trade interdependence the international financial institutions and the recent evolution of sovereign debt renegotiations abstract this paper analyzes the effect of a debtor country s pattern of trade with commercial creditors home countries on the outcome of debt rescheduling negotiations the analysis reveals that a debtor country with more market power has greater leverage in a three way debt rescheduling negotiation that includes the debtor country its creditors and the international financial institutions ifis the paper also considers the effects of the ifi sovereign debt policy on the bargaining power of the parties in debt rescheduling negotiations two bargaining frameworks analyzed and compared in the paper represent the negotiation mechanism at different stages of the ifi sovereign debt policy evolution

food versus fuel an updated and expanded evidence abstract this paper replicates the study of zhang et al 2010 food versus fuel what do prices tell us energy policy 38 pp 445 451 we confirm the findings of the original paper that there was only a weak relationship between ethanol and food commodities in the period between march 1989 and july 2008 in addition we extend that study and examine the cointegration relationship between biofuels and related commodities for a considerably enlarged dataset 3 vs 1 market 26 vs 8 commodities analysis up till 2017 vs 2008 weekly vs monthly data frequency focusing on the biofuel markets of brazil the eu and the usa in the three separate periods before during and after the food crisis of 2007 and 2008 we show that studying the time variation of the relationships plays an essential role in their proper understanding our results help to clarify the wide extensive discussion about the role of biofuels prices in food shortages manifested particularly during the food crises in agreement with the original study we confirm that price series data do not support strong statements about biofuels uniformly serving as main leading source of high food prices and consequently the food shortages

time series econometric analyses of biofuel related price volatility time series econometrics studies have analyzed volatility interactions between biofuel and food and fossil fuel markets we review data modeling techniques and the main findings in the literature and present our latest contributions we identify areas for further research

a note on the optimal tariff retaliation and the welfare loss from tariff wars in a framework with intraindustry trade abstract this paper uses krugman s 1980 model of trade with product differentiation and monopolistic competition to examine the effects of a uniform ad valorem tariff the main results are there exists an optimal tariff even for a small economy and the optimal tariff rate is an increasing function of the size of the economy and the degree of production differentiation under reasonable parameter assumptions a tariff war between two countries of equal size in which each country retaliates by imposing its own optimal tariff causes a welfare loss equivalent to a drop in income of about 4 percent

the niehans paradox flexible exchange rates and macroeconomic stability abstract this paper re examines dornbusch s suggestion that monetary expansion under a floating rate system will not cause a temporary decline in economic activity the niehans paradox because households will cut their saving to maintain consumption spending on domestic goods despite this terms of trade effect on saving it turns out that devaluation in the standard keynesian model in which trade flows however respond to the exchange rate with a simple distributed lag produces a temporary decline in economic activity under certain plausible conditions consequently the niehans paradox still can arise if domestic expenditures respond sluggishly to lower interest rates

regulation in the european community all governments regulate economic activity in their own countries the single european market will involve a significant transfer of regulatory activity from member states to the european community as well as the initiation of regulatory activity in certain areas that have not previously been subject to regulation at all including the activities of member states themselves as in taxation or the provision of subsidies to industry why should governments wish to make such a transfer of powers what do they have to gain

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

farming the tax code the impact of high marginal tax rates on agricultural tax shelters surprisingly little scholarly work has examined the practice of farming the tax code in which accounting losses on agricultural investments are used to shelter other income from taxation economic theory suggests that the amount of investment in agricultural tax shelters is positively related to the marginal tax rate this hypothesis is empirically investigated using a sample of federal individual income tax returns filed for 1983 both the probability of reporting a farm tax loss and the amount of farm losses are increased by a rise in the marginal tax rate especially among upper income taxpayers

the impact of liberalization on bureaucratic corruption abstract liberalization increases the number of goods available for consumption within a country since bureaucrats value variety this raises the marginal utility of accepting a bribe this benefit effect is counteracted by an increasing cost effect from corruption deterrence activities that arise due to greater international pressure to curb corruption the interaction of these two effects can lead to a non monotonic relation between liberalization and corruption moreover pre commitment to deterrence activities is shown to be more effective in controlling corruption empirical evidence supports the existence of a non monotonic relation between economic openness and corruption among developing countries

biofuel related price transmission literature a review abstract in this article an extensive review of the rapidly growing biofuel related time series literature is carried out the data used the modeling techniques and the main findings of this literature are discussed providing a review of this flourishing research area is relevant as a guidepost for future research this literature concludes that energy prices drive long run agricultural price levels and that instability in energy markets is transferred to food markets

tariffs in monopolistic competition models with leisure consumption trade off abstract this note introduces a leisure consumption trade off into monopolistic competition models resulting in ambiguous welfare effects of tariff protection a small tariff is welfare reducing when the terms of trade effect is smaller than an international returns to scale effect

welfare maximizing and revenue maximizing tariffs with a few domestic firms in this paper we compare the orthodox optimal tariff formula with the appropriate welfare maximizing tariff when there are a few producing or importing firms the welfare maximizing tariff can be very low voire negative in some cases while in others it can even exceed the maximum revenue tariff the relationship between the welfare maximizing tariff and the number of firms need not be monotonically increasing because the tariff is not strictly used to internalize terms of trade externality it is also used to manipulate cost asym metries between producing and importing firms welfare maximizing specific tariffs are never worse than their ad valorem counterparts jel classification f13 l13

risk forecasting models and optimal portfolio selection this study analyses from an investor s perspective the performance of several risk forecasting models in obtaining optimal portfolios the plausibility of the homoscedastic hypothesis implied in the classical markowitz model is dicussed and more general models which take into account assymetry and time varying risk are analysed specifically it studies whether arch type based models obtain portfolios whose risk adjusted returns exceed those of the classical markowitz model the same analysis is performed with models based on the lower partial moment lpm which take into account the assymetry in the distribution of returns the results suggest that none of the models achieve a clearly superior average performance it is also found that models based on semivariance perform as well as those based on the variance but not better than even if the evaluation criterion is based on the reward to semivariance ratio when attention turns to the analysis of worst case performance the results are clearly differ

adjustment of wages and equilibrium unemployment in a ricardian global economy abstract this paper develops a dynamic ricardian model of the world economy exhibiting endogenous wages and equilibrium unemployment it is shown that international trade serves to give workers an increased stake in job holding and in general equilibrium leads to higher real earnings and lower equilibrium unemployment economic shocks emanating in one country affect the trading partner s equilibrium unemployment rate by shifting the terms of trade the generality of the results are discussed along three dimensions replacing efficiency wages with bargaining in labor market introducing role for market sizes and factor proportion differences and introducing firm specific training to generate dynamics

product imitation product differentiation and international trade using the hotelling approach to product differentiation this article derives the equilibrium product configurations and prices when two firms enter and sell in two interdependent markets separated by barriers to trade it shows that product imitation and no trade as well as product differentiation with two way or one way trade are all consistent with the equilibrium copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

sustaining policy cooperation between economies of different size abstract i consider an example of a two country model featuring national heterogeneity and demonstrate that heterogeneity plays an important role for the countries gains from international policy cooperation and just as important for the incentives to break the cooperative agreement i find that national heterogeneity unambiguously reduces trigger strategies support for policy cooperation in other words the more countries differ the harder it is to sustain policy cooperation

trade policy home market effect versus terms of trade externality we study trade policy in a two sector krugman 1980 trade model allowing for wage import and export subsidies taxes we study non cooperative trade policies first for each individual instrument and then for the situation where all instruments can be set simultaneously and contrast those with the efficient allocation we show that in this general context there are four motives for non cooperative trade policies the correction of monopolistic distortions the terms of trade manipulation the delocation motive for protection home market effect the fiscal burden shifting motive the nash equilibrium when all instruments are available is characterized by first best level wage subsidies and inefficient import subsidies and export taxes which aim at relocating firms to the other economy and improving terms of trade thus the dominating incentives for non cooperative trade policies are the fiscal burden shifting motives and terms of trade effects

product diversity economies of scale and international trade the paper develops new testable implications for monopolistic competition in the open economy within a two sector model we explore how international trade affects plant size the degree of product diversity and excess capacity the analysis then focuses on how trade affects the degree of domestic and international concentration intersectoral capital mobility and output in the competitive sector finally we compare the model to the traditional hecksher ohlin model and find that many of the central propositions still hold

consumer demand under price uncertainty empirical evidence from the market for cigarettes abstract we develop a demand model for goods that are subject to habit formation we show that consumption plans of forward looking individuals depend on preferences current period prices and ind

international trade and industrial organization this survey reviews recent contributions to the interface between international trade and industrial organization import competition places a substantial limit on domestic market power in the short run competitive conditions can influence the speed and efficiency of a domestic market s adjustment to international disturbances exports effects on competition among national sellers are unclear and depend on the scope for price discrimination models of trade with monopolistic competition explain intra industry trade and also the widely observed sensitivity of firm size to market size exposure to trade also increases the technical efficiency of production diverse policy issues turn on the distinction between national and global welfare and the scope for commitment

optimal tariffs for trade in monopolistically competitive commodities abstract the welfare implications of international trade are examined for an economy which contains a monopolistically competitive industry and imports products directly competitive with this industry necessary and sufficient conditions for such trade to increase welfare are found and optimal import tariffs are derived and analysed

the wto as a mechanism for securing market access property rights implications for global labor and environmental issues can the world trade organization wto contribute to the attainment of sound labor and environmental policies an answer requires an understanding of wto rules we argue that the purpose of wto rules is to create a negotiating forum where governments can exchange secure market access commitments from this perspective we argue that supporters of sound trade labor and environmental policies can benefit from a well functioning wto because facilitating trade liberalization and preventing race to the bottom regulatory chill problems go hand in hand and each is accomplished by maintaining secure property rights over negotiated market access commitments

mobile capital and the home market effect most existing studies examine the home market effect hme in a framework with immobile labour as the only production factor and the assumption of a freely traded homogeneous good is known to be crucial for the hme to emerge this study explores the hme in the presence of mobile capital by use of a footloose capital model allowing for positive transport costs of the homogeneous good the mobile capital generates a channel to offset the trade imbalance of a country as a result the hme always appears for arbitrary transport costs in both sectors of differentiated and homogeneous goods la plup art des travaux existants etudient l effet du marche domestique dans un cadre d analyse ou le travail immobile est le seul facteur de production et ou le postulat d un bien homogene librement echange est considere comme un element crucial pour que l effet du marche domestique emerge ce texte explore le phenomene dans le cas ou le capital est mobile et ou on utilise un modele de capital libre comme l air avec couts de transport positifs pour le bien homogene le capital mobile engendre un canal pour compenser le desequilibre commercial d un pays en consequence l effet du pays domestique apparait toujours pour des couts de transport arbitraires dans les secteurs des biens differencies ou homogenes

efficient redistribution through commodity markets efficiency in redistribution is measured in terms of deadweight loss generated per dollar of economic surplus transferred between consumers and producers of a commodity by means of market intervention the implications of supply and demand elasticities for efficiency in redistribution are examined with special attention to the comparison of production control and deficiency payment programs the results may be used to aid in the evaluation of commodity programs and as a basis for consideration of the hypothesis that observed policies are efficient given the political power of interest groups

product differentiation heterogeneous labor and non homotheticity statics and dynamics the problem of product diversity and product differentiation under chamberlinian monopolistic competition has been attracting a great deal of attention recently instrumental to this is perhaps the discovery of the dixit stiglitz utility function 7 in conjunction with revived interest in scale economies the d s utility function framework has been useful to make general equilibrium analysis tractable and facilitate obtaining many interesting results scale economies provide an additional appealing feature to the results the application to other fields notably to international trade theory is impressive thus dixit norman 6 265 wrote the large volume of intra industry trade estimated at 50 of world trade by grubel lloyd 8 can only be understood in the context of product differentiation and economies of scale this line of research reached a culmination with the work of helpman krugman 13 this paper develops a general equilibrium model of monopolistic competition with nonhomothetic production and economies of scale and develops comparative statics and dynamics the lack of homotheticity enters through different types of labor skilled and unskilled the paper investigates two types of dynamic processes one leading to the chamberlinian tangency solution and the other leading to a stable allocation of skilled and unskilled labor in the economy unlike virtually all studies on this topic we have not postulated that the chamberlinian tangency solution or the zero profit condition prevails at the outset of their analysis instead we investigate whether or not the chamberlinian process of achieving the tangency solution via entry or exit of firms depending of course on profits and losses of firms in the industry is indeed stable under a general equilibrium framework with certain assumptions although this result may look intuitively obvious it may be contrasted to a different result obtained elsewhere by us 3 another problem that we are concerned with is the allocation of skilled labor and unskilled labor consider the economy which consists of manufacturing sector x and food sector y

two country trade liberalization in an address model of product differentiation this paper investigates the effects of reciprocal tariff reductions in a two identical country model of product differentiation it makes three points first the existing results about market structure effects of trade liberalization can easily be replicated from a one dimensional characteristic space model in which the prohibitive tariff rate is endogenously determined secondly these effects depend crucially on the initial ad valorem tariff rate thirdly reciprocal tariff reductions alone do not necessarily warrant welfare gains

the new protectionism revisited this paper reviews the strategic trade literature in oligopolistic industries beginning with the brander spencer 1984 model of duopolistic international rent shifting issues of long run equilibrium entry conditions and empirical estimates of the size of oligopolistic rents in tradable goods industries are reviewed in addition the results of simulation models of strategic trade policy are summarized the final sections of the paper deal with issues of the retaliation by other countries against single country policies and long term policy equilibrium it is emphasized that the prisoners dilemma characterization of these equilibria may be inappropriate and managed trade may be a more plausible outcome in oligopolistic industries than strategic trade policies

monopolistic competition nonhomotheticity and the stability of the chamberlinian tangency solution the focal point in the recent literature on international trade and monopolistic competition is to recast the chamberlinian partial equilibrium theory in a general equilibrium framework using a similar setting this paper asks whether the chamberlinian tangency solution is stable under general equilibrium paradoxical results follow when entry occurs profit per firm can increase and the tangency solution can be unstable a necessary and sufficient condition for stability is obtained the concepts of average and marginal factor intensities play an important role in obtaining the stability copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

oil and energy price volatility it is commonly believed that since the 1973 oil crisis oil and energy prices have been more volatile than other commodity prices this study examines monthly producer prices for thousands of products over the period january 1945 through august 2005 the results show that crude oil refined petroleum and natural gas prices are more volatile than prices for about 95 of products sold by domestic producers relative to crude commodities however crude oil prices are currently more volatile than about 65 of other products and oil price volatility first exceeded the median for crude commodities following the 1986 drop in oil prices

optimum tariffs and retaliation revisited how country size matters in his seminal work on tariff retaliation johnson review of economic studies 21 1953 1954 showed that a country will win a bilateral tariff war if its relative monopoly monopsony power in world trade is sufficiently large however it is unclear from johnson s analysis and from subsequent research on the subject how this power is determined in general economic environments an important goal of this paper is to address this issue with the help of a neoclassical trade model in which country size is at centre stage it is shown that a sufficient condition for a country to prefer a non cooperative nash tariff equilibrium retaliation over free trade is that its relative size be sufficiently large the paper also refines the structure of the general trade model and generates additional characterization results on the importance of country size for best response tariff functions retaliatory tariffs and welfare

distributional impacts of the 1986 tax reform act the 1986 tax reform act tra contains the most sweeping changes in tax laws in the last thirty years affecting virtually every sector of the u s economy evaluations of its impacts on agriculture appearing in the farm and nonfarm press have been concerned primarily with commodityand or producer specific issues in this paper we provide a broader perspective on the interand intrasectoral effects of tra first we examine equity versus efficiency effects of tra next we identify major changes wrought by tra and explain briefly how they may alter tax obligations for the farm sector relative to the rest of the economy finally we consider the distributional effects of tra within the agricultural production sector with a focus on differences by size type tenure patterns and debt level

monopolistic competition and the stability of industrial equilibrium abstract we consider a two sector economy consisting of the differentiated goods and the homogeneous goods industries where the former is monopolistically competitive with scale economies we show that the chamberlinian tangency solution is unstable when the supply side is characterized by the heckscher ohlin two factor model

automobile externalities and policies this paper discusses the nature and magnitude of externalities associated with automobile use including local and global pollution oil dependence traffic congestion and traffic accidents it then discusses current federal policies affecting these externalities including fuel taxes fuel economy and emissions standards and alternative fuel policies summarizing insofar as possible the welfare effects of those policies finally we discuss emerging pricing policies including congestion tolls and insurance reform and summarize the appropriate combination of policies to address automobile externalities

four myths surrounding u s biofuels the rapid growth of biofuels has elicited claims and predictions concerning the current and future role of these fuels in the u s vehicle fuel portfolio these assertions are at times based on a false set of assumptions concerning the biofuel s market related to the petroleum and agricultural commodities markets and the nonmarket consequences of our automobile driving as an aid in clarifying these market relations the following four biofuel myths are presented 1 biofuels will be adopted because we will soon run out of oil 2 biofuels will solve the major external costs associated with our automobile driving 3 biofuels cause food price inflation the food before fuel issue and 4 biofuels will become a major vehicle fuel

trade liberalization in oligopolistic industries the quota case abstract this paper analyzes the short and long run effects on domestic price and output of partially liberalizing quota restrictions in a general model of oligopolistic interactions it is shown that perverse outcomes are possible in a number of cases including that of rational conjectures a larger quota may result in an increase in domestic output in the short run and a higher price in the long run the relationship between oligopolistic conjectures and the number of firms in the industry is critical in determining the long run outcome