain the marshallian own price and cross price elasticities as well as the income elasticity of demand they take explicit account of u s imports from competitors of bangladesh relying directly on competitors prices and they use highly disaggregated data that make the unit value of exports a better proxy for price than using aggregated export data commonly used in this literature the authors outline their theoretical model for deriving their estimated equations in section 1 preliminarily determine who bangladesh s competitors are in section 2 and estimate the demand equation derived in section 1 and derive the price and income elasticities facing bangladesh in section 3

optimum tariffs and retaliation revisited how country size matters in his seminal work on tariff retaliation johnson review of economic studies 21 1953 1954 showed that a country will win a bilateral tariff war if its relative monopoly monopsony power in world trade is sufficiently large however it is unclear from johnson s analysis and from subsequent research on the subject how this power is determined in general economic environments an important goal of this paper is to address this issue with the help of a neoclassical trade model in which country size is at centre stage it is shown that a sufficient condition for a country to prefer a non cooperative nash tariff equilibrium retaliation over free trade is that its relative size be sufficiently large the paper also refines the structure of the general trade model and generates additional characterization results on the importance of country size for best response tariff functions retaliatory tariffs and welfare

sequencing regional trade integration and cooperation agreements trade integration agreements and other international cooperation agreements have proliferated in recent years around the world rather than being spurred by exogenous forces alone the two phenomena are likely to be both path dependent and endogenous to one another however the theoretical and empirical understanding of the relationships between agreements forged in different domains of cooperation remains nascent the purpose of this paper is to describe a new extensive dataset on international agreements that can be employed to start mending the gaps in the literature and to develop best practices of sequencing international agreements to obtain higher pay offs from cooperation of particular interest here is the relationship between trade integration and other cooperation agreements the data provide preliminary grounds for hypothesising that trade integration agreements can be a particularly likely catalyst for further cooperation between states

developing countries in the world trading system from gatt 1947 to the third ministerial meeting of wto 1999 the debate on the role of openness to international flows of goods technology and capital in the development process is as old as economics after all adam smith praised the virtues of openness and competition in the wealth of nations a moment s reflection should be enough to convince anyone that the sources of economic development are essentially three the growth in inputs of production improvements in the efficiency of allocation of inputs across economic activities and innovation that creates new products new uses for existing products and brings about increases in the efficiency of use of inputs

let them eat cake a note on comparing alternative models of the demand for medical care this article comments on the rand econometric approach to estimating and testing models of the demand for medical care as typified in duan et al 1983 the rand methodology is contrasted with more mainstream econometric approaches to similar empirical problems as developed in the sample selection literature it is shown that despite rand s claim their approach requires some fairly unusual assumptions on the model joint error distribution and functional form alternatively their model likelihood functions may be interpreted as being nested in more general sample selection model likelihood functions with easily testable parameter restrictions

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

the heckman correction for sample selection and its critique this paper gives a short overview of monte carlo studies on the usefulness of heckman s 1976 1979 two step estimator for estimating selection models such models occur frequently in empirical work especially in microeconometrics when estimating wage equations or consumer expenditures it is shown that exploratory work to check for collinearity problems is strongly recommended before deciding on which estimator to apply in the absence of collinearity problems the full information maximum likelihood estimator is preferable to the limited information two step method of heckman although the latter also gives reasonable results if however collinearity problems prevail subsample ols or the two part model is the most robust amongst the simple to calculate estimators

do countries free ride on mfn abstract the most favored nation mfn clause has long been suspected of creating a free rider problem in multilateral trade negotiations to address this issue we model multilateral negotiations as a mechanism design problem with voluntary participation we show that an optimal mechanism induces only the largest exporters to participate in negotiations over any product thus providing a rationalization for the principal supplier rule we also show that through this channel equilibrium tariffs vary according to the herfindahl hirschman index of export shares higher concentration in a sector reduces free riding and thus causes a lower tariff estimation of our model using sector level tariff data for the u s provides strong support for this relationship

preferential trade agreements and multilateral tariff cooperation are preferential trade agreements ptas building or stumbling blocks for multilateral trade liberalization i address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly the central result is that when countries are symmetric a free trade agreement fta undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union cu does so via its effect on the cooperation incentives of members however when countries are asymmetric with respect to either market size or cost there exist circumstances where ptas facilitate multilateral tariff cooperation

contracting for aid abstract foreign aid is analyzed as a contract where the north gives a transfer to the south in return for poverty reduction regarded as an international public good the issue of conditionality is first discussed in a moral hazard framework and then under asymmetric information about the degree of altruism of the government of the south additional actors like local ngos and multilateral aid institutions are then added to the model the optimal contracts to avoid free riding or collusion are then presented

gradualism in trade agreements with asymmetric countries this paper uses recursive methods to characterize the payoff frontier of self enforcing trade agreements between countries of asymmetric size we show that at points on the frontier where only one country s incentive constraint binds the efficient agreement will be a non stationary one that starts with a positive trade distortion but eventually reaches free trade our analysis illustrates how i relative country size ii consumption smoothing incentives and iii sunk investments affect the form of efficient trade agreements in contrast to previous work on gradualism our results are obtained from a model in which the economic environment is stationary