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

trade restrictiveness indices in the presence of externalities an application to non tariff measures we extend the trade restrictiveness index approach to the case of market imperfections and domestic regulations addressing them we focus on standard like non tariff measures ntms affecting cost of production and potentially enhancing demand by reducing negative externalities we apply the framework to the database of kee et al 2009 and derive ad valorem equivalents aves for technical measures about 39 of the product lines affected by ntms exhibit negative aves indicating a net trade facilitating effect of these measures accounting for these effects significantly reduces previous measures of countries trade policy restrictiveness obtained while constraining these ntms to be trade reducing

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

a dynamic approach to the measurement of waste in an open economy abstract the paper develops a methodology for evaluating the cost of distortions within the production sector of a small open growing economy quadratic approximations to the loss of output are developed the main new result is that the dynamic loss due to distortions generally exceeds the discounted sum of static type losses due to distortions at least to the second order another new result derives a quadratic approximation to the output loss that can be calculated using information on the size of the distortions and on producer substitution matrices evaluated at an observed distorted equilibrium rather than at a hypothetical undistorted equilibrium

the determinants of aggregate creditors voluntary liquidations this article investigates the determinants of creditors voluntary liquidations cvls an area of research that has received comparatively scant attention in the literature despite the fact that at least in the uk this form of insolvency has consistently comprised the majority of company failures it develops an equilibrium correction model ecm to explain variations in the aggregate number of cvls in england and wales between 1963 and 1995 this is then subjected to out of sample testing over the subsequent 10 year period the results indicate that in both the short run and the long run changes in the level of liquidations can be explained by two main explanatory variables namely the nominal after tax cost of borrowing and changes in the overall level of economic activity in addition confirmatory evidence is provided for the dampening effect of the 1986 insolvency act on the number of liquidations the model retains its forecasting accuracy in the out of sample period although there is possibly s

anomalies risk aversion economists ubiquitously employ a simple and elegant explanation for risk aversion it derives from the concavity of the utility of wealth function within the expected utility framework we show that this explanation is not plausible in most applications since anything more than economically negligible risk aversion over moderate stakes requires a utility of wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes we present examples of how the expected utility framework has misled economists and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting

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

robust assortment optimization in revenue management under the multinomial logit choice model we study robust formulations of assortment optimization problems under the multinomial logit choice model the novel aspect of our formulations is that the true parameters of the logit model are assumed to be unknown and we represent the set of likely parameter values by a compact uncertainty set the objective is to find an assortment that maximizes the worst case expected revenue over all parameter values in the uncertainty set we consider both static and dynamic settings the static setting ignores inventory consideration whereas in the dynamic setting there is a limited initial inventory that must be allocated over time we give a complete characterization of the optimal policy in both settings show that it can be computed efficiently and derive operational insights we also propose a family of uncertainty sets that enables the decision maker to control the trade off between increasing the average revenue and protecting against the worst case scenario numerical experiments show that our robust approach combined with our proposed family of uncertainty sets is especially beneficial when there is significant uncertainty in the parameter values when compared to other methods our robust approach yields over 10 improvement in the worst case performance but it can also maintain comparable average revenue if average revenue is the performance measure of interest

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

optimizing retail assortments retailers face the problem of finding the assortment that maximizes category profit this is a challenging task because the number of potential assortments is very large when there are many stock keeping units skus to choose from moreover sku sales can be cannibalized by other skus in the assortment and the more similar skus are the more this happens this paper develops an implementable and scalable assortment optimization method that allows for theory based substitution patterns and optimizes real life large scale assortments at the store level we achieve this by adopting an attribute based approach to capture preferences substitution patterns and cross marketing mix effects to solve the optimization problem we propose new very large neighborhood search heuristics we apply our methodology to store level scanner data on liquid laundry detergent the optimal assortments are expected to enhance retailer profit considerably 37 3 and this profit increases even more to 43 7 when sku prices are optimized simultaneously

tariffs quotas and piecemeal policy reform abstract this paper extends recent results on the welfare implications of piecemeal tariff adjustments to include cases where the initial trade distortions involve both tariffs and quotas it shows that the standard prescriptions for piecemeal tariff reform are largely unaffected by the presence of unalterable quotas on other goods prescriptions for piecemeal quota reform are also derived although they are constrained by the presence of unalterable tariffs

disappointment in decision making under uncertainty decision analysis requires that two equally desirable consequences should have the same utility and vice versa most analyses of financial decision making presume that two consequences with the same dollar outcome will be equally preferred however winning the top prize of 10 000 in a lottery may leave one much happier than receiving 10 000 as the lowest prize in a lottery this paper explores the implications of disappointment a psychological reaction caused by comparing the actual outcome of a lottery to one s prior expectations for decision making under uncertainty explicit recognition that decision makers may be paying a premium to avoid potential disappointment provides an interpretation for some known behavioral paradoxes and suggests that decision makers may be sensitive to the manner in which a lottery is resolved the concept of disappointment is integrated into utility theory in a prescriptive model

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

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

effective protection redux abstract this paper rehabilitates effective protection for use in political economy in general equilibrium the usual definition corresponds to no economically interesting magnitude the effective rate of protection for sector j is redefined here as the uniform tariff which is equivalent to the actual differentiated tariff structure in its effect on rents to residual claimants in sector j it permits political economic ranking of how much protection is given across sectors since higher uniform tariffs imply higher losses of welfare sacrificed to the interest groups demonstrating operationality the numerical results for the us economy for the old and new concepts are not significantly correlated

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

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

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

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

measuring protection mission impossible abstract there seems to be some confusion between openness and protection measures in the international trade literature the aim of this paper is to bring together the state of the art in quantifying trade policy measures and for this reason we focus on the extent of the protection granted by policies rather than on the degree of openness of the economy given the considerable amount of literature that deals with these issues we will limit our review as follows on the one hand we focus on trade policies implemented at the border and therefore do not consider all the other possible public interventions influencing trade flows on the other hand we only take into account indexes that explicitly adopt a metric expressed in a scalar aggregate tariff and quota equivalent measures or an index in a closed interval we distinguish between indexes that aggregate across products same barrier for more products and indexes that aggregate across instruments more barriers for the same product finally in order to classify the large number of indexes covered in our review we propose a typology based on three categories incidence outcome and equivalence

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

rethinking the product portfolio a generalized investment model a generalized financial product portfolio theory is developed based on the underlying economic factors determining product profitability and risk for applications involving the firm s product investment decisions the model developed provides a means for differentiating market related risk and return from firm specific risk and return for each product two hypothetical illustrations of the model are described and the managerial implications are discussed

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

information distortion in a supply chain the bullwhip effect this article originally appeared in management science april 1997 volume 43 number 4 pp 546 558 published by the institute of management sciences consider a series of companies in a supply chain each of whom orders from its immediate upstream member in this setting inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions this paper claims that the information transferred in the form of orders tends to be distorted and can misguide upstream members in their inventory and production decisions in particular the variance of orders may be larger than that of sales and distortion tends to increase as one moves upstream a phenomenon termed bullwhip effect this paper analyzes four sources of the bullwhip effect demand signal processing rationing game order batching and price variations actions that can be taken to mitigate the detrimental impact of this distortion are also discussed

how do agricultural policy restrictions on global trade and welfare differ across commodities for decades the world s agricultural markets have been highly distorted by national government policies but very differently for different commodities hence a weighted average across countries of nominal rates of assistance or consumer tax equivalents for a product can be misleading as an indicator of the trade or welfare effects of policies affecting that product s global market this is especially the case when some countries tax and others subsidize its production or consumption this article develops a new set of more satisfactory indicators for that purpose drawing on the recent literature on trade restrictiveness indexes it then exploits a global agricultural distortions database recently compiled by the world bank to generate the first set of estimates of those two indicators for each of 28 key agricultural commodities from 1960 to 2004 based on a sample of 75 countries that together account for more than three quarters of the world s production of those agricultural commodities these reveal the considerable extent of reforms in agricultural policies of developing as well as high income countries over the past two decades

quotas and the second best abstract this note makes two observations about trade restrictions on subgroups of commodities first unlike tariffs unalterable quotas provide no second best justification for general restrictions second the optimal allocation of intra subgroup trade depends on the form of restraint imposed

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

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

trade restrictiveness and efficiency this article proposes a trade restrictiveness quantity index trqi to measure the welfare impact of trade restrictions based on a distance functions approach the trqi embodies two farrell measures of efficiency respectively for producers and consumers that can be computed using standard efficiency measurement techniques the trqi can also be decomposed into a trade distortion and domestic distortion component in the context of the debate on the interlinkages between openness and economic performance the trqi offers a means to disentangle economic inefficiencies induced by trade restrictions alone from otherwise not directly trade related economic inefficiencies induced by domestic distortions

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

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

tariff reform in a small open multi household economy with domestic distortions and nontraded goods we examine tariff reforms in the context of a small open economy and simultaneously deal with three extensions of the current literature nonremovable domestic tax distortions nontraded goods and many households using the new concepts of a constant utility tax adjusted balance of trade function and a constant utility productivity improvement in tariffs necessary and sufficient conditions for the existence of strict pareto improving tariff and transfer reforms are established we also consider directional tariff reforms such as movements towards the world price vector proportional reductions and reductions of extreme tariffs also discussed is the role of normality of household preferences most of the literature on piecemeal tariff reform in small open economies has been concerned with models in which there is a single household and in which domestic commodity taxes are absent an exception to this is lloyd 1974 who allows the existence of domestic commodity taxes but maintains the assumption of a single household nor does he consider nontraded commodities other than nontaxed fixed factors others such as foster and sonnenschein 1970 bertrand and vanek 1964 bruno 1972 hatta 1977b and fukushima 1979 deal with single household economies with no domestic distortions the purpose of this paper is to consider the question of tariff reform in a very general model of a small open economy the generality of the model allows us to simultaneously deal with three extensions of the current literature the first extension is to allow for nonremovable domestic tax distortions the second is to incorporate nontraded commodities into the model and the third is to explicitly consider a multi household economy by dealing simultaneously with these extensions to the model we are able to provide a general treatment of tariff reform in small open economies and to obtain new and more general results since domestic tax distortions are prevalent in the real world it is important that they be taken into account in any analysis of tariff reform specifically it is of considerable theoretical and policy interest to determine whether the piecemeal tariff policy prescriptions that have been derived in the literature for models

the effect of the thatcher government on company liquidations an econometric study the findings from an econometric study of company liquidations in teh uk economy are presented the aim is to build on previous macroeconomic analysis of business failure in order to explore to what extent the impact of the thatcher government did represent a clear break in the determination of company liquidations while it is possible to construct a model which performs reasonably well in statistical terms prior to 1980 clear evidence is found of a structural break associated with the new attitude towards business failure brought in by the conservative government there is also strong evidence that company liquidations have become much more sensitive to the state of the business cycle the model estimated gives a prominent role to the current level of company profitability and to the growth in liquidity liquidity is measured by two alternative proxy variables the rate of growth of broad money and the flow of bank lending to the company sector the model is consistent with a cash flow that short term

robust optimization of the 0 1 knapsack problem balancing risk and return in assortment optimization abstract retailers face the important but challenging task of optimizing their product assortments the challenge is to find for every category in every store the assortment that maximizes expected category profit adding to the complexity of this 0 1 knapsack problem retailers should also consider the risk associated with every assortment while every product in the assortment offers an expected return there is also uncertainty around its expected demand and profit contribution therefore retailers face the difficult task of designing a portfolio of products that balances risk and return in this paper we develop a robust approach to optimize retail assortments that offers this balance since the dimensionality of this robust 0 1 knapsack problem in practice often precludes full enumeration we propose a novel efficient and real time heuristic that solves this problem the heuristic constructs an approximation of the risk return efficient frontier of assortments we find that the robust solutions offer the retailer a considerable reduction in risk variance yet only imply a small reduction in expected return the constructed approximations contain assortments that are optimal solutions to the robust assortment optimization problem moreover they represent insightful visualizations of the solution space allowing for interactivity what risk premium should the retailer pay in real time matter of seconds

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

inflation bankruptcy default premia and the stock market in this paper we explore some of the possibilities and argue that in the absence of index linked loans higher inflation implies higher liquidation rates and default premia this would also be one possible reason why higher inflation would depress share values our evidence also suggests that the modigliani and cohn 1979 valuation errors hypothesis is extremely important in order to see why higher inflation might lead to more bankruptcies consider the following example suppose that the real interest rate p is i and that a firm has borrowed iooo if there is no inflation the firm s interest payments are io now suppose that inflation p rises to io and that the nominal interest rate r is given by the formula i r i p i fi then r rises to i i i and total interest payments to i i i hence at a time when revenue has risen by only io interest payments rise elevenfold and this creates cashflow problems for the firm index linked debt would avoid this problem because the principal could be indexed and would rise to i ioo leaving the firm to only pay li i in interest

the mercantilist index of trade policy we introduce an index of trade policy restrictiveness defined as the uniform tariff that maintains the same trade volume as a given tariff quota structure our index overcomes the problems of the trade weighted average tariff it avoids substitution bias correctly accounts for general equilibrium transfers and takes import volume instead of welfare as benchmark empirical applications to international cross section and time series comparisons of trade policy confirm our theoretical results trade weighted average tariffs generally underestimate the true height of tariffs as measured by the trade volume equivalent index this in turn always underestimates the welfare equivalent index

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

the uruguay round and welfare in some distorted agricultural economies abstract the uruguay round s induced changes in world agricultural prices will affect the welfare of developing countries the standard terms of trade effect calculation can mislead since the distortion effect operates alongside the terms of trade effect this study of the uruguay round s impact on nine agricultural economies reveals distortion effects which are many times larger than terms of trade effects in three of nine cases the distortion effect reverses the impact of the terms of trade effect in two other cases the distortion effect raises trivial terms of trade effect up to around 1 of national income

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

more or less ambition in the doha round winners and losers from trade liberalisation with a development perspective what is at stake in the standoff and suspension of the doha round of trade talks what impact would an agreement based on greater or lesser levels of ambition have on developing countries whose economies are relatively dependent on agriculture using the mirage computable general equilibrium model of the global economy in this article we compare different scenarios for the doha agricultural and nama negotiations taking real numbers from the proposals on the table from the united states us and the european union eu in december 2005 the results for both scenarios demonstrate the high stakes for successful completion of this negotiation given the positions articulated by the countries involved a cooperative reform outcome by the us and the eu based on the most ambitious components of their negotiating proposals delivers noticeably more benefits than an unambitious outcome we measure the degree of ambition in each scenario by the construction of a mercantilist trade restrictiveness index and focus the analysis on the impacts on developing countries

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

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

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

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

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

macroeconomic determinants of corporate failures evidence from the uk previous studies on the relationship between macroeconomic aggregates and business failures have been restricted to the description of the short run relationships among the variables this paper uses an error correction model ecm to investigate the determinants of uk corporate failures by modelling the short run and long run behaviours of corporate failure rates in relation to macroeconomic phenomena over the period 1966 1999 the findings indicate that failure rates are associated with interest rates credit profits price and corporate birth rates both in the short run and in the long run of these macroeconomic variables interest rate appears to be an important factor influencing failure rates and can be used as a feasible policy instrument to reduce the incidence of corporate failures the impact of the insolvency act 1986 has also been examined and its mitigating effect on corporate failures has been identified

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