different paths to free trade the gains from regionalism we compare free trade reached through expanding regional trading blocs to free trade accomplished by multilateral negotiation with sunk costs the outcomes are different trade in an imperfectly competitive good flows disproportionately more between the original members of a regional agreement even after free trade is reached they secure a higher welfare level from regionalism than from free trade achieved multilaterally nonmembers however reach a lower welfare level a surprising result is that world welfare during free trade is greater when it is achieved by the regional path we conclude with some empirical evidence from the european union that is consistent with the model

economic determinants of free trade agreements abstract the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of the formation of free trade agreements ftas and of the likelihood of ftas between pairs of countries using a qualitative choice model we develop this econometric model based upon a general equilibrium model of world trade with two factors of production two monopolistically competitive product markets and explicit intercontinental and intracontinental transportation costs among multiple countries on multiple continents the empirical model correctly predicts based solely upon economic characteristics 85 of the 286 ftas existing in 1996 among 1431 pairs of countries and 97 of the remaining 1145 pairs with no ftas

determinants of donations in private nonprofit markets abstract we estimate the responsiveness of donations to a number of economic variables including price advertising and the availability of revenue from such other sources as government grants and program service sales utilizing a set of irs data on individual nonprofit organizations in each of seven industries including hospitals and higher education for the years 1982 1994 we find distinct overall patterns as well as notable variation across industries a nonprofit organization s fundraising expenditures are estimated to exert two countervailing effects on donations the direct advertising and information effect augments donations while the indirect effect on the price of donating has a negative effect we do not find evidence that fundraising is carried to the profit maximizing levels in some industries fundraising is substantially short of that level while in other industries it is excessive implying that the marginal return to fundraising is exceeded by the cost focusing on whether revenue from other sources affects donations to a nonprofit organization we find evidence that revenue from either government grants or from the organization s own program sales activity generally does not crowd out private donations to the contrary in most industries there are significant positive effects

beyond trade the impact of preferential trade agreements on fdi inflows summary this paper investigates the effects of preferential trade agreements ptas on net fdi inflows of member countries using a comprehensive database of ptas in a panel setting pta membership is associated with a positive change in net fdi inflows and fdi gains increase with the market size of pta partners and their proximity to the host country the estimated relationship is driven by the developing countries in the sample and agreements signed in the late 1990s early 2000s a period when the majority of deep integration ptas have been advanced

is protection for sale evidence on the grossman helpman theory of endogenous protection grossman and helpman 1994 present a theory of endogenous protection by explicitly modeling government industry interactions for which mere black box models previously existed they obtain a ramsey pricing type solution to the provision of protection which emphasizes the role of inverse import penetration ratios and import elasticities on the lobbying side the model makes predictions about lobbying competition and lobbying spending according to deadweight costs from protection the model not only makes for richer theory in terms of rigor and elegance but its predictions are directly testable whether the grossman helman model stands up to real world data is investigated in this paper predictions from both the protection side and lobbying side are tested using cross sectional u s nontariff barrier data we also compare the second generation grossman helpman model with a more traditional specification our results call for serious consideration of this model in the political economy literature

demand for charity donations in private non profit markets the case of the u k abstract this paper presents estimates of the demand for donations for u k charities in 1985 these estimates make demand depend upon price fund raising expenditure a quality index and alternative revenue sources the price elasticity of donations found here shows for the most part an elastic response and is consistent with previous studies using u s data our empirical results suggest that non profits in the u k unlike their counterparts in the u s are net revenue maximisers we discovered no significant evidence that public donations crowded out private donations in our sample of 300 charities

persistence and time varying coefficients abstract persistence in economic variables is common we re examine that using a time varying parameter model results support a substantial reduction in persistence particularly when allowing for time variation in the constant this has important implications for policy making and the effect of shocks

some welfare effects of sequential customs union formation this paper deals with the effects on world welfare of sequential customs union formation a computational model of customs union formation is developed and simulated under a variety of assumptions these assumptions concern various characteristics of the world the pattern of customs union formation and gatt restrictions on common external tariffs the results show that unrestricted customs union formation is likely to result in successive deterioration of world welfare despite gains for the member countries collectively an examination of the current gatt guidelines however suggests that if they were vigorously enforced world welfare would rise with customs union formation

demand for collective goods in private nonprofit markets can fundraising expenditures help overcome free rider behavior abstract economic theory ascribes the primary role in the provision of public goods to government this emphasis on government overlooks the role of the not for profit sector in providing collective type goods in this paper we seek to determine the factors influencing charitable contributions to private nonprofit organizations by estimating a demand function for the output of these collective good providers specifically we test the hypothesis that voluntary giving is responsive to conventional market variables such as advertising expenditures price and quality overall the results are strongly supportive

are rta agreements with environmental provisions reducing emissions article i nfo this paper investigates whether rtas with environmental provisions affect relative and absolute pollution levels in order to do so the determinants of carbon dioxide emissions convergence are estimated for a cross section of 182 countries over the period 1980 to 2008 a propensity score matching approach is com bined with difference in differences techniques to effectively isolate the effect of the regional trade agree ment rta variable the usual controls for scale composition and technique effects are added to the estimated model and the endogeneity of income and trade variables is modeled using instruments the main results indicate that the co2 emissions of the pairs of countries that belong to an rta with environmen tal provisions tend to converge and are lower in absolute terms whereas this is not the case for rtas without environmental provisions as regards specific agreements we find that emissions converge more rapidly for nafta than for eu 27 and euro med countries we find consistent evidence that only rtas with environ mental harmonization policies affect relative and absolute pollution levels

financial reporting quality and price competition among nonprofit firms donors increasingly rely on financial information reported by internal revenue service irs form 990 to allocate donations among nonprofit firms however competition among nonprofits creates an incentive for managers to under report management and fund raising expenditures to make their firms appear relatively efficient increasingly researchers suspect that information provided in the form 990 may not accurately portray the true financial condition of nonprofit firms inaccurate price information weakens the ability of donors to promote efficiency and discipline excess among nonprofit managers this article examines the reaction of donors to variation in form 990 reporting quality we find that donors reward nonprofit firms for investments in more accurate financial reporting additionally higher quality financial information sharpens the ability of donor markets to discipline nonprofit firms by increasing price sensitivity the primary implication of this study is that regulatory improvements in rep

alternative sources of the gains from international trade variety creative destruction and markups the modern theory of international trade identifies several additional sources of the gains from international trade beyond the gains from traditional comparative advantage these are the gains from importing new product varieties the gains from creative destruction as the relatively most productive firms expand their output by exporting while the less productive firms exit and the gains from competition between firms in different countries which can lead to reduced markups estimates of these various gains are provided for the united states and other countries

using nonprofit organization level financial data to infer managers fund raising strategies abstract using irs data from 1982 to 1994 this study finds the typical fund raising elasticities in seven categories of nonprofit organizations to be between zero and one these results are consistent with most nonprofit managers following intermediate strategies between pure program service maximization and pure organization size maximization however the distribution of fund raising elasticities contains extreme observations that can disproportionately affect mean elasticities and standard deviations as a result prior researchers tests of the difference of mean elasticities from zero may not properly characterize the behavior of typical nonprofit organizations

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

proliferating regional trade arrangements why and whither this paper investigates why regional trade arrangements rtas are proliferating extensively and how the effects of multiple rtas by interacting with each other evolve over time our empirical analysis based on an extended gravity model utilising a large panel dataset of 175 countries from 1948 to 1999 shows that rtas on average increase global trade by raising intra bloc trade without damaging extra bloc trade the net trade effects however heavily depend on the types of rta strategic evolution over time which we categorise as expansionary rtas duplicate rtas or overlapping rtas we find that countries excluded from an rta can benefit more from duplicating a separate rta than from joining an existing rta this result explains why the number of bilateral trade blocs rather than the membership size of existing rtas is currently exploding we also find that the net trade creating effects of rtas are substantially lower for countries participating in overlapping rtas this result suggests that it is less likely that the currently proliferating rtas will completely merge and lead the world economy to global free trade our empirical results are robust to controlling for the characteristics of countries that may influence the impact of rtas

the sensitivity of an empirical model of married women s hours of work to economic and statistical assumptions this study undertakes a systematic analysis of several theoretic and statistical assumption s used in many empirical models of female labor supply using a singl e data set psid 1975 labor supply data the author is able to replic ate most of the range of estimated income and substitution effects fo und in previous studies in this field he undertakes extensive specif ication tests and finds that most of this range should be rejected du e to statistical and model misspecifications the two most important assumptions appear to be the tobit assumption used to control for sel f selection into the labor force and exogeneity assumptions on the wi fe s wage rate and her labor market experience copyright 1987 by the econometric society

structural determinants of real exchange rates and national price levels some empirical evidence contrary to the long held notion of purchasing power parity ppp economists have found systematic evidence that the general level of prices across countries at a point in time varies dramatically irving b kravis alan w heston and robert summers 1982 for example report that some countries national price levels are no more than one third the u s price level extensions of this work show that such departures from ppp have persisted for decades recently efforts have been made to explain systematically these persistent or structural departures from ppp pioneering work by kravis and robert e lipsey 1983 1987 1988 has demonstrated that a positive correlation between the price level and real per capita gross domestic product is robust across numerous cross sectional specifications for instance using data from kravis et al 1982 table 6 12 87 percent of the variation in national price levels pl of 21 countries in 1975 is explained by per capita gdp y and a constant

charity donations in the uk new evidence based on panel data abstract this paper presents a set of panel data estimates for 159 of the most prominent uk charities for the period 1983 1990 in evaluating alternative specifications we settle on a fixed effects estimation social welfare charities are shown to fund raise short of the point at which net revenues are maximized whereas health and overseas charities are found to net revenue maximize religious charities maximize total revenues estimates of price and fund raising elasticities are presented for charities overall and for four cohorts for alternative income sources no evidence of crowding out is found

level shifts and the illusion of long memory in economic time series when applied to time series processes containing occasional level shifts the log periodogram gph estimator often erroneously finds long memory for a stationary short memory process with a slowly varying level i show that the gph estimator is substantially biased and derive an approximation to this bias the asymptotic bias lies on the 0 1 interval and its exact value depends on the ratio of the expected number of level shifts to a user defined bandwidth parameter using this result i formulate the modified gph estimator which has a markedly lower bias i illustrate this new estimator via applications to soybean prices and stock market volatility

on the different geographic characteristics of free trade agreements and customs unions abstract casual observation reveals a striking phenomenon of preferential trade agreements ptas while customs unions cus are only intra regional free trade agreements ftas are inter and intra regional using a farsighted dynamic model we endogenize the equilibrium path of ptas among two close countries and one far country rising transport costs mitigate the cost of discrimination faced by the far country as a cu non member and diminish the value of preferential access as a cu member thus sufficiently large transport costs imply that an fta is the only type of pta that can induce the far country s participation in pta formation unlike cu formation fta formation can induce participation because ftas provide a flexibility benefit an fta member can form further ptas with non members but a cu member must do so jointly with all existing members hence in equilibrium cus are intra regional while ftas are intra and inter regional

the size of trading blocs market power and world welfare effects abstract we construct an n country n commodity trade model to analyze the implications of bloc size for nash equilibrium tariffs and welfare the relationship between the absolute size of symmetric trading blocs and their market power is ambiguous and we illustrate how this relationship varies with model parameters in contrast sufficiently large increases in the relative size of a bloc enhance its relative market power and cause the welfare of its country members to rise above the free trade level we establish the existence of an optimal bloc size and study the dependence of optimal size on the parameters of the model

are economic fluctuations really persistent a reinterpretation of some international evidence in this paper the authors show that estimates of j h cochrane s 1988 suggested measure of the persistence of fluctuations in real output will be biased if there is a single break in the mean rate of growth of output the authors then show that the major findings of j y campbell and n g mankiw 1989 that for a number of industrial countries estimates of cochrane s measure of persistence are generally very high though different and that a subgroup of countries with high output persistence have low relative output persistence can be largely accounted for by the difference in each country between its pre 1974 and post 1973 mean growth rates copyright 1992 by royal economic society

measuring the world economy this paper provides an empirical assessment of whether the world economy has become smaller in terms of economic distance over the last decades we adopt a cross sectional spatial econometric approach relating domestic output volatility to distance weighted averages of other countries output volatility using a sample of 135 countries and rolling 10 year time windows over the period 1955 to 2006 using descriptive measures test statistics and spatial econometric estimates we find that cross country interdependence was virtually insignificant in the early post war period but has increased strongly from the mid 1960s to the mid 1980s and remained at a high level since then results for the most recent period suggest that common shocks to output volatility have a magnified impact and roughly quadruplicate through international spillover effects which are transmitted through both trade and financial openness

regional trading arrangements natural or supernatural members of the customs union the potential unfavorable effects arise from the introduction of distortions in the relative price between the goods of members and nonmembers in terms of classic customs union theory the trade off is between trade creation and trade diversion the entire exercise assumes that the firstbest solution of worldwide free trade is not attainable for political reasons thus the choice between a status quo of nondiscriminatory most favored nation mfn tariffs and a move to preferential trading arrangements pta s is an exercise in the theory of the second best this paper summarizes recent research by the authors we make an evaluation of the

free trade agreements and foreign direct investment the role of endogeneity and dynamics this article studies the impact of free trade agreements fta on outbound foreign direct investment fdi from one perspective fta may promote fdi since fta aim to promote economic activity between countries however lower trade barriers may lower the incentive of firms to conduct fdi therefore the net impact is an empirical question using a panel of countries for the years 1990 2006 this article effectively controls for participation in an fta when analyzing the impact on outbound fdi the lengthy time series also allows us to examine effectively the dynamic nature of the relationship failing to account for endogeneity and dynamics would likely generate inaccurate conclusions regarding the impact of fta on outbound fdi our analysis finds that outbound fdi is either unrelated to participation in an fta or is negatively affected

international evidence on the persistence of economic fluctuations abstract this paper presents new evidence on the persistence of fluctuations in real gnp we estimate two measures of persistence nonparametrically using post war quarterly data from canada france germany italy japan the united kingdom and the united states we compare these estimates with monte carlo results from various ar 2 processes for six out of seven countries the point estimates indicate that a 1 shock to output should change the long run unvariate forecast of output by well over 1 low order arma models yield similar conclusions finally we examine the persistence in relative outputs of different countries

alliances in international governmental organizations regional trade agreement formation and multinational enterprise regionalization strategy abstract drawing from political science alliance theories we explain why countries are likely to enter regional trade agreements we argue that the probability that this will happen is higher if the countries are allies in the same international governmental organizations igos as such alliances can help build trust and reduce political risk our results show that igo scope and also partner reliability and influence in the igo network play important roles our findings provide guidance to multinational enterprises in formulating regionalization strategies

international politics and import diversification abstractthis paper examines how international politics affects trade in the absence of empires or wars we first show that deterioration of relations between the united states and another country measured by divergence in their united nations general assembly voting patterns reduced u s imports from that country during 1962 2000 though statistically significant the magnitude of the effect of political distance on trade is small indeed we show that except for petroleum and some chemical products u s imports are not affected by international politics american firms however diversify their oil imports significantly away from political opponents of the united states oil trade is often associated with backward vertical foreign direct investment that is subject to the expropriation risk in contrast to the usual claim that oil is a strategic commodity we provide suggestive evidence that trade in products when rents are appropriable is more likely to be affected by international politics

trade policy and productivity abstract previous studies on the determinants of productivity emphasized the role of trade and institutions but omitted trade policy due to endogeneity concerns this paper considers the role of one important element of trade policy free trade agreements ftas based on recent work on the determinants of ftas we suggest an instrument which is based on the propensity to enter an fta due to exogenous geographical characteristics we find that differences in institutional quality and trade due to variations in geography and trade policy have a sizeable effect on productivity and can explain the huge variation in per capita income across countries