retaliation bargaining and the pursuit of free and fair trade that domestic political economic factors are important determinants of a nation s trade barriers has been empirically well established however the question of how effective strategically retaliatory trade barriers are in deterring foreign protectionism has received far less systematic empirical attention in this article we use bilateral nontariff barrier ntb data between the united states and five developed partner countries japan france germany italy and the united kingdom to systematically examine the effectiveness of strategic retaliation we employ a simultaneous tobit model where the home and foreign ntb levels are determined endogenously in a bilateral game the model provides estimates of deterrence coefficients that is the reduction in foreign trade barriers as a result of u s retaliation which we use to characterize the nature of bilateral ntb games our hope is that the empirical results presented here which have realistic though controversial implications will inform u s trade policy

economic culture and foreign policy the cognitive analysis of economic policy making political scientists researching economic foreign policy have generally taken one of two analytic approaches the first is based on realpolitik the traditional application of high politics to the low politics of economics this approach considers economics subordinate to politics the concept of the national interest dominates the pursuit of power what enables the state to achieve its goals of security welfare and other societal values is seen to underlie most actions the study of foreign economic policy is thus an analysis of the distribution of power among states within the international system by understanding a state s sources of strength and areas of vulnerability in relation to other states the analyst will better understand the creation of foreign policy hans morgenthau notes that while states may sometimes pursue economic policies for their own sake in which case they should take little interest in their success the more important economic policies they will favor are instruments of political power stephen krasner views the state as an autonomously motivated actor able to guide policy in pursuit of state priorities while resisting interest groups and ideologies according to this power theory the state tries to increase its economic competitiveness ensure security of material needs and promote its broad foreign policy objectives economic policy is for the most part subordinate to and best explained by state priorities and prerogatives robert tucker klaus knorr robert gilpin and others have also adopted this framework

understanding international trade policies an emerging synthesis the international trade problems of the 1980s stimulated an expansion of scholarship on trade policies by economists and political scientists at least four distinct theoretical perspectives weave their way through recent literature that concentrates on the united states emphasizing market conditions policy beliefs and values national political institutions and global structures respectively new studies in each of these traditions advance beyond the work of their predecessors but none of the perspectives has yet proved adequate as a single unifying vehicle nevertheless we can also see clear movement toward a synthesis with single works blending insights from several traditions thus the books under review do not all fall neatly into the familiar exclusive categories of economics or political science the emerging synthesis needs strengthening in several ways including the development of conditioning hypotheses that will reduce remaining apparent confusions

rational hegemons excludable goods and small groups an epitaph for hegemonic stability theory in defining international free trade as a public good hegemonic stability theory posited early in the 1970s that its reliable supply depended upon a distribution of international power analogous to that within a privileged group more recently however critics have challenged three assumptions fundamental to hegemonic theory its premises of free trade public goods and privileged groups they have concluded that hegemony is not necessary for and indeed may be antithetical to a stable world economy based on market exchange the author argues that the critics overstate their case the assumptions they attack allow hegemonic theory to represent analytically several critically important barriers to free trade among states among these are the existence of strategic interdependence among the actors and the prevalence of informational asymmetries the most significant flaw in hegemonic theory is its neglect of the essence of the domain to which it applies the politics of inter state trade in an anarchic world

resolving the regulator s dilemma international coordination of banking regulations since the early 1970s bankers have developed a host of new financial instruments and practices these innovations have altered the nature of banking and this in turn has complicated the task of banking regulation national regulations have become largely ineffective in monitoring the safety and soundness of global banks the resulting market changes and the growth of knowledge about the risks facing the international financial system have prompted governments to hold multilateral discussions regarding banking regulation however the task of international regulation has been compromised by the desire of states to attract foreign and domestic investment to the financial sector since states wish to create or maintain competitive banking institutions they have often deregulated in order to provide banks with a cost advantage in the international marketplace this competitive deregulation undermines collaborative efforts under the leadership of the united states and great britain a multilateral agreement on bank capital standards was reached in december 1987 this agreement suggests that the interplay of market factors consensual knowledge and leadership by powerful states can lead to international policy coordination the article describes the multilateral negotiations that led to this banking accord

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

do regimes matter epistemic communities and mediterranean pollution control international regimes have received increasing attention in the literature on international relations however little attention has been systematically paid to how compliance with them has been achieved an analysis of the mediterranean action plan a coordinated effort to protect the mediterranean sea from pollution shows that this regime actually served to empower a group of experts members of an epistemic community who were then able to redirect their governments toward the pursuit of new objectives acting in an effective transnational coalition these new actors contributed to the development of convergent state policies in compliance with the regime and were also effective in promoting stronger and broader rules for pollution control this suggests that in addition to providing a form of order in an anarchic international political system regimes may also contribute to governmental learning and influence patterns of behavior by empowering new groups who are able to direct their governments toward new ends

symmetric pass through of tariffs and exchange rates under imperfect competition an empirical test abstract this paper examines the effect of tariffs and exchange rates on u s prices of japanese cars trucks and motorcycles in particular we test whether the long run pass through of tariffs and exchange rates are identical the symmetry hypothesis we find that this hypothesis is easily accepted in our sample we also find that the pass through relation varies across products ranging from about 0 6 for trucks to unity for motorcycles these coefficients have very different implications for trade policy we explain the results based on demand cost and institutional conditions in each industry

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

ideological guerrillas and the quest for technological autonomy brazil s domestic computer industry brazil s domestic computer industry developed during the past decade has excluded multinational giants such as ibm from brazil s growing micro and minicomputer markets changes in computer technology and in markets as well as in domestic economic and political conditions helped facilitate brazil s progress toward technological independence but primary support for the project came from technocratic and military elites who were determined for ideological reasons to reduce brazil s computer dependency and to challenge the dominance of multinationals ideologically motivated technocrats used their positions in state bureaucracies to convince policy makers of the industry s viability and to set up institutions that would defend the autonomy model and turn a sectoral policy into a national policy brazil still depends on foreign software and microelectronics however bargaining theory correctly asserts that even dependency in sophisticated technological sectors can be partially overcome bargaining theories must not overlook the importance of cognitive and institutional processes which can make the difference between taking action to reduce dependency or doing nothing

the concentration of capabilities and international trade over the course of the previous two decades political scientists have become increasingly interested in the relationship between international politics and global trade much of the literature on this topic centers on the effects of a hegemonic distribution of power on commerce hegemonic stability theorists argue that hegemony is a necessary condition for the existence of a liberal economic order and that in the absence of a hegemon a liberal international economy is particularly difficult to establish and maintain however a growing number of theoretical and empirical critiques have been leveled against the gemonic stability theory and the issue of whether hegemony helps shape patterns of global trade continues to be the topic of heated debate

the impact of ideas on trade policy the origins of u s agricultural and manufacturing policies since the close of world war ii the united states has supported contradictory trade policies in manufacturing the united states has fostered a liberal trade regime spurning government involvement in market transactions in agriculture it has sanctioned policies of import restrictions export subsidies and import fees this variation is rooted in decisions that were made in the 1930s and institutionalized in the 1940s in the wake of the great depression policymakers concluded that state intervention helped agriculture and hurt industry this article argues that the choice of government policy and its appropriateness to the economic problems faced by each sector reflect the accepted knowledge at the time neither liberalization nor subsidization was inevitable both were economically viable options however central decision makers made choices that were often based on inaccurate beliefs about the utility of different policy options

the wage local unemployment relationship in a highly regulated labour market greece livanos i the wage local unemployment relationship in a highly regulated labour market greece regional studies using data obtained from 80 000 employees this paper examines the relationship between individual wages and regional unemployment in greece the findings highlight the dynamics of the local labour markets in a case such as greece where the organisation for economic co operation and development oecd claims that wage flexibility is limited this study does not find evidence that wages in greece are rigid but finds a wage curve elasticity of close to 0 1 which corresponds to evidence from many counties interestingly graduates are found to be the most responsive group of workers to the behaviour of local labour markets livanos i le rapport salaire chomage local dans un marche du travail extremement reglemente la grece regional studies a partir des donnees provenant de 80 000 salaries cet article cherche a examiner le rapport entre les salaires des individus et le chomage regional

u s corporate interests and the political economy of trade policy this paper examines the behavior of american corporations with respect to international trade policy initiatives during the 1970s using survey generated data on revealed corporate trade policy interests and firmand industry level data on company characteristics direct or proxy variables were developed and applied in linear regression equations using an ordered probit specification and in an alternative approach using factor analysis to construct a composite dependent variable hypothesized relationships were verified between corporate positions on trade liberalization and the intensity of competition from imports the benefits from improved access to foreign markets and internal risk pooling capabilities of firms firms exposed to the international competitive environment inevitably have a stake in national trade policy this paper explores the revealed behavior of u s corporations on matters of trade policy in the 1970s it develops a set of hypotheses linking corporate trade policy positions to a series of company and industry attributes these hypotheses are tested using survey generated information regarding corporate behavior on trade policy matters beginning with the protectionist burke hartke initiatives of the early 1970s through the post tokyo round period at the end of the decade studies of the political economy of protection typically begin with the proposition that import barriers create rents that can be appropriated by the protected industry the size of the rents to be obtained and their probable division among the various participants in the industry partly determine the intensity of protection seeking behavior lobbying undertaken by participants in the industry brock and magee 1978 the intensity is also influenced by the degree of success expected in the political arena and by imperfections in the lobbying process for instance the incentive to be a free rider on the lobbying efforts of others walter and jones 1981 the actual outcome of protection seeking activity is conditioned by a variety of political considerations as well for instance politicians may be constrained by the possibility of repercussions from groups adversely affected by protection including consumers and export oriented industries foreign competitors are also affected so that issues concerning foreign relations enter into the decision process in addition politicians may be influenced more generally by ideology party platforms or attitudes toward equity a number of researchers including ball 1967 fieleke 1976 clark 1980 and ray 1981a 1981b have verified that a significant positive correlation exists between nominal tariff rates or effective rates of protection across manufacturing industries and low skilled labor intensity taken to be an indicator of the intensity of import competition and thus related to the size of the rents that could be obtained by protection cheh 1974 and bale 1977 analyzed the determinants of the percentage reductions in rates of duty resulting from the kennedy round tariff cuts concluding that the cuts were determined in such a way as to minimize labor adjustment costs see also allen lewis and tower 1980 marvel and ray 1983 also explored the determinants of kennedy round tariff cuts finding the size of tariff cuts tended to be smaller if an industry was more concentrated or sold a larger fraction of its output to household consumers and larger if the industry was more intensive in research and development r d or more highly unionized the result for r d presumably represents the desire at the industry level for improved access to export markets achievable through larger reciprocal reductions in protection on the part of foreign countries along somewhat different lines baldwin 1976 analyzed several key congressional votes on the received for publication november 21 1983 revision accepted for publication december 14 1984 new york university the authors are grateful to robert lipsey robert j levenson j peter jarrett and james green for providing data that contributed to this study to jang ro lee ashok chatterjee and monica kaufmann for research assistance and to bill greene for providing advice on the estimation technique and computer program used to perform the statistical analysis thomas a pugel is also grateful for the support of an esmee fairbaim research fellowship at the university of reading 1 in both studies ray also explores nontariff barriers ntbs across u s manufacturing industries aside from finding a positive relationship between tariff rates and ntbs the results are not easily interpreted however there is some inferential evidence in walter 1971 which finds a significant positive relationship between ntb incidence and presumably relatively low skill intensive developing country exports

the political economy of the tariff cycle how can protectionism and free trade succeed one another our answer focuses on the changing balance of private actors political demands these actors acquire interests in tariff policies because their assets are spatially concentrated and trade in these assets is subject to various limitations actors in regions experiencing no new investment in an established industry old regions have interests that sometimes differ from those in regions where there is new investment we show that old regions have no reason to be involved in tariff politics at business cycle peaks during troughs whether a state becomes more or less protectionist depends ceteris paribus on the relative political strength of old import competing and old exporting interests if old import competing industries outweigh the old exporters then protection will tend to increase at the trough and decrease at the peak of a business cycle the opposite result occurs when old exporters are more influential

defense spending economic structure and growth evidence among countries and over time there is no way of telling from economic theory whether a greater military effort will slow down or accelerate output growth the results of a single empirical study have been used to support the widely held belief that in poor countries a high share of defense in gdp is associated with a high growth rate this paper shows that as is often the case such conventional wisdom is wrong across countries a greater defense burden is associated with slower growth in a regression equation estimated for 69 countries over some or all of the period 1952 70 an increase of 10 percentage points in the defense burden share of defense in gdp leads to a reduction of annual growth by 0 13 a nontrivial loss as we discuss in detail below growth retardation to approximately the same extent also is recorded in regional regression estimates though precise coefficients differ from area to area besides slowing the growth rate a changing defense burden has other macroeconomic effects for the same sample of countries and time period increases in military spending are associated with lower saving and investment shares in gdp a greater tax burden and a shift in economic activity from agriculture including food production toward the manufacturing sector when estimated econometrically the extent to which defense spending replaces investment is consistent in magnitude with the growth rate reductions mentioned above in describing these results more thoroughly in section i we review informally the channels through which arms spending can affect the growth rate and present a simple formal model in section ii the resulting reduced form equation is estimated empirically in section iii with the findings summarized above to measure other effects of military outlays on the economic structure we go on in section iv to incorporate the defense burden into the regression equations and data

the political economy of nontariff barriers a cross national analysis nontariff barriers to trade are most pervasive when deteriorating macroeconomic conditions give rise to demands for protection by pressure groups when countries are sufficiently large to give policymakers incentives to impose protection and when domestic institutions enhance the ability of public officials to act on these incentives statistical results based on a sample of advanced industrial countries during the 1980s support the argument that the incidence of nontariff barriers tends to be greatest when the preferences of pressure groups and policymakers converge more attention should be devoted to the interaction between societal and statist factors in cross national studies of trade policy

exchange rate pass through and international pricing strategy a conceptual framework and research propositions the extent to which exchange rate fluctuations affect international prices is called exchange rate pass through this paper develops a conceptual model in explaining how exchange rate fluctuations are channeled into international pricing strategy and offers research propositions our model posits that the extent of exchange rate pass through in international pricing is affected by the firm s pricing orientation performance orientation distribution policy and brand equity as well as by exchange rate uncertainty and competitive symmetry

markup adjustment and exchange rate fluctuations evidence from panel data on automobile exports abstract this paper uses data on bilateral automobile export prices from the usa germany and japan to gauge the importance of markup adjustment driven by exchange rate movements across several destination markets we find that japanese exports are characterized by a high degree of markup adjustment designed to stabilize the price measured in the buyer s currency there is weak evidence for such behavior on the part of german exporters and no evidence of markup adjustment by us exporters where it exists markup adjustment tends to be highly persistent the dynamic pattern of markup adjustment is consistent with invoicing in the exporter s currency except for exports to the usa and canada

adjustment costs and international trade dynamics abstract this paper develops a model of trader behavior that is characterized by quadratic adjustment costs imperfect competition and rational expectations the model is fitted to data on aggregate trade flows between the united states and three of its largest trading partners tests against alternative specifications confirm the importance of imperfect competition and adjustment costs the hypothesis of rational expectations cannot be rejected the estimated price elasticities of trade flows are generally in the range reported by previous researchers but the activity elasticities are significantly higher

cross border integration in the european electricity market evidence from the pricing behavior of norwegian and swiss exporters abstract this paper examines the electricity market integration process in two european areas based on the pricing behavior of norwegian and swiss exporters the aim is to gain evidence for the period after the adoption of the second legislative package 2003 the pricing behavior of norwegian exporters indicates that the wholesale markets for denmark and sweden are highly integrated moreover results are fully compatible with the existence of a very competitive marketplace for electricity this clearly contrasts with the evidence provided by swiss exporters in this last case analysis revealed differences in pricing to market behavior between italy france and germany which indicates that exporters take advantage of international market segmentation and divergences between market structures this outcome provides a reasonable explanation as to why price differences between countries cannot be fully attributed to transmission costs as has been claimed in previous research we also found cross country convergence in levels of markups and in pricing to market behavior of the swiss exporters for the first part of the period that was analyzed the evidence is fully consistent with an initial impulse toward market integration originated by reforms implemented at the beginning of the last decade

the institutional foundations of hegemony explaining the reciprocal trade agreements act of 1934 in 1930 congress approved the highly restrictive smoot hawley tariff the textbook case of pressure group politics run amok four years later congress passed the reciprocal trade agreements act rtaa surrendering much of its tariff making authority to a policy process in which internationalists had increasing influence while the united states had used reciprocity to expand exports before the stick of discriminatory treatment took precedence over the carrot of liberalizing concessions with the transfer of tariff making authority to the executive the united states could make credible commitments and thus exploit its market power to liberalize international trade despite later modifications the rtaa set the fundamental institutional framework for trade politics

grand strategy and foreign economic policy british grand strategy in the 1930s variation in the need for military and political support from military allies affects the degree to which foreign economic policies will discriminate in favor of military allies and against adversaries and other countries powers in need of such support will pursue discriminatory foreign economic policies in order to change the configuration of domestic interests to favor not only closer economic relations but also closer political relations by strengthening domestic support for an alliance policymakers make it more difficult for their allies to renege on alliance commitments stronger political relations in turn reinforce the deterrent effect of the alliance because the net strategic benefits from closer relations in their case are lower powers that can go it alone without support from allies will refrain from discriminatory policies shifts in strategic need make it possible to explain variation in the links between security considerations and foreign economic policies within alliances over time and also across alliances british grand strategy in the 1930s illustrates how shifts in strategic need influence the degree to which foreign economic policies discriminate in favor of potential military allies

price discrimination in the context of vertical differentiation an application to canadian wheat exports this study examines the ability of the canadian wheat board cwb to price discriminate in bread wheat exports this study models wheat as a vertically differentiated intermediate good and modifies the model of vertical differentiation by mussa and rosen to the realities of wheat import demand the conceptual model isolates the bases of price discrimination and demonstrates that the cwb s ability to exploit cost differences in pricing depends on the extent of the differentiation between canadian and u s wheat this model is implemented using monthly confidential price data provided by the cwb for exports to japan the united kingdom and two markets aggregating remaining exports through canada s west and east coasts for 1982 1994 the data indicate that the cwb charges different prices to different countries for wheat of the same grade and protein content results from the model indicate that the price difference between any two markets is not completely explained by elements of perfect competition however the evidence is mixed regarding the ability of the cwb to utilize all the instruments available to price discriminate thus the cwb s pricing strategy may be more complex and dynamic than the prescription for static producer surplus maximization derived in this study

are low skill public sector workers really overpaid a quasi differenced panel data analysis public private sectoral wage differentials have been studied extensively using quantile regression techniques these typically find large public sector premiums at the bottom of the wage distribution this may imply that low skill workers are overpaid prompting concerns over efficiency we note several other potential explanations for this result and explicitly test whether the premium varies with skill using australian data we use a quasi differenced generalized method of moments gmm panel data model which has not been previously applied to this topic internationally unlike other available methods this technique identifies sectoral differences in returns to unobserved skill it also facilitates a decomposition of the wage gap into components explained by differences in returns to all observed and unobserved skills and by differences in their stock we find no evidence to suggest that the premium varies with skill one interpretation is that the compressed wage profile of the public sector ind

the origins and sustainability of mexico s free trade policy standard explanations for trade liberalization do not fully account for mexico s turn toward free trade during the 1980s to a large extent the initiative came from within the country even many mexican entrepreneurs whose sectors seem likely to lose from increased competition now support trade liberalization four conditions lowered the political cost benefit ratio for policymakers and entrepreneurs first mexico s leaders dispersed implementation into several financial ministries thereby better insulating this policy from lobbying by the likely losers second potential losers were less well informed than were likely winners third under these conditions the liberal ideological biases of mexican elite policymakers and investors flourished prompting them to accept a higher political cost than would have been tolerated otherwise finally many mexicans came to perceive trade liberalization as a necessary tool in the fight against inflation each of these hypotheses however also flags a possible threat to the policy s future political survival

japanese foreign economic policy formation explaining the reactive state the concept of the reactive state is useful in understanding the foreign economic policy behavior of japan and certain other middle range powers deeply integrated in the global political economy particularly during periods of economic turbulence when international regimes do not fully safeguard their economic interests the essential characteristics of the reactive state are two fold 1 it fails to undertake major independent foreign policy initiatives although it has the power and national incentives to do so 2 it responds to outside pressure for change albeit erratically unsystematically and often incompletely in the japanese case reactive state behavior flows from domestic institutional characteristics as well as from the structure of the international system domestic features such as bureaucratic fragmentation political factionalism powerful mass media and the lack of a strong central executive have played an especially important part in japanese financial energy trade and technology policy formation since 1971

cost pass through in the u s automobile market we study cost pass through in the u s automobile market using a framework that incorporates the effects of cost changes on input decisions we find that accounting for firms factor market decisions significantly increases measured cost pass through although we reject the hypothesis of full cost pass through and constant markups in addition our evidence suggests that cost shocks common to all manufacturers have a greater effect on prices than do model specific cost shocks finally we examine how pass through varies with manufacturer nationality finding that u s firm cost pass through exceeds that of european and asian firms

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

public private wage differentials in greece separate earnings functions for public and private sector by gender are estimated for greece with appropriate correction for selectivity bias using family expenditure survey data for 1988 then a comparison of the average pay that would be received by public and private sector employees if they were paid according to the same pay structure is undertaken the empirical evidence suggests that while the observed pay advantage of male public sector employees is rather explained by higher qualifications in the case of women qualification differences partly explains the observed public private wage differential

a reexamination of the federal private wage differential in the united states the federal private wage differential is reexamined with recent data using specifications similar to those used in three previous studies i find that the federal private wage differential has narrowed since the 1974 79 period analyzed in those studies in addition i discover that wage differentials based on specifications used in the literature are biased upward because the previous studies did not control for detailed occupational and locational characteristics of workers corrected point estimates of the wage gap are much smaller than previous estimates in the literature differences in the gap across demographic groups occupations and locations are also discussed

toward a business cycle model of tariffs a modified interest group model links movements in tariffs to changes in the level of economic activity within nations this model is introduced and tested for tariff behavior in the 19th and early 20th centuries in three nations the united states great britain and germany empirical analysis lends strong support to the model s central thesis that tariffs are sensitive to movements within a business cycle tariff changes occurring in the three nations with the exception of british tariff increases generally conform to the expectations of the model furthermore business cycle sensitivity provides an explanation of the behavior of tariffs superior to two prominent alternatives those based on ideology and on hegemonic stability

rocks hard places and the new protectionism textile trade policy choices in the united states and japan why have advanced industrial countries responded with different types of protectionist policy to postwar international competition and the resulting societal pressure for state action in contrast to the across the board tariff wars of the 1930s postwar protectionism is a patchwork of tariffs unilateral and nonunilateral quotas administrative restrictions state subsidies and production cartels arguments based on international economic structure international regimes statist approaches and domestic structure all appear to have difficulty in accounting for divergent trade policy choices this article introduces a more nuanced identification and integration of the international and domestic sources of the new protectionism an examination of textile trade policy in the united states and japan reveals that when state policymakers face conflicting international constraints and domestic pressure over the use of overt types of protectionist policy the greater the domestic pressure the more overt the policy response

public goods and political institutions trade and monetary policy processes in the united states basic analytic premises are an issue in contemporary debates about the u s foreign economic policy process in dispute are the power structures alleged to govern the formation of american trade and international monetary policy thus the literature supports both of these assumptions the distribution of power is skewed towards private actors in the issue area generally the distribution of power varies according to issue area within the camp of issue specific power structures as i shall discuss in more detail support can be found for almost any assumption about the distribution of power prevailing in the language of current debate between state and society

veto points veto players and international trade policy much of the literature on foreign economic policy focuses on the preferences of societal groups to explain policy decisions here however the author emphasizes the effects of domestic political i

estimating the residual demand curve facing a single firm this paper presents an econometric technique for estimating the single firm residual demand curve that does not require the estimation of demand cross elasticities the technique is particularly suited for the estimation of firm market power in product differentiated industries where cross elasticities are notoriously difficult to measure one estimated parameter is directly related to a firm s markup of price over marginal cost when product differentiation is extensive when an industry consists of a dominant firm and a price taking fringe when a consistent conjectures equilibrium is the correct oligopoly solution concept when firms are stackelberg leaders relative to their environment or when firms are perfect competitors the estimates can indicate power over price in other circumstances an instrumental variables technique is employed using firm individuated factor prices to identify firm specific residual demand yet even when instruments are unavailable the technique produces elasticity estimates biased in the conservative direction of disproving market power this methodology is applied to estimate the market power of three firms in an industry characterized by product differentiation brewing over our 1962 82 sample period pabst and coors had similar national market shares and each had high shares in several states yet pabst was virtually a price taker while coors possessed substantial market power anheuser busch had market power in the early part of the sample but little after 1975 when miller brewing changed the competitive nature of the industry

tariffs and trade fluctuations does protectionism matter as much as we think despite the widespread assumption that tariffs reduce trade volume in the short term it is conceivable that long term expansion and contractions in trade actually drive tariff levels a granger causality analysis performed on british u s french german japanese and a systematic aggregate data on gdp tariff levels encompassing the 1854 1990 period finds mixed support for both the short and long term interpretations in general the antecedence of trade on protectionism predominates over the antecedence of protectionism on trade one implication is that the long term context should not be ignored in analyzing short term dynamics

exchange rate pass through when market share matters the authors investigate the pass through from exchange rates to import prices when firms future demands depend on their current market shares they show that profit maximizing foreign firms may either raise or lower their dollar export prices when the dollar appreciates temporarily i e the pass through may be perverse and that current import prices may be more sensitive to expected future exchange rates than to current exchange rates they present evidence that suggests the behavior of expected future exchange rates may provide a clue to the puzzling recent behavior of u s import prices copyright 1989 by american economic association

politics in command foreign trade as national security policy many of the current theoretical debates in international relations focus on the connection between economics and security policies most traditional north american textbooks have considered the two policy areas as separate domains some scholars view the major economic trends and events of the 1970s as intertwined whereas others argue that state interests properly should prevail when the two sets of values conflict the traditional liberal mercantilist and neo marxist literatures shed some light on the nexus between politics and economics in foreign policy but they offer very general statements that reflect only the conditions of the major powers two case studies of japan and finland in the postwar period suggest that generalizations must be applied cautiously that some states are compelled to follow mercantilist policies to protect their political independence and autonomy and that policies of welfare maximization often have to be subordinated to security concerns the cases also reveal that the connection between economic and security concerns changes over time a dynamic model of foreign policy will thus have to be sensitive both to the peculiar circumstances of a variety of states and to the sources of foreign policy change

the response of the us export prices to changes in the dollar s effective exchange rate further evidence from industry level data the relationship between the dollar s effective exchange rate and the export price indexes for 13 two digit us manufacturing industries is analysed to determine i which industry adjusts its dollar export price to dampen or amplify the effect of the exchange rate fluctuations on the foreign currency price of its exports and ii whether the response of the export price index to appreciation and depreciation of the exchange rate is asymmetric for several industries evidence consistent with dampening the foreign currency price of exports in an asymmetric fashion is found the implications of the results for the price competitiveness of the industries studied is discussed

adjustment costs and pricing to market theory and evidence abstract this paper develops an adjustment cost model of pricing to market the model consists of a monopolist who supplies an identical nondurable good to two foreign markets it is shown that the degree of pricing to market increases with the relative importance of the transitory component in exchange rates customs data from 1978 through 1987 on u s and canadian imports of seven german commodities are used to estimate the model s parameters and test its over identifying restrictions

government wage differentials a sample selection approach this paper uses the econometrics of sample selection to estimate the net wage differential between workers in the public and private sectors of the united states the results indicate workers self select by systematically locating in the sector which offers them the higher expected wage as a consequence previous research based on the assumption of random allocation between sectors is subject to serious specification bias the present estimation indicates government workers are slightly underpaid taking into account their observed characteristics and the selection process

tariff protection in developed and developing countries a cross sectional and longitudinal analysis four political models the international system rational domestic economic policy intragovemmental politics and interest group influence may explain the cross national structure of average nominal levels of tariffs on manufactures using available data measuring or approximating the explanatory variables for the time periods 1902 and 1971 selected hypotheses were tested in regression equations the 1971 tariff levels are best predicted by rational economic policy variables while for 1902 international power variables provide the best predictions of the tariff in general the causal forces influencing the cross national pattern of tariff levels appear to have shifted in the 20th century from those indicating international power to those measuring domestic politico economic development these results provide evidence relevant to some of the general propositions about size and development suggested by the contemporary political economy literature they also lend support to those who argue that a rising level of international interdependence has resulted in long term changes in the pattern of influences on national public policies

free trade fair trade strategic trade and protectionism in the u s congress 1987 88 what conditions led the one hundredth congress of the united states to enact fair trade and strategic trade policies into law during 1987 88 political partisanship is an important force with democrats supporting and republicans opposing all types of trade intervention otherwise the coalitions of support for and opposition to the various trade policies differ particularly in the senate in that body international business is associated with support for fair trade policies and with opposition to classical protectionism while domestic u s business is associated with support for classical protectionism liberalism is strongly associated with support for fair and strategic trade policies but is not associated with classical protectionism in the house of representatives the long standing protectionist coalition remains an influence few forces in support of free trade remain in u s politics changing international market conditions rapidly affect the making of u s trade policy

an analysis of public and private sector wages allowing for endogenous choices of both government and union status a general selection model is estimated in which workers select across four labor markets private nonunion private union public nonunion and public union evidence is found of positive selection bias in the private nonunion sector and of negative selection bias in the public union sector union wage differentials in the public and private sectors as well as public private wage differentials are then calculated two different types of wage differentials are contrasted we discuss when it is appropriate to use each type of differential

export price responses to exogenous exchange rate movements the export price responses to three different exogenous exchange rate movements are investigated using data on swedish exports of automobiles and kraft paper to three destination countries a pric

public private employment choice wage differentials and gender in turkey abstract the main objective of this article is to examine the factors that explain the employment choice and the wage differentials in public administration state owned enterprises and the formal private wage sector in turkey selectivity corrected wage equations are estimated for each sector for men and women separately oaxaca blinder decomposition of the wage differentials between sectors by gender and between men and women by sector are carried out results indicate that when controlled for observed characteristics and sample selection for men public administration wages are higher than private sector wages except at the university level where the wages are at par state owned enterprise wages for men are higher than private sector wages similar results are obtained for women further while the wages of men and women are at parity in the public administration there is a large gender wage gap in the private sector in favor of men private returns to schooling are found to be lower in the noncompe

ideas institutions and american trade policy nowhere is america s hegemonic decline more evident than in changing trade patterns the united states trade balance a measure of the international demand for american goods is suffering historic deficits lowered demand for american goods has led to the under utilization of both labor and capital in a growing number of traditionally competitive american industries conversely americans taste for foreign goods has never been so great japanese cars european steel third world textiles to name a few are as well produced as their american counterparts and arrive on the u s market at a lower cost

exchange rate shocks and the speed of trade price adjustment 1 introduction theoretical and empirical work in the international trade literature dealing with the relationship between exchange rate and trade prices has been dominated and guided by the static pass through and profit markup model see e g feinberg 1986 mann 1986 fisher 1989 hooper and mann 1989 knetter 1989 gagnon and knetter 1995 feenstra gagnon and knetter 1996 and lee 1997 the shortcoming of such models is well captured by william branson 1989 p 333 difference in adjustment response signals to me the need for a reconsideration of the theoretical framework for the analysis of the pass through question by now we should be thinking about optimizing price policy for investors and exporters who know that they face an exchange rate that follows some sort of stochastic process over time these differences call for a revision of pass through theory along the lines of time series analysis our explicit incorporation of profit maximizing firms facing adjustment costs develops the model introduced by krugman 1987 it transforms the traditional markup and pass through model to explain from first principles a dynamic markup and a price adjustment speed both depending on fundamental characteristics of the firms involved krugman 1989 concludes his paper on pricing to market by calling for further research on the adjustment cost model regarding the adjustment cost approach he states krugman 1989 p 44 it is still a speculative idea not grounded in solid empirical tests but it is a good story and if it is correct it has extremely important implications for economic policy the present paper provides the quantity adjustment cost approach that krugman calls for as such it complements the work of gagnon 1989 and kasa 1992 while gagnon and kasa employ quantity adjustment cost models with many of the same features as the model developed here they provide only approximate solutions and focus on a quite different set of issues gagnon examines the effect of exchange rate variability on trade volume kasa investigates the importance of mean reversion in exchange rates as an explanation for the pricing to market hypothesis in contrast our focus is on the relation between adjustment speeds and pass through thus our contribution relative to gagnon 1989 and kasa 1992 is that we provide the passthrough issue in a dynamic context with exact analytical solutions that relate the degree of passthrough to adjustment speeds and identify the determinants of commodity specific adjustment speeds in response to exchange rate shocks the remainder of the paper is organized as follows in section 2 we develop a partial equilibrium model taking exchange rates as given of the pricing policies of a profit maximizing firm competing in foreign markets and subject to a convex quantity adjustment cost section 3 develops testable implications directly from the model section 4 discusses the data and empirical methodology for preliminary two stage time series and cross sectional tests section 5 provides the tentative estimation and section 6 concludes 2 a simple partial equilibrium model consider a representative firm producing fox export that maximizes the expected discounted value of infinite horizon real profits the firm generates its revenue abroad in foreign currency it has no influence on the exchange rate may adjust its price at any point in time but is subject to a convex cost of quantity adjustment the firm maximizes where x is the exogenously given real exchange rate at time t we define x as the units of domestic currency per unit of foreign currency multiplied by the export destination country s price index and divided by the home country s price index instantaneous profits are discounted at a rate r which is specific to the firm this rate accounts for a standard risk premium inherent in the riskiness of the firm s activities

exchange rate pass through and currency invoicing implications for monetary integration in east asia exporter s price setting behaviour and currency invoicing play a key role in the literature on the new open economy macroeconom ics this paper estimates exchange rate pass through coefficients for the exports of four asean

international comparisons of pricing to market behavior this paper measures the degree of price discrimination across export destinations that is associated with exchange rate changes using u s u k german and japanese industry level data given the industries sampled more price discrimination across destinations is observed in the u k german and japanese data for industries that match across source countries however behavior is very similar across source countries furthermore destination specific price adjustment on exports to the united states from germany and japan is similar to price adjustment observed on shipments to other destinations most variation in the data appears to be related to industry copyright 1993 by american economic association