why are taxes so high in egalitarian societies in an analysis of the relative income or relative consumption hypothesis it is shown that if the ratio of agent i s consumption to agent j s consumption enters into the utility function a tax on labor income may increase welfare for all agents if pretax wage inequality is low all agents will unanimously be in favor of such a tax thus there will be a tendency for taxes to be high in societies where pretax wage inequality is low copyright 1995 by the editors of the scandinavian journal of economics

on the equivalence of profit and revenue sharing abstract this paper shows that even in a unionised labour market net and gross profit sharing as well as revenue sharing are isomorphic neither the capital stock nor the wage employment combination depends on the deductibility of base wages and or capital costs from the share base

the ineffectiveness of quantitative restrictions with production diversion long ago meade 21 and samuelson 23 noted that when the number of goods exceeds the number of factors in a general equilibrium model the production set will not be strictly convex later studies have focused either on the shape and geometry of the production possibility frontier 22 17 18 15 26 13 or on generalizations of the stolper samuelson rybczynski and factorprice equalization theorems 22 16 4 27 little attention however has been given to the policy implications for quantitative restrictions qrs in a model with more goods than factors traditional results in trade theory are based on a 2 x 2 x 2 general equilibrium model within this context qrs have effects similar to tariffs namely they raise the domestic price of the protected good increase output and factor usage in the industry and raise the returns to factors used intensively in the industry 5 2 14 bhagwati 3 has shown that quotas and tariffs are equivalent when there is perfect competition in the domestic market but that equivalence will break down in the presence of a domestic monopoly further studies by itoh and ono 12 benson and hartigan 1 hwang and mai 11 and dockner and haug 7 demonstrate surprising results about when equivalence holds under various assumptions of imperfect competition 25 12 20 in this paper we will show that qrs need not be equivalent to tariffs even in a perfectly competitive model as long as there are more goods than factors of production we define production pattern replicate equilibria as the set of world production and trade configurations that can be supported by one vector of equilibrium prices in general replicate equilibria exist whenever there are more goods than factors because in this situation there will exist an infinite number of production configurations consistent with any equilibrium price vector in each country 2 as melvin 22 1263 points out the most important conclusion to be drawn from this indeterminacy is that the actual pattern of trade depends on which of the possible production configurations is chosen this corresponds to our notion of replicate equilibria since a qr represents a restriction only on a particular pattern of trade it may not preclude the existence of a replicate equilibrium not restricted by the qr

the excise tax effects of the property tax abstract this paper constructs a theory of how differences across regions in property tax rates affect product prices and factor prices for a model where labor and capital are perfectly mobile between regions it is shown that consumers residing in different regions face the same nontraded good prices even when property tax rates differ across regions

profit sharing capital formation and the nairu this paper reconsiders the impact of different remuneration systems on aggregate employment contrary to common wisdom on this topic we show that the switch from a fixed wage economy to a share economy results in lower aggregate unemployment an additional innovation of this paper is the endogeneity of the capital stock decision of the firm which enables us to assess and reject the common disincentive to invest criticism of a share economy

rent seeking with multiple winners this paper examines the impact of the number of winners allowed by regulators on rentseeking expenditures it is demonstrated in a widely used model that an increase in the number of winners will decrease total rent seeking expenditures this result is generally obtained regardless of whether the firms are risk averse or risk lovers when regulators award coveted market franchises there will be smaller welfare losses if more winners are allowed

a multi winner nested rent seeking contest this paper considers a symmetric imperfectly discriminating rent seeking contest in which there may be several winners we first demonstrate a serious flaw in previous work and then go on to suggest an alternative method for analyzing the contest in contrast to the previous work we show that the value of the rent is fully dissipated in equilibrium as the number of players becomes large

some results on rent seeking contests with shortlisting we show that rent seeking contests with shortlistinghave comparative static properties which depend on thestage of the contest by generalising the argument inamegashie 1997 we show that well known comparativestatic results in single stage rent seeking contestsdo not necessarily carry over to contests withshortlisting the analysis suggeststhat policy prescriptions for reducing rent seekingexpenditures in contests with shortlisting cannot begiven without taking into account the stage of thecontest we also extend the model in amegashie 1997 to the case of unequal class sizes finally theshortlisting method in amegashie 1997 is comparedwith that in clark and riis 1996

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

efficient prizes in prototype development contests abstract a prototype has a specific payoff with technological uncertainty about the costs of development market uncertainty involves the issue of which developer has his prototype accepted by the sponsor an efficient prize induces the welfare maximizing amount of r d

profit shares bargaining and unemployment i introduction weitzman 1987 has argued that in an economy with long term unemployment due to extra competitive wages profit sharing can eliminate this unemployment by lowering the marginal cost of labor jackman 1988 provides additional microfoundations for this claim by modeling long term unemployment as arising from an externality in decentralized wage setting in that model a mandated profit share lowers wages and raises net profits thereby inducing the entry of firms into the market unambiguously lowering unemployment and leaving the real wage unchanged in general equilibrium the generality of this result is put into question by holmlund 1990 who considers a similar case but with the capital stock fixed economy wide and shows that profit sharing may raise or lower unemployment depending on standard properties of the production function in that short run model firms implicitly operate on downward sloping labor demand curves so profit sharing expands employment only to the degree that it reduces wages in general equilibrium if the labor demand elasticity is great enough the general equilibrium effect of profit sharing is to raise wages and lower employment holmlund also shows that his result is independent of whether the profit share is bargained over or mandated in models with variable capital the question of the effect of profit sharing on employment does not reduce to the question of its effect on wages the introduction of profit sharing also affects net profitability and so may lead to an inflow or withdrawal of capital in the market in the long run further influencing employment in jackman s model employment unambiguously increases however jackman only considers a mandated profit share under monopoly union wage setting leaving the impact of bargaining over profit shares and wages unresolved further substantial structural differences in the models of jackman and holmlund make direct comparisons of these models difficult in the present paper i present a model in the spirit of holmlund s but with free entry of firms subject to overhead costs and show that under nash wage bargains the effect of profit sharing on both employment and compensation depends on whether the profit share is bargained over or mandated as well as on the profit accounting used to determine share payments of particular interest is the possibility that profit sharing may reduce both aggregate employment and total compensation per worker due to general equilibrium effects no such possibility exists in the models of jackman and holmlund profit sharing employment and bargaining as is well known if nash bargaining is over both wages and employment then profit sharing leaves microeconomic employment and incomes unchanged further under unilateral employment setting by firms nash union wage and profit share bargains emulate nash bargains over wages and employment pohjola 1987 anderson and devereux 1989 johnson 1990 in partial equilibrium the ability to bargain over either profit shares or employment in addition to wages raises employment and is pareto improving in general equilibrium however reservation utilities may rise enough to cause wages to rise and employment to fall this is shown by layard and nickell 1990 for bargaining over employment and by holmlund 1990 for bargaining over profit shares both models are short run models in which the capital stocks are fixed economy wide holmlund goes further to show that the same mechanism also operates for mandated profit shares in the long run model presented here holmlund s result for bargained profit shares continue to hold as does layard and nickell s for bargained employment though for different reasons the introduction of profit sharing does not produce upward wage pressure since free entry eliminates profits and thus any direct effect of profit sharing on reservation utilities rather employment is reduced if it reduces profitability and so yields exit of capital sufficient to offset the positive effect of reduced wages on employment

committees and rent seeking effort under probabilistic voting congleton 1984 shows that a rent awardedby a committee results in smaller aggregaterent seeking expenditures than a similarrent awarded by a single administrator this note modifies congleton s model byconsidering a model in which voting isprobabilistic instead of deterministic ishow that the relative magnitudes ofrent seeking expenditures could go eitherway depending on the relative weightedsensitivities to rent seeking efforts ofthe committee and the single administrator i show how the distribution of votingpowers of committee members affectsrent seeking efforts i also examine thecase where there is some probability thatthe rent may not be awarded if thecommittee is unable to reach a majoritydecision my results diverge from congleton 1984 because of the absence ofmajoritarian cycles in my model

profit sharing in a unionised economy with imperfect competition abstract this paper sets up a simple model of a unionised economy and shows that the introduction of profit sharing unambiguously reduces the unemployment rate the result arises because unions are assumed to care about the employment of their members but cannot bargain over employment directly profit sharing reduces the perceived cost in terms of worker income foregone of increasing employment in the firm in the economy as a whole the equilibrium unemployment rate falls

the regional consequences of international trade with interregional capital mobility abstract this paper examines the resource allocation and welfare effects of international trade when a nation is composed of distinct regions and capital is mobile interregionally the introduction of capital mobility significantly alters the regional consequences of free trade it is shown for example that it is possible that the source of the nation s export expansion is the region that is at a technological disadvantage in the production of the export good also that region whose comparative advantage coincides with that of the nation as a whole may see its welfare decrease with free trade

the design of rent seeking competitions in the standard tullock model of rent seeking as a noncooperative game aggregate expenditures by seekers can equal exceed or fall short of total rents depending on what is assumed about the number of seekers and the marginal return to a seeker s investment if the supply of an input into the rent seeking process is controlled by a politician who receives payment from seekers for it the indeterminacy of the process becomes a less serious problem he supplies it and designs the rent seeking game to maximize his wealth the author derives expressions for the number of seekers and the marginal return parameter which maximize the politician s wealth in one input and two input rent seeking processes

contests with multi tasking the standard contest model in which participants compete in a single dimension is well understood and documented multi dimension extensions are possible but are liable to increase the complexity of the contest structure mitigating one of its main advantages simplicity in this paper we propose an extension in which competition ensues in several dimensions and a competitor that wins a certain number of these is awarded a prize the amount of information needed to run the contest is hence limited to the number of dimensions won by each player we look at the design of this contest from the point of view of maximising effort in the contest per dimension and totally and show that there will be a tendency to run small contests with few dimensions the standard tullock model and its results are encompassed by our framework

asymmetric two stage group rent seeking comparison of two contest structures two variations of a two stage rent seeking contest areconsidered in the first stage of the between groupmodel groups compete through the expenditure of resources bytheir members based on group expenditures one winning groupis probabilistically determined on the second stage membersof the winning group compete with one another for an exogenousprize in the semi finals model a player is chosen fromeach group and then these players compete for the prize groups differ in size or in their valuation of the prize subgame perfect equilibrium solutions are constructed forthese two contest structures

the efficient side of progressive income taxation abstract this paper examines allocative properties of progressive income taxation when individuals care about their relative income it shows that introducing a progressive income tax can yield a pareto improvement if pre tax income is evenly distributed implementing undistorted choices of working hours requires a progressive tax schedule and the optimal degree of progressivity decreases with pre tax income inequality

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

symmetric two stage contests with budget constraints the impact of a budget constraint on individual expenditures is examined in two models of two stage contests with homogenous and risk neutral players competing to win a single indivisible commonly valued rent the set of players is partitioned into equally sized groups in the first model one contestant from each group survives to compete on the second stage against the other survivors in the second model one group survives the first stage and its members compete against each other on the second stage we derive and discuss the symmetric subgame perfect equilibrium solution for each model

capital markets and dimension in neoclassical models of growth with trade abstract this paper explores the role of arbitrary assumptions regarding dimension and the tradeability of capital in neoclassical growth models it is shown that international markets for physical and financial capital are required to reproduce the competitive world growth path only when the number of traded non capital goods is less than the number of factors provided that countries are diversified along their growth paths capital markets compensate for lacking consumption good markets in models with low dimension thus reinforcing an earlier static argument that trade theory requires a sufficient number of markets rather than particular dimensional attributes

international trade and capital mobility between diversified economies abstract this paper reconsiders and simplifies the theory of international trade with foreign investment while concentrating on significant gaps in the analysis of the globally diversified case where both countries of the two commodity two factor model remain incompletely specialized the analysis goes beyond previous literature by 1 deriving an important condition for stability of equilibrium 2 investigating the effects of import tariffs and foreign investment taxes on the international allocation of capital 3 examining the actual signs of optimal first best and other tariffs and taxes and 4 developing new and plausible conditions for existence of global diversification

victimization rent seeking and just compensation when should government compensate citizens for harm inflicted by public policy in practice all public policy is harmful to somebody even when it is beneficial to society as a whole the common view in the legal profession is that a fuzzy but serviceable line can be drawn between taking which should be compensated and the proper exercise of the policy power where no compensation is warranted recently this view has been challenged by some authors who argue that harm to victims of socially advantageous public policy should never be compensated and by others who argue that compensation is almost always warranted the latter would go so far as to proscribe all redistribution of income as a taking from the well to do this paper is a defense of the common view against both challenges the key to the problem is the distinction between unalterable risk and the risk of victimization of citizens by the government giving rise to rent seeking and a general disorganization of society

committees and rent seeking effort abstract this paper explores the extent to which administrative structures may influence the extent of rent seeking effort within the environments explored relatively smaller efforts tend to be invested to influence the deliberations of commitees than those of single administrators to the extent that these efforts may be considered unproductive rent seeking the widespread use of committees may reflect the fact that savings from reduced rent seeking more than offset the greater decision costs of committees

experimental comparison of multi stage and one stage contests this article experimentally studies a two stage elimination contest and compares its performance with a one stage contest contrary to the theory the two stage contest generates higher revenue than the equivalent one stage contest there is significant over dissipation in both stages of the two stage contest and experience diminishes over dissipation in the first stage but not in the second stage our experiment provides evidence that winning is a component in a subject s utility a simple behavioral model that accounts for a non monetary utility of winning can explain significant over dissipation in both contests it can also explain why the two stage contest generates higher revenue than the equivalent one stage contest

rigging the lobbying process an application of the all pay auction textabstractin a world where a politician can explicitly auction off a prize to the high bidder the standard auction literature can be used to analyse political behavior the justice system however precludes politicians from explicitly selling the prize to the highest bidder thus politicians cannot let it become public knowledge that they are in the business of selling political favors an institution has emerged in political markets to overcome this constraint which are termed as lobbying lobbyists make implicit payments to the politician through campaign contributions if these up front payments were rebated to those failing to receive the prize it would be clear that the politician was selling favors this article has examined an interesting principle arising in all pay auctions this principle states that a politician wishing to maximize political rents may find it in his best interest to exclude certain lobbyists from participating in the lobbying process particularly lobbyists valuing most the political prize

mixed strategy play in single stage first price all pay auctions with symmetric players abstract we consider sealed bid first price all pay auctions with complete information discrete strategy space budget constraint and symmetric players and then construct the equilibrium solution in mixed strategies for both fixed and variable prizes the equilibrium solution yields predictions concerning the effects of group size and value of the prize that are tested experimentally the experimental results support equilibrium play on the aggregate but not individual level adaptive learning on the individual level accounts for the major trends in the aggregate expenditures over time

a tug of war team contest this paper analyzes a tug of war contest between two teams in each round of the tug of war a pair of agents from the opposing teams competes in a private value all pay auction with asymmetric value distributions and effort effectiveness whichever team arrives first at a given lead in terms of battle victories over the opponent wins the tug of war there exists a unique markov perfect equilibrium in bidding strategies which depend on the respective player s valuation and the current state of the tug of war we derive rich comparative statics for this equilibrium by using the fact that the state of the tug of war evolves according to a time homogeneous absorbing markov chain

jealousy and equilibrium overconsumption the idea that the happiness of an individual depends upon the consumption of others is widely viewed as an important feature of our shared social existence recent research in finance has used this idea through consumption externalities to explore asset pricing anomalies consumption externalities potentially break the link between pareto optimality and competitive equilibria and open the door for beneficial government intervention e g lars ljungqvist and harald uhlig 2000 in this paper we delineate two effects that a consumption externality may have an increase in aggregate consumption may a raise the marginal utility of individual consumption relative to leisure and or b lower an individual s utility level we refer to a as keeping up with the joneses henceforth kuj following jordi gali 1994 and we refer to b as jealousy jealousy is a distinct concept from kuj under kuj an individual derives greater utility from additional own consumption relative to leisure when others consume more at the same time higher per capita consumption holding fixed individual consumption can trigger either jealousy so that individual utility falls or admiration so that individual utility rises in section i of this paper we show that jealousy implies that the laissez faire equilibrium consumption level is greater than the optimal level whether preferences exhibit kuj is not necessary for this main result intuitively in the presence of jealousy consumption is similar to pollution overpollution exists because individuals do not take into account the cost of polluting on others not because an increase in economywide pollution makes the return to individual polluting higher similarly overconsumption exists because individuals do not take into account the negative effect of own consumption on jealous others things go in the opposite direction when individuals are admiring in section ii we consider a functional form that encompasses several existing models we show that jealousy determines the optimal tax to correct overconsumption and that kuj is mainly important for asset pricing

rule changes and competitive balance in formula one motor racing this article provides an economic explanation of the frequent rule changes in the formula one f1 motor racing series in a two stage model the fia the organizer of the f1 first decides whether to change the rules or not and then the racing teams compete in a contest it turns out that a rule change reduces the teams performances but also improves competitive balance between the teams the rule change is implemented if the fia s revenue gain from the latter effect overcompensates the fia s revenue loss from the former effect we provide empirical evidence from f1 seasons in the period 1950 to 2005 which supports the main implications of the model

multi stage sequential all pay auctions abstract we study multi stage sequential all pay contests auctions where heterogeneous contestants are privately informed about a parameter ability that affects their cost of effort we characterize the perfect bayesian equilibrium of these contests and analyze the effect of the number of contestants and their types on the contestants expected highest effort

profit sharing and relative consumption mandatory profit sharing can represent a pareto improvement if labour supply is excessive due to relative consumption effects profit sharing reduces wages if the rise in profit income keeps total income constant there will only be a pareto improving substitution effect

the design of rent seeking competitions committees preliminary and final contests the paper examines the common practice in multi contest rent seeking competitions where finalists are selected based on rent seekers efforts in a preliminary contest we find that for any single contest design rent seeking expenditures could be reduced by introducing a preliminary contest if the marginal returns to rent seeking effort in the preliminary contest is sufficiently low in addition to other reasons the paper argues that this may explain why such multi contest designs are common we argue that rent seeking expenditure in the preliminary stage represents the cost of reducing the number of contestants we also find that the practice of setting a higher quality standard in the final contest than the quality standard in the preliminary contest reduces rent seeking waste we derive an expression for the optimal number of finalists under certain conditions we find that the optimal number of finalists is directly proportional or equal to the square root of the number of potential contestants finally we show that whether rent seeking expenditures rise or fall when the rent is awarded by a committee instead of a single administrator depends on the sensitivity of the committee relative to that of the single administrator

risk averse rent seekers and the social cost of monopoly power there is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents however since the activity of rent seeking is generally not observable direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by 1 as a consequence the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity

orchestrating rent seeking contests contests have different sometimes quite complex organisational structures in particular while most of the existing literature focusses on simultaneous contests multistage contests are also quite frequently encountered this paper seeks to provide a rationale for the latter by endogenising the choice of a contest structure which is made by an organiser of a contest interested in maximising the efforts expended by the contenders

on the shape of the world production possibility frontier with three goods and two primary factors with and without capital mobility recently there have been many articles discussing whether it is possible for two trading countries to specialize only incompletely when labor is immobile while capital is perfectly mobile between two countries kemp 1966 pioneered this topic followed by jones 1967 and inada kemp 1969 chipman 1971 showed that based on classical assumptions two traded goods two primary factors with labor immobile but capital freely mobile neoclassical technologies and perfect competition the world production possibility frontier i e the efficient set of world production with complete diversification contains a flat segment under certain conditions uekawa 1972 furthered his results by investigating some sufficient conditions for the existence of such a flat segment of the world production possibility frontier p p f with complete diversification the aim of this paper is to investigate the shape of the world p p f when there are three goods instead of two and two primary factors with labor immobile and under alternative assumptions concerning capital mobility the other assumptions remain classical neoclassical production functions fixed factor supply and perfect competition in product markets as well as in factor markets we first show that when production technologies are different and without capital mobility if the world p p f with complete diversification exists then in general it is flat next we investigate some sufficient conditions for the existence as well as non existence of such a world p p f then assuming that capital is mobile we show that if there is a good whose technology is the same between countries and is produced by both countries then the wage rate as well as rental price of capital is equalized between countries further assuming that capital is mobile if the technology of at least one good is different then the world p p f with complete diversification does not exist in general lastly we show that assuming the technologies of all goods are different 1 if three goods are produced in the home country and two goods are in the foreign country the world p p f is a part of a tangent developable surface without capital mobility 2 the world p p f is flat with capital mobility 3 if each country produces two goods such that the world as a whole produces three distinct goods then the world p p f is strictly concave toward the origin without capital mobility and 4 the world p p f is a part of a tangent developable surface with capital mobility

voting on meritocracy abstract this paper considers a setting where a resource such as education budget is to be distributed among agents the latter differ in their ability to make use of the resource and the issue is that of determining the allocation rule whereby the individual shares of the resource may depend on their relative efforts of obtaining it the paper s focus is on endogenous determination through voting of the degree of meritocracy in the resource allocation system which determines the marginal productivity of one s effort it is found that a meritocratic system is expected to be supported by highly productive individuals and opposed by those with low productivity when the decision making becomes less elitist and involves broader participation of population groups the support for meritocracy decreases

the simple macroeconomics of profit sharing this paper is in the spirit of the temporary equilibrium approach to macroeconomics it basically extends that framework to cover a profit sharing system and then compares the macroeconomic characteristics with those of the more familiar wage system a first preliminary step is to demonstrate how a microeconomic model of monopolistic competition can be built up into a junior member of the keynesian macro family the methodology is to create from first principles including a careful formulation of a monopolistically competitive product market structurea natural underpinning for the standard aggregate demand specification the primary goal of the paper is to apply the integrated monopolistic competitionkeynesian type apparatus described above to investigate the macroeconomic properties of a profit sharing economy the existence of a consistent general framework covering both cases invites meaningful comparisons that indicate clearly why an economy based on profit sharing principles possesses natural immunity to stagflation by contrast the wage economya system we have largely accepted without critically examining its macroeconomic consequences is more prone to suffer from unemployment and inflation the policy implications for aggregate demand management in wage and share systems are analyzed and contrasted in writing this paper my philosophy has been to not shirk from using those reasonable parameterizations and functional forms which yield nice crisp results and permit me to focus sharply on the essential logic of basic issues it is certainly possible to present the main results in a somewhat more general formulation as the astute reader will appreciate but i fear only at some cost of distracting attention from those central features i wish to highlight

inefficient competition in shadow education investment abstract we investigate how inequalities in wages productivity and education affordability determine individuals educational efforts as they compete for premier jobs extending tullock s 1980 contest theory framework with endogenous returns we first find that competition for better paying jobs can result in social inefficiency in the form of excessive educational efforts second a widening wage gap intensifies the effort competition which induces inefficiency with higher likelihood when the returns to education effort diminish too quickly third when one player s productivity improves relative to the other s the benefitting player is encouraged to exert more effort while his opponent tends to be discouraged to do so the larger share of social inefficiency is carried by the less productive player fourth when educational effort becomes more affordable to one player compared to the other competition increases efficiency only if the change favors the more productive player in the opposite case social inefficiency increases in both cases the less productive player again bears the larger share of social inefficiency

how organizational structure can reduce rent seeking in multi tiered organizations individuals can engage in unproductive rent seeking activities both within and between the divisions of the organization nevertheless a multi tiered organizational structure can induce efficiency gains by decreasing rent seeking we present a model of production and simultaneous internal and external rent seeking assuming a logistic contest success function in equilibrium there is generically either internal or external rent seeking but not both a multi tiered organization leads to less rent seeking and higher welfare even though the production technology gives no reason for any specific organizational structure our findings constitute a new efficiency rationale for multi tiered organizations

trade policy with several goods and market linkages abstract in this paper we demonstrate a substantial role for trade policy in a competitive model finding that a an export subsidy may benefit the exporting country b a voluntary export restraint may benefit the importing country and c a countervailing duty may benefit the importing country even if it has no effect on the foreign price of that good these results are in sharp contrast to the conventional wisdom from two good or partial equilibrium models and are derived in a framework of several goods the pattern of substitution and complementarity across goods or market linkages determines the role for trade policy

international capital mobility and commercial policy in an economic region abstract if two small countries are linked by capital movements then at low tariff levels any increase in capital flows induced by the commercial policy of either country will harm that country and benefit the other country while at low levels of international investment a tariff increase always harms the country levying the tariff nevertheless an increase in one country s tariff could benefit both countries by alleviating regional distortions in factor allocation if the countries liberalize factor movements within a customs union then conflicts must arise in choosing the level of the common external tariff

are international trade and factor mobility substitutes abstract this paper analyzes whether factor flows and commodity trade are substitutes or complements i e whether increasing the level of one impacts adversely or favorably on the volume of the other it derives with the aid of a new general equilibrium framework of the world which allows possible differences in factor endowments tastes and technologies across the two trading countries the necessary and sufficient condition for substitutability and complementarity the results are then further examined in two special cases a survey of different concepts of substitutability and complementarity which have appeared in the literature is also given

second best policy for international trade and investment abstract this paper investigates second best commercial policy for an open economy within the two commodity two factor model of a two country world where the first best strategy is known to require taxes subsidies on both international trade in commodities and foreign investment via capital movements as the analysis shows when either of these policy instruments is prohibited the other instrument generally must be complemented by a tax subsidy in consumption or production if a second best rather than third best equilibrium is desired the paper derives moreover precise conditions for determining the second best package of policies

liquidity constraints and the formation of unbalanced contests abstract we analyze the effects of future liquidity constraints on contestants investment in a dynamic contest model contestants invest in two consecutive contests to win a prize in each period the loser of the first period contest can be liquidity constrained in the second period due to too little remaining wealth the winner of the first contest can reinvest the prize in the second contest we show that future liquidity constraints mainly affect the imbalance of the contest in the future but not today surprisingly larger contest prizes decrease contestants future investments and amplify the imbalance of future contests however the contest organizer can reduce this imbalance by increasing the share of the prize money in the second contest