international trade development traps and the core periphery structure of income inequality abstract research on economic complexity has shown that a country s type of exports conditions its future path of economic diversification and economic growth yet little emphasis has been put on the inequality associated with the types of products traded between countries and different regions of the world here we analyze the income inequality associated with the imports and exports of 116 countries in the period from 1970 to 2010 our analysis shows that methods from network science and visual complexity research can help to reevaluate old theories in economics such as core periphery structures in international trade or structural development traps our results illustrate that the core periphery structure of global trade affects not only the income inequality between countries but also the income inequality within countries moreover they reveal the structural constraints that developing and emerging economies face in promoting inclusive growth and benchmark their productive transformations with cases of successful catching up and developed economies the results show that countries such as south korea or germany have benefited from outsourcing high inequality products in contrast some middle income countries such as brazil or south africa face structural development constraints consisting of a large average distance of their export products to low inequality products and a gravitational force towards high inequality products finally developing economies such as nicaragua or sri lanka face a double development trap for inclusive growth as their economies depend on both a large share of high inequality exports and imports

in search of smoking guns what makes income inequality vary over time in different countries we investigate the forces affecting the distribution of income by analyzing an unbalanced panel of information for 16 industrialized countries for the years 1966 through 1994 income inequality is measured with the gini coefficient of equivalent disposable income individuals are the unit of analysis the statistical analysis uses panel methods the results suggest that many factors affect the development of income inequality some factors are strictly economic a decreased industrial sector generally fosters inequality and some support is found for the view that increased trade of manufactured goods from developing countries is also a factor other forces are outside a strictly defined market sphere low inequality is found when a large proportion of the labor force belongs to a trade union and also when there is a large public sector in addition demographic circumstances are important since the proportion of the population under age 15 has a positive effect on inequality we find however no association between the unemployment rate and inequality

understanding corporate coherence theory and evidence abstract multiproduct firms are perceived to be coherent in their scope yet there is no strong theoretical foundations to explain coherence in modern industrial organization theory this paper shows that as u s manufacturing firms grow more diverse they maintain a constant level of coherence between neighboring activities this finding runs counter to the idea that firms with many activities are generally more incoherent a framework is then presented which appeals to the nature of enterprise learning path dependencies and the nature of the selection environment to explain the ubiquity of coherent diversifiers

valuing thinly traded assets we model illiquidity as a restriction on the stopping rules investors can follow in selling assets and apply this framework to the valuation of thinly traded investments we find that discounts for illiquidity can be surprisingly large approaching 30 50 in some cases immediacy plays a unique role and is valued much more than ongoing liquidity we show that investors in illiquid enterprises have strong incentives to increase dividends and other cash payouts thereby introducing potential agency conflicts we also find that illiquidity and volatility are fundamentally entangled in their effects on asset prices this aspect may help explain why some assets are viewed as inherently more liquid than others and why liquidity concerns are heightened during financial crises this paper was accepted by gustavo manso finance

the economic commission for latin america and the caribbean eclac was right scale free complex networks and core periphery patterns in world trade the main purpose of this paper is to apply big data and scale free complex network techniques to the study of world trade with a specific focus on the investigation of eclac and structuralist ideas a secondary objective is to illustrate the potentialities of the use of the new science of complex networks in economics in what has been recently referred to as an econophysics research agenda we work with a trade network of 101 countries and 762 products sitc 4 which generated 1 756 224 trade links in 2013 the empirical results based on network analysis and computational methods reported here point in the direction of what eclac economists used to argue countries with higher income per capita concentrate in producing and exporting manufactured and complex goods at the center of the trade network countries with lower income per capita specialize in producing and exporting non complex commodities at the network s periphery

a model of intraurban employment location an application to bogota colombia this report which examines the location behaviour of manufacturing firms in urban areas is part of a world bank urban study project a theoretical model of employment location is formulated and extended to an empirical specification in the multinomial logit framework a bid rent function is derived from the profit function and captures the firms locational equilibrium situations survey data from bogota colombia provides information on i attributes of the establishment such as plant space and ii attributes of the plant site such as access to markets the estimated model is capable of predicting the location choices of different types of firms separate regression results using the same data set indicate a strong relationship between the intensity of input use and land price supporting the hypothesis that the firms respond to the substitutability of land with respect to other inputs over space the patterns of employment location in bogota are by no means random they are quite similar to those observed for large cities in the united states

the demand for industrial sites in a metropolitan area theory empirical evidence and policy implications abstract a model of urban manufacturing location is developed in order to explain the demand for industrial sites in a metropolitan area within the theory of qualitative choice behavior firms identified by a set of eight characteristics are viewed as selecting sites possessing two attributes of varying degrees of importance to different kinds of firms using a multinomial logit specification the model is estimated for the cincinnati smsa the results lend support to the firm specific nature of the site selection process information concerning the determination of the spatial distribution of the firm types in cincinnati is derived from the analysis implications for the possible effectiveness of a policy initiative designed to alter existing patterns of urban industrial location conclude the paper

export product diversification and co2 emissions contextual evidences from developing and developed economies abstract ascertaining cleaner production and sustainability is a major issue in the developed and developing world income and international trade are the predominant factors behind this this article explores the heterogeneous impacts of export product diversification extensive margin and intensive margins on the co2 emissions for developing and developed countries to this end the authors analyze the annual data of variables from 1971 to 2014 and employ unrestricted fixed effects and system gmm to solve the research problem the empirics suggest that all three indicators of export diversification significantly reduce co2 emissions in 63 developed and developing countries as a global sample the fixed effect models reveal that product diversification and intensive margin have a negative and significant impact in developed economies the negative impacts of product diversification show that economic sophistication is an important tool to reduce emissions further the chow test proved the statistical difference between developed and developing economies which contributes to policy recommendations based on the empirical outcomes the study suggests innovative policies for cleaner production and industrial manufacturing purposes making the policies more effective in achieving sustainable development goals sdgs

the sophistication of exports a new trade measure summary trade data are often classified by product characteristics we propose a new classification sophistication as a means of distinguishing between products we construct a sophistication index based on the income levels of exporting economies sophistication captures a range of factors including technology ease of product fragmentation natural resource availability and marketing we calculate sophistication scores at the 3 and 4 digit levels and test how far the index relates to existing technological classifications of products we use the index to examine trade patterns and illustrate how it can be applied in the analysis of export performance of individual economies

linking economic complexity institutions and income inequality summary a country s mix of products predicts its subsequent pattern of diversification and economic growth but does this product mix also predict income inequality here we combine methods from econometrics network science and economic complexity to show that countries exporting complex products as measured by the economic complexity index have lower levels of income inequality than countries exporting simpler products using multivariate regression analysis we show that economic complexity is a significant and negative predictor of income inequality and that this relationship is robust to controlling for aggregate measures of income institutions export concentration and human capital moreover we introduce a measure that associates a product to a level of income inequality equal to the average gini of the countries exporting that product weighted by the share the product represents in that country s export basket we use this measure together with the network of related products or product space to illustrate how the development of new products is associated with changes in income inequality these findings show that economic complexity captures information about an economy s level of development that is relevant to the ways an economy generates and distributes its income moreover these findings suggest that a country s productive structure may limit its range of income inequality finally we make our results available through an online resource that allows for its users to visualize the structural transformation of over 150 countries and their associated changes in income inequality during 1963 2008

testing a model of intraurban firm relocation abstract a neoclassical model of firm behavior analogous to muth s household analysis in a monocentric urban environment yields comparative static predictions concerning radial direction of relocation knowledge of plant production and demand conditions and economic characteristics of the urban environment is needed to make relocation predictions expected and unexpected relations between the technology economic environment and comparative static results on input demands and location are derived a small detailed data set from cincinnati is used to test a probit model of the relocation decision the results are consistent with theoretical expectations demand changes initial plant size and the relative magnitude of transport costs are the most important determinants of the propensity to decentralize traditional measures of agglomeration economies lack explanatory power

locational patterns and dynamics of industrial activity in the modern metropolis this paper attempts to review and re structure a mass of published ideas on the geography of industrial activity in the modern metropolis the argument proceeds in a series of stages first some basic locational factors in the city are examined second a critical discussion of the literature on economies of agglomeration and scale in cities is undertaken third a brief description of manufacturing activity in nineteenth century cities is provided by way of motivating and orientating the succeeding discussion fourth the phenomenon of industrial decentralisation in twentieth century cities is described fifth an attempt is made to construct a composite theory of intra metropolitan industrial location on the basis of the historical process of the substitution of capital for labour in capitalist commodity production sixth a schematic re statement of the theory is presented and its implications for the spatial cum organisational evolution of modern industry are elucidated seventh some of the main po

whose greed whose grievance and whose opportunity effects of foreign direct investments fdi on internal conflict abstract this paper investigates the influence of foreign direct investments on the probability of civil conflict onset contributing to the debate on globalization and civil conflict i relax the common assumption that all forms of globalization are equivalent in their effects on civil conflict i also incorporate the cross sectoral heterogeneity of investments in existing arguments about the socioeconomic externalities of foreign direct investments as determinants of conflict with long time horizons and managerial control of their foreign affiliates foreign direct investors are strategic players aiming to maximize profits and uniquely able to alter their environment through socio political channels this distinguishes fdi from trade and foreign portfolio investments through a combination of political agency and socio economic influences on grievance and greed among domestic groups some types of fdi are likely to alleviate the risk of civil conflict service sector fdi while others exacerbate it primary sector fdi analyses using a new data set of sector specific fdi stock 1980 2013 lend empirical support to the argument showing that economic globalization can have simultaneous positive and negative externalities these findings are informative for the current dialogue on the role of global markets in sustainable development

a search based theory of the on the run phenomenon we propose a model in which assets with identical cash flows can trade at different prices infinitely lived agents can establish long positions in a search spot market or short positions by first borrowing an asset in a search repo market we show that short sellers can endogenously concentrate in one asset because of search externalities and the constraint that they must deliver the asset they borrowed that asset enjoys greater liquidity a higher lending fee specialness and trades at a premium consistent with no arbitrage we derive closed form solutions for small frictions and provide a calibration generating realistic on the run premia

paper millionaires how valuable is stock to a stockholder who is restricted from selling it abstract many firms have stockholders who face severe restrictions on their ability to sell their shares and diversify the risk of their personal wealth we study the costs of these liquidity restrictions on stockholders using a continuous time portfolio choice framework these restrictions have major effects on the optimal investment and consumption strategies because of the need to hedge the illiquid stock position and smooth consumption in anticipation of the eventual lapse of the restrictions these results provide a number of important insights about the effects of illiquidity in financial markets

portfolio claustrophobia asset pricing in markets with illiquid assets many classes of assets are illiquid or nonmarketable in that they cannot always be traded immediately thus a portfolio position in these becomes at least tem porarily irreversible we study the asset pricing implications of this type of illiquidity in an exchange economy with heterogeneous agents in this market one asset is always liquid the other asset can be traded initially but then not again until after a blackout period illiquidity has a dramatic effect agents abandon diversification and choose polarized portfolios instead the value of liquidity can represent a large portion of the equilibrium price of an asset jel g11 g12

new ways of looking at old issues inequality and growth abstract the paper uses new cross country data on income and asset land distribution to show that i there is a strong negative relationship between initial inequality in the asset distribution and long term growth ii inequality reduces income growth for the poor but not for the rich and iii available longitudinal data provide little support for the kuznets hypothesis policies that increase aggregate investment and facilitate acquisition of assets by the poor might thus be doubly beneficial for growth and poverty reduction

the tips treasury bond puzzle we show that the price of a treasury bond and an inflation swapped treasury inflation protected securities tips issue exactly replicating the cash flows of the treasury bond can differ by more than 20 per 100 notional treasury bonds are almost always overvalued relative to tips total tips treasury mispricing has exceeded 56 billion representing nearly 8 of the total amount of tips outstanding we find direct evidence that the mispricing narrows as additional capital flows into the markets this provides strong support for the slow moving capital explanation of arbitrage persistence

outsourcing r d and the pattern of intra metropolitan location the electronics industries of madrid the relationship between intra metropolitan location research and development r d and the outsourcing of production is analysed to determine differences in and the supportive character of intra metropolitan areas for high technology production madrid s electronics industries have shown a remarkable resilience in the face of extensive economic restructuring and the change in trade regimes that has accompanied continental integration much of the strength of the electronics sector may have been due to the metropolitan area s support for outsourcing and the creative specialisation that it facilitated the distribution of manufacturing establishments their local sourcing characteristics industrial district or agglomeration effects and the role of r d are evaluated to determine the intra metropolitan context of production extensive statistical analyses of the relationship between r d and productive performance with various indicators of capital costs revenues and scale are undertaken with estab

the rent gradient for manufacturing abstract rent gradients for manufacturing are estimated using actual rent and value figures for cincinnati distance to the city center is found to be of no importance in explaining rent or value variations

how much can marketability affect security values how marketability affects security prices is one of the most important issues in finance we derive a simple analytical upper bound on the value of marketability using option pricing theory we show that discounts for lack of marketability can potentially be large even when the illiquidity period is very short this analysis also provides a benchmark for assessing the potential costs of exchange rules and regulatory requirements restricting the ability of investors to trade when desired furthermore these results provide new insights into the relation between discounts for lack of marketability and the length of the marketability restriction

institutions and diversification related versus unrelated diversification in a varieties of capitalism framework the varieties of capitalism literature has drawn little attention to industrial renewal and diversification while the related diversification literature has neglected the institutional dimension of industrial change bringing together both literatures the paper proposes that institutions have an impact on the direction of the diversification process in particular on whether countries gain a comparative advantage in new sectors that are close or far from what is already part of their existing industrial structure we investigate the diversification process in 23 developed countries by means of detailed product trade data in the period 1995 2010 our results show that relatedness is a stronger driver of diversification into new products in coordinated market economies while liberal market economies show a higher probability to move in more unrelated industries their overarching institutional framework gives countries more freedom to make a jump in their industrial evolution in particular we found that the role of relatedness as driver of diversification into new sectors is stronger in the presence of institutions that focus more on non market coordination in the domains of labor relations corporate governance relations product market relations and inter firm relations c 2015 elsevier b v all rights reserved less

stages of diversification this paper studies the evolution of sectoral concentration in relation to the level of per capita income we show that various measures of sectoral concentration follow a u shaped pattern across a wide variety of data sources countries first diversify in the sense that economic activity is spread more equally across sectors but there exists relatively late in the development process a point at which they start specializing again we discuss this finding in light of existing theories of trade and growth which generally predict a monotonic relationship between income and diversification

long run scale adjustments of a perfectly competitive firm and industry an alternative approach the purpose of this note is to use the cost function technique to derive the results of the recent article in this review by c e ferguson and thomas saving hereafter f s our interest lies not so much in the results as in the simplicity and power of the technique itself in contrast to the rather cumbersome conventional apparatus of comparative statics micro theory 1 we shall not therefore discuss in detail the f s interpretations of their results although the technique should give the reader a more intuitive grasp of what is going on following f s we assume that the production function f x is increasing in each input strictly concave and twice continuously differentiable on the positive orthant all equilibrium input vectors are assumed strictly positive we start from the duality between production and cost functions demonstrated by shephard uzawa and mcfadden under our assumptions the production function may be uniquely characterized by its minimum total cost function defined for all p 0 by2 c min ptixi f x q

economic development as self discovery in the presence of uncertainty about what a country can be good at producing there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated we develop a general equilibrium framework for a small open economy to clarify the analytical and normative issues we highlight two failures of the laissez faire outcome there is too little investment and entrepreneurship ex ante and too much production diversification ex post optimal policy consists of counteracting these distortions to encourage investments in the modern sector ex ante but to rationalize production ex post we provide some informal evidence on the building blocks of our model

transaction costs and asset prices a dynamic equilibrium model in this article we study the effects of transaction costs on asset prices we assume an overlapping generations economy with a riskless liquid bond and many risky stocks carrying proportional transaction costs we obtain stock prices and turnover in closed form surprisingly a stock s price may increase in transaction costs and a more frequently traded stock may be less adversely affected by an increase in transaction costs calculations based on the marginal investor overestimate the effects of transaction costs for realistic parameter values transaction costs have very small effects on stock prices but large effects on turnover

when complexity meets finance a contribution to the study of the macroeconomic effects of complex financial systems in the last decade complexity economics has emerged as a powerful approach to the understanding of the most relevant factors influencing economic development the concept of economic complexity has been applied to the study of different economic issues such as economic growth technological change and inequality with this work we aim at extending the application of this concept to the study of the financial side of the economy and in particular of the macroeconomic effects of rising financial complexity in this paper we present an agent based model integrating an increasingly complex financial sector with a real side of the economy populated among other sectors by heterogeneous households we test the systemic impact that the increasing complexity of both the financial system and the financial products it manufactures bear on economic growth macroeconomic stability and inequality we find mixed results with respect to the positive economic implications the existing literature ascribes to products complexity and deepening production capabilities despite higher financial complexity may lead to faster growth our model suggests that this comes at the cost of heightened financial fragility a more crisis prone economic system and increasing levels of income and wealth inequality according to these findings and consistently with pioneering insights from minsky we claim that rising complexity does not always entail positive consequences for the well being of the economy this is particularly true when it comes to financial innovations and financial complexity

the price of options illiquidity the purpose of this paper is to examine the effect of illiquidity on the value of currency options we use a unique dataset that allows us to explore this issue in special circumstances where options are issued by a central bank and are not traded prior to maturity the value of these options is compared to similar options traded on the exchange we find that the nontradable options are priced about 21 percent less than the exchange traded options this gap cannot be arbitraged away due to transactions costs and the risk that the exchange rate will change during the bidding process

structural reforms technological gaps and economic development a latin american perspective this paper explores the impact that recent structural reforms have had upon macro to micro linkages as well as upon the pattern of production specialization the entry and exit of firms during the adjustment process and the sources of technical change in the present more open and deregulated latin american macroeconomic scenarios from this exploration a major question emerges is the new market oriented development paradigm sustainable in the long run the interpretation presented in this paper suggests that the present pattern of production specialization strongly biased in favour of industries featuring low domestic knowledge generation and value added content and the inhibition of local r d and engineering activities resulting from the rapid expansion of internationally integrated production systems are pushing latin american economies into a low development trap from which it might prove extremely difficult to escape on the basis exclusively of free market principles copyright 2003 oxford university press

information percolation with equilibrium search dynamics we solve for the equilibrium dynamics of information sharing in a large population each agent is endowed with signals regarding the likely outcome of a random variable of common concern individuals choose the effort with which they search for others from whom they can gather additional information when two agents meet they share their information the information gathered is further shared at subsequent meetings and so on equilibria exist in which agents search maximally until they acquire sufficient information precision and then search minimally a tax whose proceeds are used to subsidize the costs of search improves information sharing and can in some cases increase welfare on the other hand endowing agents with public signals reduces information sharing and can in some cases decrease welfare