piecemeal trade reform in presence of producer specific domestic subsidies abstract we extend the theory of unilateral piecemeal tariff reforms by considering both economy wide tariffs and sector specific production subsidies distortions sufficient conditions for welfare improving policy reforms involve both tariffs and sector specific distortions changes and require stronger assumptions on goods substitutability and the structure of distortions

eco labelling by a for profit certifier countervailing power and its consequences for profit certifier s eco labelling is common in industries where firms have some countervailing power on sharing gains from labelling we show that the certification standard for an environmental quality is lowered when firms have strong power a certifier with too low bargaining power will prefer to sell to the best offer rather than bargain this switch in the selling mechanism also thwarts his incentives in setting the standard this is consequential for evaluating policies the dimensions and even signs of welfare changes induced by taxes and subsidies depend upon the mechanism used and ultimately upon firms countervailing power

dairy tariff quota liberalization contrasting bilateral and most favored nation reform options we develop a highly disaggregated tariff line source differentiated partial equilibrium model of u s specialty cheese imports to investigate alternative reform options for tariffrate quotas a mixed complementarity framework is used to represent bilateral and multilateral tariff quota administration methods within the u s dairy industry the impact of liberalizing u s specialty cheese imports via bilateral and multilateral tariffrate quota expansions out of quota tariff cuts and simultaneous liberalization scenarios is evaluated we find that the path of liberalization is quite different depending on the reform approach undertaken the results have important policy implications in the agricultural negotiations

urban bias rural bias or state bias urban rural relations in post revolutionary china the authors aim to evaluate the relevance of urban bias and rural bias to the chinese case they present empirical evidence on the nature and extent of differentiation in rural urban living standards examine the political basis of relevant economic policies and investigate the relationship between these policies both the changes in labour productivity in each sector and the inter sectoral savings transfers both urban and rural bias hypotheses illuminate certain dimensions of chinese development strategy but the realities of rural urban relations have been complex and analysis must be supplemented by a focus on the divide between state and society and the question of state bias

extrinsic versus intrinsic problems of agricultural cooperation anti incentivism in tanzania and china peasant willingness to engage in collective farming and the efficiency of collective farms once established may be preconditioned on local self determination participatory control discriminating work incentives and external manoeuvrability in the absence of such preconditions whether or not there exist economies of scale sufficient to offset effectively minimised incentive problems cannot be determined anti incentivism bureaucratic controls and extractive external environments are identified as factors inhibiting successful collective farming in both tanzania and china explanations of these tendencies in the two countries are sought in their political economies and ideological structures

quality improvements and the incentive to leapfrog abstract in a model of an uncovered market of vertically differentiated products incentives of non identical duopolists to improve the technological maximum quality are analyzed it is assumed that initially firms offer products with different qualities and that the r d cost function changes exogenously this induces a reconsideration of firms quality decisions both firms have the same r d costs for improving the maximum quality quality changes within the existing quality range are assumed to incur only fixed adjustment costs it is shown that the firm which initially is in the low quality position always has a higher incentive to improve industry s quality than its rival if adjustments costs are sufficiently high persistence of dominance may occur for a low degree of initial differentiation low adjustment costs and r d cost functions with a high slope

income distribution and the contractionary effect of protection a theoretical analysis abstract in terms of a simple model we show that the removal of a tariff from a competing foreign brand is likely to expand the size of the domestic industry when income disparities exist a tariff increases the profits of the local monopolist but is capable of cutting down the size of the local industry after providing the general theoretical condition we construct an example from a class of examples where such an outcome holds in equilibrium

role of demand side strategy in quality competition abstract the research questions studied in this paper concern the role of demand side strategy for a firm engaged in duopolistic competition in quality and price a demand side strategy research looks towards markets and consumers unlike the traditional resource side strategy research that looks upstream into the firm s resources and its supply side we examine whether following a demand side strategy would benefit the firm the consumers or both in a market where two firms are competing with each other we first find the equilibrium quality and price levels for the traditional case where the two firms optimize their own profit function we use this case as a benchmark case for comparison next we let one firm the lower quality firm adopt a demand side strategy operationalized by an objective function where the profit is augmented by consumer surplus the equilibrium results show that a demand side strategy would increase the product quality level in the market and improve the adopter firm s competitiveness at the same time increasing the market consumer surplus we also study the case where the higher quality firm adopts demand side strategy and compare the results with the two cases mentioned above overall we find that adopting a demand side strategy would benefit the adopter firm s profitability and the consumers we therefore find evidence of what the strategy literature has been predicting about the role of demand side strategy

information goods vs industrial goods cost structure and competition we study markets for information goods and find that they differ significantly from markets for traditional industrial goods markets for information goods in which products are vertically differentiated lack the segmentation inherent in markets for industrial goods as a result a monopoly will offer only a single product competition leads to highly concentrated information good markets with the leading firm behaving almost like a monopoly even with free entry and without network effects we study how the structure of the firms cost functions drives our results this paper was accepted by barrie r nault information systems

better product at same cost lower sales and lower welfare we consider a high quality dominant firm facing a low quality competitive fringe we show that the dominant firm s quantity is weakly increasing in its quality if and only if its marginal cost weakly exceeds that of the fringe otherwise it is strictly decreasing in quality this result is driven by the fact that a quality increase causes the marginal revenue curve to rotate clockwise rather than shift outwards and at a height equal to the fringe firms marginal cost this fact combined with the dominant firm s mr mc condition determines the result for closely related reasons the effect of a quality increase on consumer welfare also depends on the relationship between the costs it is possible that all consumers are weakly better off that some are better off and some worse off or that all are weakly worse off we also consider several extensions and variations of the model

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

the optimality of tariff quotas under uncertainty abstract a tariff quota is a schedule of tariffs in which the tariff rate steps upward as imports exceed some critical quantity or value this has desirable properties in the face of uncertainty about domestic demand and supply and about foreign supply we show that a specific ad valorem tariff quota is the policy maximizing domestic expected surplus subject to constraints on average imports import expenditure and on the average amount by which imports import expenditure exceed some critical value

testing hypotheses about firm behavior in the cigarette industry data on the effects of excise taxes are used to investigate the level of competition in the cigarette industry a lower bound on the numbers equivalent of firms in the context of the conjectural variations model is derived and estimated results point to at least a moderately high level of competition and in particular allow for the rejection of the perfect cartel model this paper relies on comparative statics results and hence circumvents recent criticisms of a study of monopoly behavior in the cigarette industry

measurement of monopoly behavior an application to the cigarette industry a simple scheme is proposed to measure monopoly pricing behavior the coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost no direct measurement of costs is required so a major problem for other empirical studies of monopoly is avoided empirical results for cross section time series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry the model represents an alternative interpretation of related results in a recent paper by barzel application of the methodology to other markets is feasible

monopoly and product quality abstract this paper points out that without restrictions on the cost function distribution of consumer types and on the extent of market coverage the standard parameterization of preferences cannot by itself guarantee that a monopolist would choose a separating menu moreover there may not be any quality distortion

u s agriculture in a general equilibrium framework analysis with a social accounting matrix traditionally the analysis of u s agricultural policy has been carried out in a partial equilibrium framework it has thus ignored the linkages of the agricultural sector with the rest of the economy it is only recently that the importance of various economic linkages has started being recognized in work on u s agriculture the importance to the agricultural sector of exchange rates and other instruments of monetary and fiscal policies was first emphasized by schuh his seminal work sparked other studies of the interaction between agricultural production and incomes and traditional instruments of macroeconomic policy see also shei chambers and just freebairn rausser and de gorter the partial equilibrium analysis of u s agriculture stands in sharp contrast to traditional approaches to the formulation of agricultural policy in developing countries development economists have long been sensitive to the importance of leakages from policies aimed at the agricultural sector to the rest of the economy and vice versa in this paper we discuss how multisectoral models of the sort often used in developing countries can be used to analyze such issues in the united states we construct a u s social accounting matrix sam for 1982 and use a variety of multiplier models to analyze the impact of different exogenous shocks on agriculture focusing on the links between the agricultural and nonagricultural sectors a longer version of this article is provided by adelman and robinson soci accounting matrices

research joint ventures product differentiation and price collusion abstract we investigate the interplay between firms decisions in product development either joint or independent and their ensuing repeated pricing either collusive or bertrand nash a joint venture develops a single product whereas independent ventures develop their respective products which can be differentiated we prove that joint product development and the resulting lack of horizontal product differentiation may destabilise collusion whilst firms r d decisions have no bearings on collusive sustainability if differentiation is vertical we also discover the non monotone dependence of firms venture decisions at the development stage upon their time preferences as well as upon consumers willingness to pay

optimal allocation of quotas abstract consider a government which fixed the supply of a good e g by an import quota suppose the market for the good can be partitioned e g sales in different years or in different areas of the country can be considered sales in different markets we show that maximization of consumer surplus in the domestic economy may require segmentation of the domestic market into two but no more parts

productivity consequences of alternative land division methods in china s decollectivization an econometric analysis abstract in this paper we examine the productivity effect of the manner of distributing collective land to households under the chinese economic reforms of the 1980s during that period land was distributed by a formula putting weight on both household size and household labor force and land and labor markets were absent or underdeveloped in most regions a simple model of household decision making is developed for this case and a basic result is that agricultural output is concave in the proportion of land distributed according to workforce as opposed to household size this hypothesis is tested on data for 61 production teams of a township formerly commune in hebei province under a quadratic specification grain output displays the expected concave relationship with the land distribution parameter our results provide some evidence of congruence between equality in the distribution of resources and incentives for productivity

pses and the mix of measures to support farm incomes summary and conclusions in summary the mix of support provided to agriculture does matter when pses are to be cut across the board reductions in individual components of pses will have different implications for output exports land values and employment in different countries these differences can be systematically related to the type of instruments used to support agriculture for example cutting subsidies on an input such as fertilizer can result in greater long run reductions in output exports and employment in agriculture than would cuts in output subsidies of equal magnitude these differences may make it attractive for countries engaging in partial liberalization to change the mix of subsidies even as they reduce their aggregate pse in so doing they may be able to lessen or even eliminate some of the deleterious effects of reduced farm support for example the united states could maintain the demand for farm labour while cutting its aggregate pse in half by shifting the mix of farm support towards selected input subsidies by contrast there appears to be little incentive for substituting export subsidies for output subsidies under the pure pse approach proposed by professor tangermann et al this is because such a switch would have to be accompanied by further reductions in budgetary outlays in order to avoid exceeding the pse target agreed in negotiations

mixed strategy equilibria in a quality differentiation model abstract this paper shows that the standard quality differentiation duopoly model has in addition to the two well known pure strategy equilibria of maximum quality differentiation an infinity of mixed strategy equilibria in which firms choose mixed strategies in the first stage quality game in these equilibria maximum quality differentiation does not occur due to coordination failure total expected consumer surplus is the same at all mixed strategy equilibria and is higher than that under either pure strategy equilibrium total expected industry profit is the same at all mixed strategy equilibria and is lower than that under either pure strategy equilibrium

the asymmetric effects of reversible tariff changes under the united states gsp in a partial equilibrium textbook model of competitive international trade the volume and net value of imports always vary inversely with the tariff rate this result depends on assumptions that the tariff changes are substantial exogenous permanent and applied on a most favorednation mfn basis empirical applications of this theory however encounter different conditions generalequilibrium effects such as changes in prices exchange rates and income tend to be offsetting imperfect competition can make the incidence of the tariff indeterminate many tariff changes are small endogenous temporary and or discriminatory to illustrate how these differences in tariffs can alter their observed relation to imports we offer the following examples a tokyo round cuts in u s tariffs were staged generally over eight years and averaged only 0 3 percent per annum 6 as compared to 6 4 percent average annual changes in american import prices over the same 1980 87 period 18 if search and recontracting costs caused buyers to ignore relatively small price variations then many observed tariff changes would produce negligible effects b governments tend to lower tariffs when imports are low enough to obviate political problems and they raise them as a response to import surges observers who ignore this endogeneity might conclude that imports are positively related to tariff rates c while many tariff concessions are bound under the gatt some duties are temporarily altered to provide import relief for domestic producers or preferential access for certain trade partners importers may not respond if the temporary benefits of doing so are exceeded by the costs of finding substitutes d the importers response to a tariff change will also differ between cases where some or all imports of a given product are affected a discriminatory tariff change might shift the shares of suppliers while leaving total imports virtually unaltered empirical studies seldom test the relation between imports and tariffs directly time series estimates of import demand equations usually subsume the tariff in a gross price variable

quality and quantity competition in a multiproduct duopoly author affiliation yi ling cheng ylcheng thu edu twshin kun peng speng econ sinica edu tw acknowledgment we are most grateful to three anonymous referees who generously offered a number of insightful comments to improve this article we have also benefited much from fruitful discussions with takatoshi tabuchi hong hwang and toshihiro matsumura which led to significant improvements in this article we are especially indebted to takatoshi tabuchi for his contributive comments and suggestions finally we would like to thank conference participants at 2010 association for public economic theory in istanbul society for the advancement of economic theory in singapore as well as seminar participants at institute of economics academia sinica and national taiwan university financial support from academia sinica and the national science council taiwan is gratefully acknowledged the usual disclaimer applies 1 introductionmost of the literature dealing with vertical product differentiation such as bonanno 1986 and motta 1993 assumes that each firm can produce only one product however multiproduct firms abound in the real world firms in various industries produce multiple quality differentiated goods for example mercedes benz provides three different classes of sedans namely its c class e class and s class and bmw has its 3 series 5 series and 7 series in addition both lenovo and sony supply around 20 kinds of laptops ranked in accordance with their central processing units and outfits 1a casual survey of the empirical evidence also suggests that any two multiproduct oligopolies usually differentiate the qualities of their products and the patterns of their quality differentiation can be classified into the segmented type and the nonsegmented type the former type implies that the products of one firm are always of higher quality and more highly priced than those of the other firm such as the sedans of bmw and honda all the sedans sold by bmw are more expensive and of higher quality than those of honda the latter type denotes completely different patterns where the products produced by the two firms have interlacing patterns of their prices qualities for example the prices of the mercedes benz c e and s classes are respectively 32 900 52 700 and 87 800 while the prices of bmw s 3 5 and 7 series are given as 33 600 45 800 and 80 300 respectively 2 the prices of their sedans are interlaced and it is inferred that their qualities are interlaced and nonsegmented other examples include the whiskey offered by johnnie walker and edrington and the plasma televisions provided by samsung and sony the nonsegmented patterns of differentiation between the multiproduct firms with similar technological capabilities are very common in reality however the related literature has not shed enough light studying them while the segmented type of quality differentiation has been characterized by champsaur and rochet 1989 1990 with a quality then price competition of multiproduct duopolists the nonsegmented one so far has not been captured and explained in the literature 3therefore this article intends to examine the equilibrium qualities as well as the number of products chosen by the multiproduct firms with identical similar technological capabilities such as mercedes benz and bmw our main purpose is to characterize the patterns of vertical product differentiation and to reveal the properties of quality differentiation between them the contributive articles gal or 1983 de fraja 1996 johnson and myatt 2003 2006 examine a variety quality and quantity competition between multiproduct firms 4 gal or 1983 de fraja 1996 and johnson and myatt 2003 proposition 6 conclude that firms with equal technological capabilities will compete head to head by producing identical products qualities

an empirical model of mark ups in a quality differentiated export market abstract this paper develops an empirical model to allow for imperfect competition in the market for traded goods a simultaneous equation model incorporating the demand for and supply of taiwanese footwear exports to the united states is specified and estimated the model allows the identification of two separate sources of mark ups in export prices the first comes from the u s imposed quantitative restriction on these exports the second comes from imperfect competition in the international market for these exports the results suggest competitive behavior by taiwanese footwear exporters the quantitative restriction resulted in a 16 9 percent mark up of prices over marginal cost

pass through of exchange rates and tariffs in greek us tobacco trade abstract the paper examines the extent to which exchange rate and unit tariff changes are passed through in us import prices of unmanufactured greek oriental tobacco the results indicate partial pass through of exchange rates and tariffs exchange rate pass through is about 0 272 and tariff pass through about 0 185 one possible reason for the partial pass through is oligopoly in tobacco exporting oligopoly would imply that depreciation of the drachma relative to the us dollar benefits tobacco exporters operating in greece a second possible reason is a possible correlation between exchange rates premiums paid to tobacco exporters in previous agricultural policies an important implication of this possible correlation is that greek tobacco prices may be more sensitive to exchange rate changes under the current agricultural policy

strategic choice of quality when quality is costly the persistence of the high quality advantage in a two firm two stage model of vertical product differentiation i show that for every convex fixed cost function of quality the firm that chooses the higher quality at the first stage earns the higher profits the result holds for the pure strategy equilibrium in the simultaneous quality game and it holds as well if firms choose their qualities in sequential order

the incentive problem and the demise of team farming in china abstract this paper begins with a discussion of what can be inferred about the efficiency of collective farming from the demise of team production in rural china after reviewing the formal literature on incentives in collective farms it examines two problems that may have plagued the chinese teams first excessive egalitarianism which can be analyzed by modifying existing models and second monitoring problems which require a departure from the perfect information context of those models by numerical example it is shown that the superiority of household farming over forced collective farming does not preclude the possibility that some team production would have existed in a democratic equilibrium dominating both of them finally the post reform household contracting system is examined with special reference to distributive and allocative issues

product differentiation and the treatment of foreign trade in computable general equilibrium models of small economies this paper examines the treatment of exports and imports and external closure rules adopted in recent single country computable general equilibrium models of small economies the paper presents a simple one sector analytic model which captures the major features of the multi sector counterpart used in applied models the paper derives graphical and algebraic solutions to the model and shows that unlike some earlier external closures this one gives rise to a well behaved price taking economy the model is also useful to illustrate the role of elasticities in popular trade theoretic models that include traded and non traded goods

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

welfare improving tariff changes a case of many goods and countries abstract in a model of many goods and countries with specific tariffs and subsidies the paper proves that a proportional reduction a radial contraction of all tariff subsidy rates improves the world s potential welfare this generalizes a result obtained in a two good economy by hatta and fukushima 1979

incumbent positioning as a determinant of strategic response to entry existing research has identified different firm characteristics that determine an incumbent s reaction toward market entrants this study widens the perspective from a firm s absolute attributes to its relative positioning within its competitive environment the hypotheses for the empirical analysis are derived from game theoretic models with either vertical or horizontal product differentiation in each of the two theoretical models two incumbents initially choose very different quality and variety levels respectively and move closer to the center when faced by entry of a competitor from the vertical differentiation model we predict a stronger price reduction by high quality firms in our empirical analysis we are using a novel dataset of the high quality restaurant market in germany to test the theoretical findings while the hypotheses with respect to adjustments of prices and varieties are supported we do not find empirical evidence for the predicted quality adjustment

risky quality choice abstract in vertical product differentiation with a stochastic research technology firms should target their research at different quality levels for efficiency in a natural monopoly where the top firm finds it most profitable to sell to the whole market the incentives for risk taking and for firms to differentiate their targeted qualities are optimal in a natural oligopoly which results when there is sufficient dispersion of tastes the relationship between a firm s payoff and its quality improvement over other firms is weakened this diminishes the firms incentives to differentiate and the targeted qualities are too low and too close together

how effective are trade barriers an empirical analysis of trade reduction diversion and compression we analyze the effects of trade barriers using highly disaggregated data the level of disaggregation allows us to separate the effects of tariffs and nontariff barriers ntbs into reduction dive

differentiated products and supply controls in the analysis of agricultural policy reform the case of tobacco abstract with a multi market model of the u s tobacco and cigarette industries we analyze the impact of a reduction in the assistance to u s tobacco producers by relaxing production quotas with nonbinding price support and by lowering tariffs on tobacco imports the results show the importance of incorporating differentiated product and supply control assumptions into agricultural policy analysis

tax policy and u s agriculture a general equilibrium analysis this article emloys a computable general equilibrium model to analyze the effects of eliminating farm and food tax preferences in 1977 tax differentials on capital income labor payments and production and sales taxes are each examined results indicate that these combined preferences lowered food costs by about 4 5 billion while enhancing after tax returns to farm land labor and capital the associated general equilibrium tax expenditure is estimated to have been between 5 5 and 6 6 billion

the relative inefficiency of quotas the cheese case the nonequivalence of tariffs and quotas under a wide variety of circumstances is well established in economic theory this study considers heterogeneity as a source of nonequivalence and demonstrates its practical importance where restriction is inevitable the bias of economists in favor of price instruments is not thoroughly grounded this study should help provide a foundation the point of departure from the equivalence model is differentiation of products

innocuous minimum quality standards abstract the present note shows that innocuous minimum quality standards namely below the lowest quality level in a market may have effects on equilibrium outcomes such a mqs reduces the incentive to invest in r d by the quality leading firm

restricting the market for quota an analysis of tobacco production rights with corroboration from congressional testimony regulatory programs that restrict output levels often impose restrictions on the transfer of rights to produce or to use particular inputs in this paper we use a unique cross section time series data set from north carolina to quantify the welfare effects of transfer restrictions for poundage quota under the u s flue cured tobacco program we find that the deadweight costs of such restrictions are small but that the distributional effects are substantial we analyze congressional testimony on quota transfer legislation and conclude that our estimates of the distributional effects are consistent with expressed views of market participants

the effects of trade liberalisation abstract the liberalisation of agricultural trade has been an important component of the uruguay round of multilateral trade negotiations under the gatt a considerable amount of research effort has been expended on estimating the costs of agricultural protectionism most of this activity has been based on a partial equilibrium framework with conventional quantification of the distributive benefits and costs to be expected from liberalisation attempts at general equilibrium analysis have been fewer but provide evidence of the economy wide gains from the removal of protection whilst these analyses have had a powerful influence on the nature of the political discussions on agricultural trade policy they have not helped define the details of politically acceptable alternatives to current agricultural supports the reasons are the technical economic data and statistical problems which restrict the interpretation of results to broad generalisations and the failure of analyses to focus on the most important political concerns indicating these concerns may help define the focus of future research but it is doubted if conventional economic analysis has very much more to offer

minimum quality standards and market dominance in vertically differentiated duopoly abstract the paper establishes conditions for low quality dominance within a vertically differentiated duopoly and studies the consequences for minimum quality standard policies gross surplus from unit consumption consists of a benefit from quality and a baseline benefit consumers are heterogeneous homogeneous with regard to the former latter marginal cost increases in quality the quality then price equilibrium exhibits low quality dominance first in market share and then in profit as baseline benefit increases relative to the willingness to pay for quality the preference structure determines the effect of a minimum quality standard in a way related to the pattern of dominance the standard reduces increases welfare under conditions that lead to low high quality dominance

tariff reform in the presence of sector specific distortions the problem of choosing second best trade policies is modified by including sector policies as well as tariffs formulae for the optimal tariff and sector specific subsidy are derived and used to study the design of optimal policy menus the theory is applied to a computable general equilibrium model of the u s economy which emphasizes agriculture the model suggests that non agricultural distortions do not provide a second best argument for substantial levels of agricultural protection reforme tarifaire quand il existe des distorsions specifiques a un secteur le probleme du choix de politiques commerciales de second ordre est modifie quand on inclut des politiques specifiques a un secteur tout autant que les tarifs douaniers les auteurs derivent les formules pour le tarif optimal et pour la subvention sectorielle optimale et les utilisent dans l etude de la construction des menus de politiques optimales ils appliquent la theorie a un modele calculable d equilibre general de l economie des etats unis qui met l accent sur le secteur agricole le modele suggere que des distorsions dans les secteurs non agricoles ne fournissent pas un argument de second ordre qui supporterait des niveaux de protection substantiels pour le secteur agricole

a comment on a model of vertical product differentiation in a duopoly model with vertical differentiation if the firms do not cover the market the lower quality firm chooses a quality level exactly 4 7 of that of the higher quality firm and chooses a price that is 2 7 of the price of the higher quality firm copyright 1992 by blackwell publishing ltd

price discrimination and markups in export markets abstract imperfect competition in international markets is one of the key explanations for why prices of similar goods might differ among destination countries this paper develops an empirical model to examine the presence of price discrimination stemming from imperfect competition in the international market for a country s exports the model is used to examine the export behavior of taiwanese exporters of footwear the generalized supply relation allows identification of deviations from competitive pricing in each export market in addition the model provides insights into the extent of exchange rate pass through finally the model is modified in order to estimate the effect of the voluntary export restraint imposed in the u s on footwear imports from taiwan

trade democracy and the gravity equation abstract does democracy affect trade there are several channels by which democracy may affect trade with differing implications first democratization in the exporting country can improve product quality and reduce trade costs increasing bilateral trade second democratization in the importing country may increase trade barriers and thus reduce imports in this paper i analyze the effect of democracy on trade by augmenting the gravity equation with democracy using a rich panel data set and controlling for the endogeneity of democracy i find empirical evidence consistent with the hypothesis that democracy fosters trade this finding is robust to various econometric methods and to the use of disaggregated specifications

cigarette taxes and smoking restrictions impacts and policy implications the effects of recently proposed increases in cigarette excise taxes and smoking restrictions on tobacco prices and quantities quota lease rates and revenues to tobacco producing areas are analyzed the price elasticity of demand for u s cigarette exports is estimated proportionally similar increases in smoking restrictions or cigarette taxes are shown to have effects of similar magnitude on cigarette consumption a policy of reducing price instead of the quantity produced is found to minimize the impact of increased taxes and smoking restrictions on revenues to tobacco producing areas

egalitarianism subsistence provision and work incentives in china s agricultural collectives abstract collective agriculture in china failed because its reward system was too egalitarian to provide sufficient work incentives to the peasants a popular view attributes egalitarianism to the difficulties of monitoring work effort in a team an alternative view presented here argues that a the egalitarian provision of basic foodgrains to peasant households reflected more generally the consumption problem of the peasantry who were impoverished by the state s policy of extracting agriculture and b as a remuneration system time rates better served the work and income sharing purpose than piece rates and therefore better protected households with high dependency ratios egalitarianism survives under the household farming system

product aggregation bias as a specification error in demand systems inherent in all demand studies is some form of product aggregation which can lead to product aggregation bias this article develops a simple procedure for incorporating product aggregation bias in demand systems that permits testing of product aggregation bias with a standard likelihood ratio test an empirical illustration of the procedure demonstrates the importance of proper product aggregation

effects of an increase in the federal excise tax on cigarettes the economic impact of a cigarette tax increase on the cigarette and tobacco industries depends on market forces and on the u s tobacco program this study uses a log linear equilibrium displacement model parameter estimates from prior studies and recent data to indicate quantitative effects international trade implies that the effect of the tax increase on the price of domestic tobacco will be small even in the case of fixed tobacco quotas however the effects on tobacco producers revenue quota lease rates and producer economic rents can be significant depending on the response of u s tobacco policy to a tax change

welfare in differentiated oligopolies with more than two firms abstract excessive differentiation in the quality or location dimension in order to soften price competition is a well established conclusion concerning duopolistic markets this has inspired authors to discuss policy measures that may improve welfare in a differentiated market in the present paper a general welfare analysis is conducted for a varying number of firms it is shown that outcomes are almost optimal when three or more competitors are in the market in light of this a laissez faire policy should be adopted for a range of entry costs market outcomes entail insufficient entry therefore a subsidy to entry may improve welfare

adjustment costs and dynamic factor demands for u s cigarette manufacturing abstract following the approach of berndt fuss and waverman a dynamic model for u s cigarette manufacturing is developed and factor demands estimated tobacco and capital stocks are treated as quasi fixed inputs the results indicate that there are significant adjustment costs associated with adjusting tobacco stocks but not with adjusting the capital stock short run intermediate run and long run output constant elasticities are estimated for inputs in cigarette production demand for u s tobacco by u s cigarette manufacturers is found be more inelastic than shown by previous studies using static models cigarettes produced for export appear to differ in their marginal cost of production from cigarettes produced for the sale in the u s market

dynamic factor demands for us cigarette manufacturing under rational expectations the rational expectations approach to adjustment cost models for factor demand is used to develop a dynamic model for us cigarette manufacturing in the present study dynamic production modelling is extended to the case of multiple outputs this analysis is the first to address cigarette manufacturing allowing for the possible influence of quasi fixed factors multiple outputs and rational expectations short intermediate and long run factor demands are estimated and the presence of adjustment costs tested for in us cigarette manufacturing the results indicate that there are significant adjustment costs associated with adjusting tobacco stock but not with adjusting the capital stock cigarettes produced for exports appear to differ in their marginal cost of production from cigarettes produced for sale in the us market

agricultural trade liberalization in a multi sector world model abstract impacts of agricultural and nonagricultural trade liberalization on agriculture are assessed in a multi commodity multi country framework by modeling simultaneously all goods sectors of the economy we evaluate the importance of a relative price changes between sectors and b income and exchange rate adjustments that follow trade liberalization in a world of floating rates specifically we compare two cases using a static world policy simulation swopsim model agricultural multilateral liberalization and complete multilateral liberalization with floating exchange rates for all countries regions in both cases agricultural commodity prices tend to increase an effect which is more pronounced when currency values adjust the developing countries in particular argentina brazil and mexico have the most significant advances in agricultural and total production when exchange rates vary moreover the gains from international trade are extended to all countries regions explicitly specified in the model

certification and minimum quality standards when some consumers are uninformed we compare certification to a minimum quality standard mqs policy in a duopolistic industry where firms incur quality dependent fixed costs and only a fraction of consumers observe the quality of the offered goods compared to the unregulated outcome both profits and social welfare would increase if firms could commit to producing a higher quality an mqs restricts the firms quality choice and leads to less differentiated goods this fuels competition and may therefore deter entry a certification policy which awards firms with a certificate if the quality of their products exceeds some threshold does not restrict the firms quality choice in contrast to an mqs certification may lead to more differentiated goods and higher profits we find that firms are willing to comply with an ambitious certification standard if the share of informed consumers is small in that case certification is more effective from a welfare perspective than a minimum quality standard because it is less detrimental to entry

does the central american common marke1 benefit its members does the central american common market benefit its members i introduction the members of the central american common market cacm have recently taken measures to revitalize their union they have formally pledged to improve regional economic integration and they have reinforced the common external tariff they took these measures in the belief that a stronger union would improve their economic welfare a belief that has also led both the united states and the european community to support a stronger union the idea that a regional trading group would improve economic welfare of the central american countries originated in the early 1950s when raul prebisch and other economists in the united nations economic commission for latin america ecla argued persuasively that such a union would help these countries develop their economies to many the views of the ecla economists were vindicated when the inceptionof the cacm in 1960 was followed shortly by accelerated economic growth in the region further support for their views came from quantitative studies cline and delgado 1978 willmore 1976 yotopoulos and nugent 1976 nugent 1974 and wilford 1970 which all concluded that the union provides static welfare gains for its members there is however room for skepticism about the benefits of the cacm much of the argument of the ecla economists is based on the notion that import substitution is a good way to promote economic development a notion that has since fallen into disrepute nor does the accelerated growth that followed the union s formation provide strong evidence that the cacm provides benefits the volume of trade between members is too small for the union to have had more than a minor effect on the region s economy so even if this effect were negative the region would presumably still have grown rapidly in the mid 1960s the evidence from the quantitative studies is also faulty these studies did not estimate directly the effects of the cacm but merely imputed these effects by assuming either that market shares or income elasticities would have remained constant without the union furthermore they assumed that supplies of different countries are perfect substitutes for each other whereas recent studies by collier 1979 grossman 1982 and anderson 1985 have shown that the degree of substitutability in demand between these supplies is important in determining how customs unions and other discriminatory tariff changes affect welfare it is particularly important to allow for less than perfect substitutability when analyzing the cacm because member imports from developed countries often have no close substitutes among locally produced goods in this paper the static welfare consequences of the cacm are reexamined with two important advances over the previous studies first direct estimates are made of the effects of the union second the shortcomings of the perfect substitutes assumption are overcome by allowing imports from different countries to be imperfect substitutes for each other and for domestic output the model which is partial equilibrium in nature also enjoys two advantages over the computable general equilibrium models such as those whalley 1985 and hamilton and whalley 1985 used to examine the effects of various economic integration schemes it requires fewer data and its operation is more transparent so it shows more clearly how introducing imperfect substitutes alters the traditional analysis of a customs union the model s main limitation is that it applies only to customs unions among small countries ii the model geometric presentation figures 1 2 and 3 show the home market and figure 4 the export market for country a a representative member of the cacm a s residents distinguish between four goods imports from other members imports from nonmembers domestic output for home consumption and exports

substitutability for farm commodities the demand for u s tobacco in cigarette manufacturing a generalized leontief cost function and system of factor demand functions for the domestic cigarette industry is estimated we strongly rejected fixed proportions both imported tobacco and other inputs are substitutes for u s tobacco the estimated output constant price elasticities are combined with the output effect calculated from cost shares and time series estimates of the cigarette demand elasticity and an export demand elasticity from previous studies to consider the effects of reducing the u s price support competition from foreign tobacco implies that a u s price decline would increase significantly the quantity of u s tobacco demanded

social cost of the tobacco program redux economists do not often get the chance to make long run checks on their own predictions fifteen years ago the senior author johnson analyzed the welfare effects of the flue cured tobacco program as it then was operating the somewhat surprising conclusion of that study was that the program s social cost was essentially zero the fact that the united states faced a less than perfectly elastic foreign demand function produced gains to offset the usual welfare triangle loss and the rather large efficiency loss from restricting an input land rather than output at that time the author made several long run predictions a the elasticity of foreign demand would increase as foreign output increased b institutional rigidities that fostered the u s monopoly position would erode c inefficiency losses would increase all of these would put financial and political pressure on the support

endogenous quality choice price vs quantity competition two versions of a vertical product differentiation model one with fixed and the other with variable costs of quality are analyzed to study how the hypotheses of price versus quantity competition affect equilibrium solutions product differentiation arises under all the scenarios considered contrasting previous findings of symmetric quality choices under cournot behavior however to relax harsher market competition firms differentiate more under bertrand than under cournot a simple welfare measure also indicates that the economy is better off when firms compete on prices with fixed costs of quality not only consumer but also producer surplus is higher under price competition copyright 1993 by blackwell publishing ltd

time cost substitutability earlycutting threat and innovation timing with time cost substitutability a potential imitator could threat to earlycut the innovator by increasing experimental intensity the earlycutting threat or uncertainty about the potential imitator s experimental cost advantage usually drives down the new product s quality but advances its launching date

quotas as options quota licenses are options their price is given by expected discounted future value which hangs on the possibility that the quota may bind a number of auxiliary administrative details of quota systems are also analyzed in this context the presence of use it or lose it requirements and of restrictions on rate of usage of the annual quota can be seen as attempts to offset the implied protection on below limit imports they are shown to be inefficient recognition of the option valuation of quota licenses is rich with suggestions for future work on evaluation of quotas and comparisons with alternative schemes for protection

setting the price of oil in a distorted economy the international price of oil increased dramatically in 1974 and again in 1979 many developing countries responded to these price shocks by keeping the domestic price of oil products below import parity levels and borrowing abroad to finance the increased oil import cost in extreme cases the domestic price of sensitive fuels such as kerosene was frozen so that for example by 1981 the price of kerosene in egypt was 15 of its border price world bank 1983 table 12 p 109 see also julius 1981 in many cases this was not a sustainable strategy and with some prompting from international agencies such as the i m f and the world bank these countries were persuaded that the domestic prices of oil products should be increased economists were asked to advise on the correct domestic price of oil and frequently argued that it should be raised to the international price level this would be sound advice in an undistorted and competitive economy but few developing countries satisfy that description and in many cases whilst the government was prepared to change the price of oil it was not willing to alter the whole structure of taxation and trade protection what then is the optimal price of oil or equivalently tax on imported oil in a distorted economy in which no other tax or tariff can be altered this is a fairly standard second best problem in the choice of policy which is readily answered given certain conventional assumptions suppose that it is possible to discriminate between the price of oil facing producers and consumers so that we can separate the efficiency and equity aspects of the pricing problem and rather less plausibly that domestic industry is production efficient though not trade efficient as it faces a distorted set of prices finally suppose that any revenue collected from the oil tariff can be redistributed to consumers in a non distortionary way then it is well known e g green 1962 that the solution is to set the tariff on oil which is equivalent to setting the domestic price of oil given the world price at an ad valorem rate which is a weighted average of other ad valorem distortions in the economy if these weights were all non negative then the tariff on oil would have to lie

the eec s wheat price policies and international trade in differentiated products several features of the ec wheat market are analyzed including the imperfect substitutability between imports and domestic supplies the simultaneous import and export of wheat and the distinct impact of threshold versus intervention policy prices in theory the impact of ec price policies on wheat consumption and net trade are found to be indeterminate a priori empirical results show that intervention prices have a positive impact on ec net exports while increases in threshold import prices have decreased ec net wheat exports competing wheat exporters would prefer the ec to lower the intervention price to world levels but maintain threshold prices

impact of domestic content requirement on the us tobacco and cigarette industries abstract using a log linear equilibrium displacement model we quantify the impact of the recent domestic tobacco content requirement on us cigarette manufacturing we investigate effects on us growers and manufacturers and competing tobacco imports the policy increased domestic use of us grown tobacco but induced a small negative output effect tobacco imports decreased substantially the paper also discusses the political economic incentives for us manufacturers to comply with such policies the political cooperation between us growers and manufacturers decreases the opposition of the latter to protectionist policies championed by the former

estimating the distortionary effects of ethnic quotas in singapore using housing transactions abstract desegregation is a key policy issue in many countries i investigate a residential desegregation program in singapore the ethnic housing quotas i show that choice restrictions imposed on apartment blocks above the quota limits constrained could have distortionary effects causing price and quantity differences for constrained versus unconstrained blocks i test these predictions by hand matching more than 500 000 names in the phonebook to ethnicities to calculate ethnic proportions at the apartment block level i can then investigate differences for constrained and unconstrained blocks close to the quota limits and test for sorting around the limits i find that price differences are between 3 and 5 quantity effects are economically significant translating to longer time on market durations selection cannot fully explain these results my results point to challenges in achieving desegregation using quantity restrictions

input price discrimination in the presence of downstream vertical differentiation abstract this paper investigates the competitive effects of input price discrimination ipd in a setting in which an upstream monopolist produces an essential input supplied to the downstream market where there is competition between two vertically differentiated retailers two different input pricing regimes are investigated i the uniform pricing regime in which third degree input price discrimination is prohibited and i i a discriminatory pricing regime under which the upstream monopolist may charge different prices to the two downstream firms we find that despite favoring the low quality firm ipd is welfare enhancing if and only if the quality gap is sufficiently high

exit with vertical product differentiation abstract this paper presents a duopoly model of exit from a declining industry with vertical product differentiation it extends previous io models on exit that have so far ignored demand effects the model shows how the interplay between demand and technological factors determine the order of exit therefore demand factors are relevant and should be taken into account thus the firm with a longer tenure as a profitable monopolist does not necessarily outlast its rival in addition this paper argues that the low quality firm may find it optimal to stay in the market despite making temporary losses to outlast its rival