trade migration and integration evidence and policy implications this paper takes as its point of departure the unique position recently adopted by swedish policymakers emphasizing migration as a tool to increase trade we attempt to empirically scrutinize this

what determines bits abstract similar to bilateral or regional preferential trade agreements ptas bilateral investment treaties bits have proliferated over the past 50 years the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of bits and of the likelihood of bits between pairs of countries using a qualitative choice model in a manner consistent with explaining ptas we develop the econometric specification for explaining the two based upon a general equilibrium model of world trade and foreign direct investment with three factors two products and trade and investment costs among multiple countries in the presence of national and multinational firms the empirical model for bits and ptas is bivariate in nature and supports a set of hypotheses drawn from the general equilibrium model using the preferred empirical model for a sample of 12 880 country pairs in the year 2000 we predict correctly 88 of all pairs with a bit and a pta 81 with a bit but no pta and 84 with a pta but no bit

the relationship between international trade and capital flow a network perspective abstract the relationship between international trade and capital flow has been extensively discussed using bilateral data from 2001 to 2016 we construct international trade and capital flow networks defined as a weighted graph in which nodes are countries and edges represent trade and capital flow linkages centrality is employed as the main variable in this study to represent the importance of a country in the networks to gain further insight into the network characteristics we adopt a turning parameter centrality to combine both the original degree and strength measurements within the weighted network moreover we develop a new indicator called partner quality centrality to identify the quality of neighbors within the panel cointegration framework we argue that a positive long run equilibrium exists between the trade and capital flow networks as constructed in addition we employ a panel causality test to investigate the short run dynamics indicating that the international capital flow network has predictive power on the trade network from the short run perspective but not vice versa

scale economies in factor supplies international trade and migration this paper incorporates externalities generated by human capital into the heckscher ohlin samuelson framework to examine the patterns of international trade and migration individuals endowed with different levels of human capital choose to become either unskilled or skilled workers national scale economies with respect to human capital play an important role in endogenously determining these factor supplies and yield a number of interesting patterns of trade and migration migration could reinforce comparative advantage both skilled and unskilled workers could migrate in the same direction

adapting the knowledge capital model of the multinational enterprise to trade and investment in business services at some conceptual level trade in goods and services are not that much different however the speed at which trade and foreign investment in services is growing along with the fact that the barriers to these activities are quite different from those for trade in goods prompts us to take a more careful look the paper begins with a general discussion about the various policies and technological constraints that impact foreign trade and the establishment of foreign commercial presence in intermediate business services we then discuss which characteristics an accurate modelling approach must capture following that we develop a model that allows for different regimes of trade and or foreign affiliate production in services using markusen s knowledge capital model simulations show that the pattern of service firm headquarters and office locations can differ considerably depending on whether it is trade investment or both that are either liberalised or become technologically feasible our results find that the welfare and factor price consequences are quite similar across the different scenarios

international migration and trade agreements the new role of ptas this paper provides an empirical analysis of the relationship between preferential trade agreements ptas and bilateral migration flows building on the empirical literature on the determinants of migration flows i estimate a modified gravity model to assess the role of ptas and their content on bilateral migration flows using a sample of 29 oecd destination countries over the period 1998 2008 i show a strong positive effect of ptas on bilateral migration flows i find that the content of ptas also matters when visa and asylum and labour market related provisions are included in ptas this further stimulates bilateral migration flows different estimation strategies including instrumental variables are employed to address the potential endogeneity bias problems related to ptas and their content

immigrant specificity and the relationship between trade and immigration theory and evidence studies routinely document that immigrant employment concentrates in non traded goods sectors and that many immigrants have low inter sectoral mobility we consider these observed characteristics of immigrant employment with regard to the question of how immigration affects a nation s pattern of production and trade we model an economy producing three goods one is non traded domestic labor and capital are domestically mobile but internationally immobile allowing that some new immigrants will become specific to the non traded goods sector the model indicates that the effects of immigration on output and trade depend importantly on the sectoral pattern of employment of both new and existing immigrants empirical investigation in a panel data set of oecd countries supports the model s prediction that immigration raises the output of non traded goods consistent with the model we also find that immigration and trade are complements given its empirical support the model s implications for immigration policy are then discussed

do state borders matter for u s intranational trade the role of history and internal migration empirical evidence of the impact of borders on international trade flows using the gravity equation approach abounds this paper examines the empirical relevance of state borders in u s interstate trade for various specifications of the gravity equation we find a large and economically significant subnational border effect for some specifications however two model specifications drastically reduce if not eliminate the border effect i dynamic panel specifications controlling for past levels of trade and ii models conditioning on internal migration les resultats empiriques de l analyse des impacts des frontieres sur les flux de commerce international en utilisant les modeles de gravite sont devenus monnaie courante ce texte examine l impact des frontieres entre etats a l aide de cette technique il s avere que les effets de frontieres infranationales sont grands et significatifs pour certaines specifications du modele cependant deux specifications du modele reduisent dramatiquement s ils n eliminent pas l effet de frontiere i des specifications qui prennent en compte les niveaux anterieurs de commerce et ii des specifications qui dependent de la migration interne

is a policy of free movement of workers sustainable this paper studies the costs and benets of the adoption of the policy of free movement for workers for the countries to agree on uncontrolled movement of workers the short run costs must be outweighed by the long term benets that result from better labor market exibility and income smoothing we show that such policies are less likely to be adopted when workers are impatient and less risk averse workers when production technologies display decreasing returns and when countries trade a share of their products

migration and trade theoretical and empirical research in economics suggests that bilateral migration triggers bilateral trade through a number of channels this paper assesses the functional form of the impact of migration on trade flows in a quasi experimental setting we provide evidence that the relationship is not log linear in particular at small levels of immigration stocks the elasticity of trade to migration is quite high and it declines to zero at about 4 000 immigrants if immigration stocks exceed such a level the evidence suggests that trade will not increase anymore this suggests that for cross country network and other effects flowing from immigration to materialise at a significant level for trade a high enough level of immigrant stocks is necessary but there appears to be satiation as immigrant numbers increase

international trade agreements and international migration despite large potential economic gains bilateral and multilateral negotiations focusing on liberalisation of migration have not shared the high profile of international trade negotiations and agreements migration and trade have been traditionally viewed rather separately and the relevance of the many and complex interdependencies has been given remarkably little attention in the literature to date in this article we focus on the two way interaction between international migration and agreements designed to enhance cross border trade and investment liberalisation of international trade in services and in the movement of people potentially offers much greater economic gains than liberalisation of remaining barriers to goods trade however progress within multilateral frameworks is fraught with difficulty the world trade organization s general agreement on trade in services gats has yielded little real progress so far and negotiations within more flexible unilateral and bilateral frameworks are likely to be more successful in liberalising the movement of labour we discuss a range of specific examples focusing particularly on the interesting case of new zealand we find that trade agreements are increasingly including agreements on migration though typically favouring temporary migration and involving numerically modest quotas we conclude that migration regulatory frameworks are likely to be further and more strongly linked to trade and investment agreements in the future particularly given changing economic and demographic forces the primary focus of migration policies may nonetheless remain different from that of trade policies while further migration liberalisation is likely to be through bilateral and regional agreements it will be important to try to lock in the gains of such agreements while simultaneously working to consolidating these in a way that will help to facilitate future multilateral agreement

in search of substitution between foreign production and exports abstract are foreign production and exports substitutes or complements standard theory of the multinational corporation mnc assumes substitution while previous empirical work examining the relationship has generally found strong evidence of complementarity this study examines product level data which more closely fits the assumption of a single product firm often used in mnc theory and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with japanese automobile parts for the us market i also test for and find evidence of substitution using product level data on a set of japanese produced final consumer goods

foreign direct investment and exports a time series approach the impact of the accelerated internationalization of the last decade on the austrian economy is a controversial issue granger s concept of casuality is used to investigate one aspect of the internationalization of production the realtionship between foreign outward direct investment and exports using aggregate flow data from the austrian economy the stationarity of the time series is examined and cointegration tests for the adequacy of the multivariate time series approach are performed the estimation results suggest significant causality of austrian foreign outward direct investment and exports in both directions impulse response analysis and varience decomposition show a very slow dynamic response of both variables to exogenous shocks of the other it furthermnore indicates the possiblity of a positive effect of exogeneously increased foreign direct investment on exports and a negative effect of export shocks on foreign direct investment however significant long run effects are not established

interacting factor endowments and trade costs a multi country multi good approach to trade theory abstract we provide a synthetic analysis of the different ways in which countries participate in the world economy classic trade questions are reconsidered by generalizing a factor proportions model to multiple countries multiple goods or multi stage production and country specific trade costs each country s production specialization trade and welfare is determined by the interaction between its relative endowment and its trade costs we consider the effects of allowing one good to fragment into component and assembly production the volume of trade and welfare levels are higher with fragmentation for most countries although for many countries these variables fall with fragmentation

illegal immigration a supply side analysis abstract this paper analyzes the supply side determinants of illegal immigration using a three sector general equilibrium model of the source country agricultural liberalization raises illegal immigration while liberalization of the high tech sector reduces it in contrast capital mobility in the source country renders trade policy ineffective for controlling illegal immigration paradoxically increased enforcement by the host country may raise source country unskilled wages although illegal immigration falls finally under capital mobility a rise in the source country restrictions on capital inflow raises the level of illegal immigration and reduces the effectiveness of border enforcement efforts by the host country

oligarchies and development in a global economy a tale of two elites this paper studies how comparative advantage and the political elites endowments shape long run performance in economies with imperfect political institutions the trade regime interacts with industrial policy and regulations on capital mobility in governing capital accumulation in a capital scarce economy capitalist oligarchs striving for import substitution industrialization isi initially shelter the economy from trade while promoting industrial policies that promote total factor productivity growth in the manufacturing sector this gradually shifts the comparative advantage toward manufacturing and renders the economy attractive to foreign investors allowing for trade and foreign capital inflows are thus complementary policies that spur growth in the capital oligarchy by contrast landed oligarchs in a capital scarce economy favor openness to trade at an early stage of development neglect industrial policies and block foreign capital to maximize extractable rents the policy mix causes the economy to stagnate consistent with the experiences of south korea and argentina in the postwar era the model predicts that the success of isi policies depends crucially on the conditions governing the incentives for capital accumulation jel f10 f20 p40 p50 o10 o24

factor ownership taxes and specialization this paper examines the incentives of regions to levy source based capital taxes when the tax revenue is not needed to finance the regional public sector it is assumed that capital is completely mobile among regions but that labour is completely immobile since each region can produce the same two tradable goods using the same technology then differences in tax rates on capital will lead to some specialization if residents of one region own more of the nation s capital per person then these tax differences may be an equilibrium phenomenon regions with below average capital endowment per person will levy capital taxes to lower the cost of the capital they import even though these taxes lead to capital flight and specialization in the labour intensive good

trade migration costs and asymmetric migration patterns increase in trade has an asymmetric impact on emigration by skill types for a developing country cost of migration is a dynamic function of the type of emigration and it determines a complementary relation between emigration of skilled workers and expansion of trade emigration of unskilled workers is a substitute however and these outcomes coexist with endogenously determined emigration rates that depend crucially on wage responses among the own skill types at the source additionally asymmetric emigration patterns increase wage inequality

the dynamics of leverage in a demand driven model with heterogeneous firms abstract this paper introduces heterogeneous microeconomic behavior into a demand driven macroeconomic model in order to study the joint dynamics of leverage and capital accumulation by identifying the links between firm level variables and aggregate quantities the paper contributes toward a reformulation of the minskyan formal analysis that explicitly considers the role of microeconomic factors in generating macroeconomic instability the aggregation of heterogeneous agents is not only performed numerically as in traditional agent based models but also by means of an innovative analytical methodology originally developed in statistical mechanics and recently imported into macroeconomics the distinctive feature is in that the joint analysis of the numerical and analytical solutions of the model sheds light on the effects of financial fragility at the firm level on the dynamics of the macroeconomy in particular the analysis of steady state and stability properties of the system provide additional insights on the role of behavioral and size heterogeneity of firms for the stocks of aggregate debt and capital

explaining the absence of international factor price convergence abstract as capital markets have become integrated factor prices have not converged as expected this paper provides an explanation the key observation is that non specific output risks are borne by capital making international portfolio diversification a dominant strategy capital market integration can elicit many patterns of factor price response under this circumstance factor prices will move in parallel if countries are identical when countries differ factor prices may diverge or even have their relative sizes reversed the integration of capital markets affects welfare through changes in risk and in overall returns to savings welfare need not improve

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

free trade and global warming a trade theory view of the kyoto protocol this paper demonstrates how three important results in environmental economics true under mild conditions in closed economies are false or need serious amendment in a world with international trade in goods since the three results we highlight have framed much of the ongoing discussion and research on the kyoto protocol our viewpoint from trade theory suggests a re examination may be in order specifically we demonstrate that in an open trading world but not in a closed economy setting 1 unilateral emission reductions by the rich north can create self interested emission reductions by the unconstrained poor south 2 simple rules for allocating emission reductions across countries such as uniform reductions may well be efficient even if international trade in emission permits is not allowed and 3 when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions

analysis of global bifurcations in a market share attraction model in this paper we demonstrate how the global dynamics of an economic model can be analyzed in particular as an application we consider a market share attraction model widely used in the analysis of interbrand competition in marketing theory we analyze the local and global dynamic properties of the resulting two dimensional noninvertible dynamical system in discrete time the main result of this paper is given by the study of some global bifurcations that change the structure of the attractors and their basins these bifurcations are investigated by the use of critical curves a powerful tool for the analysis of the global properties of noninvertible two dimensional maps 2000 elsevier science b v all rights reserved jel classixcation e32 m30

cash flow investment and keynes minsky cycles this paper analyzes a dynamic model with 1 an investment function that emphasizes cash flow 2 a keynesian macroeconomic framework that determines cash flow endogenously 3 a dynamic labor market model that drives wage and price adjustments and 4 boundedly rational expectations simulations from the calibrated model generate endogenous cycles with characteristics described in hyman minsky s research the cycle arises from the link between investment interest rates debt service and cash flow the amplitude and frequency of the cycle are related to the importance of cash flow for investment the dynamics of inflation and the distribution of income

u s foreign direct investment in latin america and the caribbean a case of remittances and market size abstractthis article investigates the effect of remittances on u s foreign direct investment fdi flows to latin america and the caribbean lac it covers 26 countries for the period 1983 2010 the results show a positive and significant impact of remittances on u s fdi flows however this effect depends upon the level of gross domestic product gdp per capita of the host country on average the results show that increasing remittances by one standard deviation increases u s fdi flows by 0 44 percent a year also host country demand positively affects u s fdi flows which supports the market size hypothesis

bridging trade theory and labour econometrics the effects of international migration this paper surveys current theoretical and empirical research on international migration with a particular emphasis on the links between trade theory and labour empirics

individual preferences monetary gambles and stock market participation a case for narrow framing we argue that narrow framing whereby an agent who is offered a new gamble evaluates that gamble in isolation may be a more important feature of decision making than previously realized our starting point is the evidence that people are often averse to a small independent gamble even when the gamble is actuarially favorable we find that a surprisingly wide range of utility functions including many nonexpected utility specifications have trouble explaining this evidence but that this difficulty can be overcome by allowing for narrow framing our analysis makes predictions as to what kinds of preferences can most easily address the stock market participation puzzle

trade factor prices and the gains from trade with increasing returns to scale existing analyses seem to suggest that national increasing returns to scale are not a very useful tool for analysing trade owing to problems such as multiple equilibria and the tendency towards complete specialization the purpose of this paper is to construct a model in which there are in fact determinant relationships among country size the direction of trade the gains from trade and international factor price differences in the model differences in country size determine the direction of trade which in turn determines factor price differences and limits the possible distribution of the gains from trade commerce international prix des facteurs de production et les gains de l change dans un contexte de rendements croissants a l echelle les analyses conventionnelles semblent suggerer que les rendements croissants h l 6chelle au niveau national ne constituent pas une avenue prometteuse dans l analyse du commerce international parce que de tels rendements creent une presomption en faveur de la specialisation complete et conduisent a des situations d 6quilibres multiples le but de ce m6moire est de construire un mod le dans lequel il existe des rapports determinants entre la dimension du pays la direction des 6changes les gains de l echange et les differentiels internationaux entre les prix des facteurs de production dans ce mod le les differences entre les pays en termes de dimension d6terminent la direction du commerce international laquelle d6termine le differentiel entre les prix des facteurs de production et limite l eventail des r6partitions possibles des gains de l echange

trade and investment with constant and increasing returns to scale it has been well known since the seminal paper by mundel that in a heckscher ohlin model with constant returns to scale factor flows can be perfect substitutes for com modity trade this paper extends the analysis to differentiate between factor movements and investment and considers the possibility of trade and investment occurring simultaneously the analysis is carried out in models with constant and increasing returns to scale in the crs model it is shown that it is important whether the returns to capital are repatriated in terms of commodity x or commodity y the country well endowed with capital could export the labour intensive good and generally the pattern of trade cannot be predicted by endowment differences between countries with both investment and trade tariffs need not produce a welfare loss with irs it is shown that there can be no presumption as to the direction of investment in the no trade world trade patterns however are predictable as investment will be after trade has taken place thus the direction of investment may depend on whether trade or investment occurs first

the impact of selected abatement strategies on transnational pollution the terms of trade and factor rewards a general equilibrium approach abstract widespread publicity of international conflict over transfrontier pollutants such as acid deposition and the november 1986 chemical spill in the rhine river has increased the public s awareness of the need to devise abatement strategies appropriate for transnational pollution this article develops a general equilibrium approach for analyzing the economic impacts of selected abatement strategies the model includes internationally mobile goods capital and pollution flows and flexible output and factor prices the general equilibrium approach provides policymakers with important information which is usually not revealed by a partial equilibrium approach that is demonstrated by applying the model to the north american acid deposition issue

why do rich countries prefer free trade over free migration the role of the modern welfare state abstract according to traditional trade theory heckscher ohlin free trade and free migration are equivalent measures of economic integration leading both to an equalization of factor prices this prediction is in sharp opposition to the observed preference of rich countries for free trade over free migration we provide an explanation for this inconsistency the redistribution policies in the countries social welfare in countries with a relatively small number of low skilled native workers is higher with free trade than with free migration due to redistribution of income towards immigrating workers

factor trade and goods trade world equilibria with trade in both goods and some factors are studied when international factor endowment differences are the cause of trade a generalized heckscher ohlin theorem is presented the goods trade patterns with and without factor trade are compared factor trade and goods trade tend to be substitutes complements if traded and non traded factors are cooperative non cooperative

the new keynesian economics preface 1 from keynesian to new keynesian economics 2 keynesian microfoundations in historical perspectives part i real rigidities 3 the labour market and real wage rigiditry 4 credit rationing and imperfect capital markets 5 real rigidities in the goods market part ii nominal rigidities introduction 6 rational models of irrational behaviour 7 price setting with adjustment cost 8 real and nominal price rigidity further issues part iii coordination failures and hysteresis 9 coordination failures 10 hysteresis conclusions

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

the economics of foreign direct investment and trade with an application to the u s food processing industry this article investigates the determinants of foreign direct investment and its relationship to trade in the u s food industry a multinational corporation maximizes profits by choosing between production at home which is exported and production in a host country this introduces the possibility that foreign affiliate sales can substitute and or complement exports the empirical framework consists of a four equations system with foreign affiliate sales exports affiliate employment and fdi as endogenous variables the results confirm small substitution between foreign sales and exports and that the host country s protection policies affect the decision to invest abroad

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

investment confidence corporate debt and income fluctuations in this paper we present a macroeconomic model with new keynesian features which endogenously generates dynamic paths of income and the stock of corporate debt of a cyclic and chaotic nature from the market clearing condition on goods and money markets we derive the dynamic paths of income and corporate debt whose stability properties depend upon the propensity to invest out of the flow of internally generated funds which in turn is a positive function of income if it is relatively low the dynamic paths on income and corporate debt converge to their steady state long run values when the propensity to invest is neither too low nor too high the system can exhibit either bounded cycles or chaotic dynamics finally if it exceeds a critical upper value an explosive growth of debt occurs and a financial crisis is likely to ensue

the theorems of international trade with factor mobility abstract this paper addresses the relation between goods trade and international factor mobility in general terms the basic theorems of international trade suitably interpreted are shown to hold in their strong versions if the number of international markets for goods and factors is at least as large as the number of factors the crucial dimensionality issue is hence not the relative number of goods and factors per se but the number of international markets relative to the number of factors only the price version of the heckscher ohlin theorem fails to be essentially preserved by this condition

liberalising temporary movement of natural persons an agenda for the development round we discuss liberalising the temporary mobility of workers under mode 4 of the gats particularly the movement of medium and low skilled service providers between developing and developed countries such mobility potentially offers huge returns a flow equivalent to three per cent of developed countries skilled and unskilled work forces would generate an estimated increase in world welfare of over us 150 billion shared fairly equally between developing and developed countries the larger part of this emanates from the less skilled essentially because losing higher skilled workers cuts output in developing countries severely the mass migration of less skilled workers raises fears in developed countries for cultural identity problems of assimilation and the drain on the public purse these fears are hardly relevant to temporary movement however the biggest economic concern from temporary mobility is its competitive challenge to local less skilled workers but as populations age and the average levels of training and education rise developed countries will face an increasing scarcity of less skilled labour temporary mobility thus actually offers a strong communality of interest between developing and developed countries the remainder of the paper looks at the gats provisions on mode 4 and the commitments that have been made under it the paper reviews several official proposals for the doha talks including the very detailed one from india and considers several countries existing schemes for the temporary movement of foreign workers many countries have long had bilateral foreign worker programmes and some regional agreements provide for liberal and flexible movement these show what is feasible and how concerns can be overcome we caution that to be useful any wto agreement must increase mobility not just bureaucratise it the paper concludes with some modest and practical proposals we suggest inter alia that licensing firms to arrange the movement of labour is the most promising short term approach to increasing temporary mobility

factor movements and commodity trade as complements abstract several models are presented in which factor mobility leads to an increase in the volume of world trade the models share the common characteristic that the basis for trade is something other than differences in relative factor endowments these alternative bases for trade include returns to scale imperfect competition production and factor taxes and differences in production technology taken together the models suggest a more general idea the widely held notion that trade in goods and factors are substitutes is in fact a rather special result which is a general characteristic only of factor proportions models

people flows in globalization the policy debate over globalization in the past decade has largely bypassed the international mobility of labor restrict trade and cries of protectionism resound suggest linking labor standards to trade and it s protectionism in disguise limit capital flows and the international monetary fund is on your back but restrict people flows that s just an accepted exercise of national sovereignty during the last few decades when most countries reduced barriers to trade in goods and services and liberalized financial capital markets most also sought to limit immigration in this essay i examine what we know about the causes and consequences of immigration i argue that people flows are fundamental to creating a global economy and that the interplay among immigration capital and trade is essential to understanding the way globalization affects economies i consider ways to reduce barriers to immigration that could improve the well being of workers around the world

resource abundance and economic growth in the united states abstract it is a common assumption that regions within the same country converge to approximately the same steady state income levels the so called absolute convergence hypothesis focuses on initial income levels to account for the variability in income growth among regions empirical data seem to support the absolute convergence hypothesis for us states but the data also show that natural resource abundance is a significant negative determinant of growth we find that natural resource abundance decreases investment schooling openness and r d expenditure and increases corruption and we show that these effects can fully explain the negative effect of natural resource abundance on growth

transport costs in a ricardian model with multistage production a significant share of international trade is generated by a mismatch of factors of production and technologies with markets international trade in final goods is one way of overcoming this geographical mismatch as pointed out by mundell 15 magee 13 and others this mismatching could also be overcome by a movement of factors and or technologies across international boundaries 2 when the production of a good consists of a series of production stages it is conceivable that trade of the good at any one of those stages could remedy the mismatching problem the stage at which the good or intermediate good will be traded will depend on a series of factors such as the costs of transportation tariffs or other trade restrictions levied on the good at different stages of production etc 3 this paper focuses on transport costs as a determinant of the stage at which a good is traded the quantitative importance of transport costs in international trade has been documented by various authors 9 10 4 it is generally believed that for international trade as a whole transport costs average around 10 of the value of the good 5 the theoretical treatment of international transport costs has concentrated on trade in final goods the standard result mentioned in textbooks is that transport costs close the gap between autarkic prices with the possibility of goods dropping out of international trade when transport costs are sufficiently high so as to close the gap entirely the explicit incorporation of a resourceusing transport sector into the standard two factor two good model 2 7 11 revealed that the

should export share requirements be implemented under quota protection in this paper the authors develop a model to analyze the effects of export share requirements when a quota is in place they show that when foreign capital is located in specific economic activity zones identified with the importable sector an increase in export share requirements reduces welfare owing to the price induced higher payments to foreign capital

tariff reductions under foreign factor ownership in the presence of foreign factor ownership the traditional welfare effects of tariff reforms have to be reconsidered to include income redistribution between national and foreign owned factors jagdish n bhagwati and richard a brecher 1980 showed that when the relative amount of foreign owned factors in the host country is sufficiently large to induce a change in the direction of the trade pattern immiserizing tariff reductions may occur here it is shown that in the mirror case when foreign owned factors tend to promote the existing trade pattern i e trade promoting similar results can be obtained on the other hand when foreign factors are trade substituting tariff reductions cannot be immiserizing

international trade and the internal organization of firms an evolutionary approach masahiko aoki and others have distinguished two alternative modes for a firm s internal organization we argue that the profitability of each mode depends on the distribution of firms across modes and on the general economic environment we characterize the evolutionary equilibria in both a parametric and a general model and argue that corner equilibria predominate we analyze the effects of trade between the two countries in a outputs only and b inputs factors as well as outputs our most striking conclusion is that in case b a less efficient mode can displace a more efficient mode when trade barriers are sufficiently low

testing two trade models in latin american agriculture abstract the heckscher ohlin and markusen models state that countries export the goods intensive in the use of their relatively abundant factor latin american agricultural trade is consistent with both models the paper then shows that latin american agricultural trade is primarily explained by country differences in relative factor abundance between countries rather than differences in technology this findings does not reject the heckscher ohlin model but rejects one of markusen s models

trade and capital flows a financial frictions perspective the classical heckscher ohlin mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to ow to capital scarce countries in this paper we show that in a world with heterogeneous nancial development the classic conclusion does not hold in particular in less nancially developed economies south trade and capital mobility are complements within a dynamic framework the complementarity carries over to nancial capital ows this interaction implies that deepening trade integration in south raises net capital in ows or reduces net capital out ows it also implies that at the global level protectionism may back re if the goal is to rebalance capital ows when these are already heading from south to north our perspective also has

locational advantage and us foreign direct investment in uk manufacturing the relationship between foreign direct investment fdi and international trade is examined with specific reference to us fdi in the uk four complementary hypotheses are tested on a cross section of uk industries there is evidence of us fdi being located in uk industries which have a revealed comparative advantage and that large market size effects are important on the other hand little evidence was found for the protection jumping and industrial concentration hypotheses

factor endowments heterogeneous labor and north south migration the relationship between the relative factor endowments of heterogeneous labor in the north and south of the united states and interregional labor migration is examined the purpose of the present paper is to make explicit a sufficient set of conditions that will support a factor endowment based migration model and to evaluate the advantages and weaknesses of that model the models predictions are tested using data from the 1970 census excerpt

optimal policy toward international factor movements with a country specific factor abstract this paper examines the optimal taxation of factor movements in a three factor model where two factors are potentially mobile results emphasize the role of substitutability or complementarity between factors in determining the optimal pattern of factor flows in particular a result analogous to the ramaswami result on the desirability of factor importing over factor exporting will hold if factors are complements but may not hold if they are substitutes also a capitalexporting country that cannot tax imported labor should allow labor imports when capital and labor are substitutes but may not allow labor imports if they are complements

factor mobility trade and welfare abstract the paper develops a north south model which is driven by scale economies in the modern sector the model predicts that skilled and unskilled labor migrate from south to north and capital migrates from north to south migration of skilled labor and capital exhibits complementarity with trade while migration of labor may exhibit complementarity or substitutability if the terms of trade effects are ignored small movements of all factors affect the welfare of the population in south negatively and of that in north positively the effects of migration on the terms of trade are ambiguous in general

aid and migration substitutes or complements this paper investigates the impact of aid on migration and identifies two channels bilateral aid influences migration by enhancing the information about labor market conditions in the destination country attraction effect total aid correlates with migration through increasing expenditure financing and hence wages in countries of origin push effect we compute the critical level of income above which emigration and income are substitutes which is about us 7 300 per capita in ppp 2000 prices for example brazil or russia we argue that for countries below this threshold there is a trade off between aid and migration policies a tightening of the migration policy is equivalent to a reduction of the level of aid by about 24 a comparison of skilled and unskilled migrations shows that the former are more sensitive to the attraction effect than the latter

what is new keynesian economics this research was supported by the national science foundation i am grateful to george williams for help with the data and to steven allen laurence ball olivier j blanchard timothy bresnahan charles calomiris dennis carlton robert chirinko russell cooper stanley fischer herschel grossman r glenn hubbard david laidler john leahy assar lindbeck n gregory mankiw david romer julio rotemberg dennis snower john taylor andrew weiss and two anonymous referees for comments on one or more earlier drafts i am also indebted to michael parkin and edmund s phelps for helping to establish the etymology of the phrase new keynesian

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

ergodic fluctuations in deterministic economic models abstract nonperiodic business fluctuations are shown to exist with positive measure generically and to behave like stationary stochastic processes in the standard dynamic macro model the implication is that so called chaotic fluctuations are probable for random initial conditions in a large class of recursive economies

the political economy of international trade and factor mobility abstract free trade in goods and factors is efficient when we move away from economic theory and consider the policies actually followed by governments we observe distortions being implemented both on goods and factors trades it is natural then to question the relative merits of the two types of intervention and the normative literature has provided only partial answers we ask then why is the international flow of goods and factors not free and the political economy literature has looked at the two issues only separately in studying the determination of trade policy a theoretical paradigm has emerged focusing on the role of influence driven contributions this approach has also found strong empirical support the literature on the political economy of factor mobility on the other hand is fragmented distortions in labor and capital flows are typically the subject of different studies and only recently a unified framework has been proposed more work has to be done in this area as well as in integrating the political economy of trade and factor movements

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

trade capital mobility and tax competition this paper examines a system of governments national state or local that finance public expenditures with taxes on mobile capital e g a property tax unlike previous research on tax competition explicit consideration is given to the general equilibrium determination of the prices at which goods are traded between regions the analysis identifies inefficiencies in government behavior that are not apparent in models in which the terms of trade are exogenously given capital taxation is shown to create an inefficient distribution of public good outputs across regions accompanied by an inefficient pattern of trade a model is presented in which the chosen levels of public good outputs differ across regions containing identical residents and production possibilities there is a wasteful diversity of public good supplies

towards a common market factor mobility in a customs union this paper examines whether the member countries of a customs union would gain from moving towards the next stage of economi c integration the common market when the set of common external tar iffs is not chosen optimally increased factor mobility may reduce th e welfare of the customs union however common market formation is t he best policy when a customs union of any size sets its tariffs to t he appropriate levels

international trade and finance complementaries in the united kingdom 1870 1913 and the united states 1920 1930 abstract do international trade and finance flow together in a variety of theoretical models trade and finance can be shown to have the potential to be substitutes or complements so the matter must be resolved empirically we study trade and financial flows from the united kingdom from 1870 to 1913 and the united states in the interwar years these were the two major capital exporters and key financial centers in each era we find that trade and finance were robustly correlated for each case we consider simultaneity issues we also discuss evidence from the british empire which casts doubt on the idea that trade is a punishment device in the event of a default

why doesn t capital flow from rich to poor countries an empirical investigation we examine the empirical role of difierent explanations for the lack of ows of capital from rich to poor countries the lucas paradox the theoretical explanations include difierences in fundamentals across countries and capital market imperfections we show that during 1970i2000 low institutional quality is the leading explanation for example improving peru s institutional quality to australia s level implies a quadrupling of foreign investment recent studies emphasize the role of institutions for achieving higher levels of income but remain silent on the speciflc mechanisms our results indicate that foreign investment might be a channel through which institutions afiect long run development

equilibrium selection in a nonlinear duopoly game with adaptive expectations abstract we analyze a nonlinear discrete time cournot duopoly game where players have adaptive expectations the evolution of expected outputs over time is generated by the iteration of a noninvertible two dimensional map the long run behavior is characterized by multistability that is the presence of coexisting stable consistent beliefs which correspond to nash equilibria in the quantity space hence a problem of equilibrium selection arises and the long run outcome strongly depends on the choice of the players initial beliefs we analyze the basins of attraction and their qualitative changes as the model parameters vary we illustrate that the basins might be nonconnected sets and reveal the mechanism which is responsible for this often neglected kind of complexity the analysis of the global bifurcations which cause qualitative changes in the topological structure of the basins is carried out by the method of critical curves

trade in a tiebout economy the purpose of this paper is to explore both the positive and normative aspects of commodity trade in a tiebout economy by tiebout economy i mean an economy with a large number of small regions for example communities or states and no impediments to the mobility of individuals between these regions this type of economy has received widespread attention since the appearance of charles tiebout s classic 1956 article on local public goods in part because it bears a close relation to the standard competitive model this relation suggests that tiebout economies may serve as an

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances