towards a vanishing middle competition in the world garment industry abstract the international garment industry falls broadly into two segments one which may be referred to as the fashion segment is governed by competition based on new product introduction and quality improvements the other segment comprising of mass produced garments is governed by price competition while there is some evidence that the fashion sector is growing in importance our concern in this paper will be the price competitive sector which has been and continues to be predominantly the main arena in which newly industrializing and developing countries participate

s p 500 cash stock price volatilities s p 500 stock return volatilities are compared to the volatilities of a matched set of stocks after controlling for cross sectional differences in firm attributes known to affect volatility no significant difference in volatility is observed between 1975 and 1983before the start of trade in index futures and index options since then s p 500 stocks have been relatively more volatile the difference is statistically but not economically significant the relative increase occurs primarily in daily returns and only to a lesser extent in longer interval returns other factors besides the start of derivative trade could be responsible for the small increase in volatility stock price volatility has received much attention in the popular press over the last few years especially since the october 19 1987 stock market crash the rise in volatility has alarmed investors regulators and the public in general some suggest that the start of trade in stock index futures and index options increased speculative activity that in turn destabilized cash markets causing higher volatility large trading activity in the derivative contracts makes the suggestion plausible volume in index futures and index options increased dramatically since their introductions in 1982 and 1983 by 1987 the average daily dollar volume in the s p 500 futures contracts alone exceeded the dollar volume of cash s p 500 trade by a factor of about two while the dollar value of the daily net change in total open interest is about 8 of s p 500 stock dollar volume speculative trade in futures and options frequently is accused of destabilizing underlying cash markets the charge has been made for more than a century in the agricultural precious metal and currency markets recent evidence by french and roll 1986 showing stock variance to be strongly related to trading session hours heightens these concerns unfortunately theoretical analyses of whether speculative trade destabilizes cash markets lead to conflicting conclusions depending on what assumptions are made 1 school of business administration university of southern california and office of economic analysis u s securities and exchange commission i wish to thank mary denny mcsweeny and steve hornstein for their valuable research assistance and the referee and editor for their many suggestions and insights the opinions expressed in this paper do not necessarily reflect those of the u s securities and exchange commission or those of the author s colleagues on its staff an increase in well informed speculative trade has two opposite effects on measured volatility it decreases volatility due to order flow imbalances caused by uninformed traders because informed traders provide liquidity in such events and it increases volatility due to new fundamental information since the information which is assumed to be generated at discrete time intervals is impounded into

a spatial model of international conflict 1 he model presented here assumes that nations initiate conflict to change the international status quo across one or more issues to an outcome they prefer their preferences for different issue outcomes are represented by a classical spatial utility function international coalitions are formed both to enhance the chance of a successful challenge and to counter existing challenges disputes are modeled as periods of competition between two coalitions through the recruitment of additional members erosion of support for the opposing coalition and escalation of the crisis the two nation model is analyzed in detail and the existence of the core for the resulting game is proved the two main conclusions of the two nation model are that nations have a general incentive to exaggerate their issue positions in disputes and that the possibility of issue trades enhances the likelihood of compromise because scientific understanding arises from theories the explication of theories is essential for the development of scientific understanding to understand international conflictthat is the resolution of disputes between nations by coercion or the threat of coercion a theory that can explain such conflict is needed this paper will present a model drawn from rational choice theory specifically game theory that explains national actions in conflicts as strategic choices made in order to gain preferred resolutions of the international issues in dispute compared to existing game theory models of international conflict the model presented here provides an explicit description of how each nation s evaluation of the issues in dispute affects its desire to pursue compromise or conflict a more detailed sequence of escalation allowing for the detailed study of escalation strategies and a framework that can explain the timing and extent of third party interventions into ongoing crises

climate coalitions and international trade assessment of cooperation incentives by issue linkage this paper investigates climate control coalition games it studies whether incentives exist for non cooperating nations like the usa to join a coalition based upon issue linkage issue linkage is considered through increased r d expenditures triggering improved technological innovations that advance energy efficiencies model calculations demonstrate that incentives exist for non cooperating countries like the usa to join a climate control coalition if nations cooperate on technological innovations restrictions on trade such as sanction mechanisms against non cooperating countries are not necessarily an incentive to join a coalition technological spillover effects lead to improved economic situations and increased energy efficiencies in non cooperating countries

rationality and deterrence this essay explores the relationship between deterrence theory and two distinct notions of rationality associated with it the author argues that the concept of procedural irrationality which is the basis of many critiques of contemporary deterrence theory is not necessarily inconsistent with the instrumental definition of rationality implicit in many models of deterrence he also argues that some recent rational choice models of deterrence are nonetheless deficient in their application of the rationality postulate finally he provides an outline of a possible resolution of the paradox of deterrence

an updating country study thailand s needs and prospects in the 1990s abstract as one of the fastest growing economies of the latter half of the 1980s thailand is rapidly emerging as one of the new nics in seeking to examine the major issues facing thailand in the 1990s our paper focuses on two major themes first we address the trade and industrial policy issue while our conclusions favor a fairly orthodox open trade pattern of industrialization favoring functional rather than selective intervention we question the wisdom of trusting thai growth to the single engine of exports the second theme of the paper underlines the need for reasons of equality as well as of expediency for devoting more attention and resources to rural development

multilateral negotiations a spatial analysis of the arab israeli dispute a model for forecasting political choices and for explaining the perceptual conditions that lead to those choices is delineated the model based on the median voter theorem and on the axioms of expected utility maximization is applied to the prospects for a multilateral peace conference in the middle east the analysis helps provide insights into the motivations behind recent actions by leaders in the soviet union the united states jordan the palestine liberation organization and israel

the intertemporal relation between the u s and japanese stock markets this paper finds a high correlation between the open to close returns for u s stocks in the previous trading day and the japanese equity market performance in the current period in contrast the japanese market has only a small impact on the u s return in the current period high correlations among open to close returns are a violation of the efflcient market hypothesis however in trading simulations the excess profits in japan vanish when transactions costs and transfer taxes are included the two largest stock markets in the world in terms of capitalization volume and shares listed are the tokyo stock exchange tse and the new york stock exchange nyse because tokyo is 14 hours ahead of new york there is an eight and one half hour difference between the close of the tse and open of the nyse since there is no overlap between the two markets traders or technical analysts may look to the tse as a predictor of market movement on the nyse and or examine changes on the nyse as indicators of tse performance as shown in figure 1 the tse opens at 7 00 p m eastern standard time est and closes at 1 00 a m est 1 the nyse opens at 11 30 p m japanese time 9 30 a m est and closes at 5 00 a m japanese time 4 00 p m est thus there is no common time interval in which both markets are open high correlations between the respective open to close returns are a violation of the efficient market hypothesis because public information about the performance in one market could be used to profitably trade in another market if the markets are efficient information about the open to close performance in one market for example the u s return in period t 1 will be fully reflected in the open price of the other market japan in period t for example since new information flows randomly into the market subsequent price changes should be random and the open to close returns in japan will be uncorrelated with the u s returns thus the u s performance should affect the open price in japan and the correlation between the open to close returns of the two markets will be zero early research on the synchronization among stock prices across countries grubel 1968 levy and sarnat 1970 agmon 1972 ripley 1973 lessard

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

trading halts and market activity an analysis of volume at the open and the close this paper analyzes how the daily opening and closing of financial markets affect trading volume we model the desire to trade at the beginning and end of the day as a function of overnight return volatility nyse data from 1933 88 indicate that closing volume is positively related to expected overnight volatility while volume at the open is positively related to both expected and unexpected volatility from the previous night we interpret the symmetric response of trading at the open and the close to expected volatility as being due to investor heterogeneities in the ability to bear risk when the market is closed this desire of investors to trade prior to market closings indicates a cost of mandating marketwide circuit breakers

issue linkages in international crisis bargaining students of international relations have long been concerned with questions regarding the impact of issue linkages on bargaining outcomes unfortunately the body of theory attempting to provide a systematic and rigorous analysis of issue linkages is woefully underdeveloped in this study i contribute to the development of this theory with a particular emphasis on accounting for cases in which issue linkage fails in international crisis bargaining the spatial model of crisis bargaining which is a formal model constituting a synthesis of the spatial theory of voting and traditional utility based bargaining theory is used to develop a theory of issue linkages and to address a number of points regarding linkage strategy that are found in the literature after demonstrating how linking issues can affect the outcome of an international crisis i argue that existing explanations for linkage failure are inadequate the majority of the paper is devoted to determining what characteristics of the issues involved and of the disputants determine the likelihood that a linkage attempt will be successful i conclude with a brief discussion relating these results to the literature on crisis management

issue linkage and issue tie in in multilateral negotiations we describe a model of international multidimensional policy coordination where countries can enter into selective and separate agreements with different partners along different policy dimensions the model is used to examine the implications of negotiation tie in the requirement that agreements must span multiple dimensions of interaction for the viability of multilateral cooperation when countries are linked by international trade flows and transboundary pollution we show that while in some cases negotiation tie in has either no effect or can make multilateral cooperation more viable in others a formal tie in constraint can make an otherwise viable joint multilateral agreement unstable

the expected utility theory of conflict measuring theoretical progress we examine the progressivity of bruce bueno de mesquita s theory of conflict as originally developed in the war trap and as extended later bueno de mesquita offers the progressivity of the expected utility theory relative to other theories and approaches to conflict as his major defense in responding to critics bueno de mesquita essentially relies on imre lakatos definition of theoretical progress in presenting his argument a review of the literature addressing the concept of theoretical progress indicates that bueno de mesquita s application of lakatosian criteria is incomplete and that lakatos criteria are themselves flawed we review the philosophy of science literature dealing with theoretical progress or rational criteria for theory choice and evaluate the progressivity of the expected utility theory of conflict in light of criteria other than lakatos while we do recommend further elaboration of bueno de mesquita s theory we do not find it more progressive than its rivals

trade policy cross border externalities and lobbies do linked agreements enforce more cooperative outcomes abstract we analyze whether linking international cooperation in trade policy to environmental policy or other issues with nonpecuniary externalities promotes more cooperation in both policies or whether cooperation in one is strengthened at the expense of the other in the context of self enforcing agreements we show that if the policies are independent in the government s objective function then linkage promotes cooperation in one policy at the expense of the policy that is easier to enforce under no linkage however if the linked policies are not independent and if these policies are strategic complements then linkage can sustain more cooperation in both issues than no linkage the policies are strategic complements only if i the production externality has cross border effects ii the weight on the externality cost is high iii import competing lobbies are not powerful

a new approach to the spatial theory of electoral competition in his unidimensional model of electoral competition downs argues that voters use party ideology as an informational short cut for forecasting the policies that a party will pursue if elected parties are perceived by voters as points on an ideological axis in the davis hinich multidimensional model on the other hand the axes are real issues and the principal actors are politicians who are modeled as points in the multi issue space this paper reformulates spatial voting theory in terms of a model that connects what we call predictive dimensions with political issues that are salient during a given election campaign this model is both a synthesis and an extension of the downs and davis hinich spatial models we obtain a median voter result for one predictive dimension that is similar to the downs result but with important differences we also obtain results showing the electoral advantage of incumbency and the tendency for incremental change when there is a great deal of heterogeneity in voter perceptions about the candidates

political leadership and regime formation on the development of institutions in international society leadership plays a critical but poorly understood role in determining the success or failure of the processes of institutional bargaining that dominate efforts to form international regimes or more generally institutional arrangements in international society an examination of the nature of institutional bargaining serves as a springboard both for pinpointing the role of leadership in regime formation and for differentiating three forms of leadership that regularly come into play in efforts to establish international institutions structural leadership entrepreneurial leadership and intellectual leadership because much of the real work of regime formation occurs in the interplay of different types of leadership the study of interactions among individual leaders is a high priority for those seeking to illuminate the processes involved in the creation of international institutions not only does such a study help to explain the conditions under which regimes form or fail to form but it also provides an opportunity to bring the individual back in to an important area of international affairs

in view of ratification governmental preferences and domestic constraints at the amsterdam intergovernmental conference the bargaining product of the amsterdam intergovernmental conference the amsterdam treaty dwindled down the draft proposal to a consensus set of all fifteen member states of the european union eu using the two level concept of international bargains we provide a thorough analysis of how this consensus set was reached by issue subtraction with respect to domestic ratification constraints drawing on data sets covering the positions of all negotiating actors and ratifying national political parties we first highlight the differences in the amsterdam ratification procedures in the fifteen member states of the eu this analysis allows us to compare the varying ratification difficulties in each country second our empirical analysis of the treaty negotiations shows that member states excluded half of the amsterdam bargaining issues to secure a smooth ratification because member states with higher domestic ratification constraints performed better in eliminating uncomfortable issues at the amsterdam intergovernmental conference issue subtraction can be explained by the extent to which the negotiators were constrained by domestic interests

patterns in japanese common stock returns day of the week and turn of the year effects stock markets in the united states and foreign countries exhibit a strong weekly seasonal 1 an empirical regularity for which no theoretical explanation has been found one s belief in this phenomenon would be strengthened if it is known to also occur in capital markets separated from those in the united states by distance institutional arrangements and culture this paper extends the results found in 5 and more closely examines the day to day stock market returns for japan while we find a weekly seasonal in japan its nature is significantly different in a statistical sense from the american one for example the lowest mean return in japan occurs on tuesday not monday as in the united states thus while the day of the week effect for american stocks has been casually called the weekend effect it should not be referred to in this way for japanese stocks the next part of the paper examines causes for the unique japanese seasonal we investigate whether the results in japan are associated with those in the united states and in particular consider whether the low tuesday return in japan and the low monday return in the united states are due to time zone differ ences the settlement process and the measurement error problem also are treated we next consider the relationship between foreign exchange returns and stock market returns the seasonal in daily foreign exchange returns does not offset the seasonal in daily stock market returns thus both japanese and american investors confront a day of the week effect in the japanese stock mar ket our data also allow us to investigate the turn ofthe year effect japanese stock returns in january are significantly above the returns during the rest of the year however unlike some reports using u s data see 12 and 13 we find no interaction in japan between the monday effect and the january effect

disguised protectionism and linkages to the gatt wto member states of the gatt wto have linked some issue areas outside trade to the institution and did so with varying depths at the same time they have chosen not to link other issue areas what accounts for this variation the author argues that states establish a legalized linkage between the gatt wto and an issue area outside it when they are uncertain about the possibilities of disguised protectionism such uncertainty exists under two conditions when diversity in regulations in an issue area across states generates a large adverse impact on trade negative externalities but that diversity can be justified at the international level for 1 having an independent objective apart from hampering trade and 2 when there are few alternative policies to achieve that objective legitimacy states establish a highly legalized linkage in these situations to reduce the uncertainty and minimize disguised protectionism by contrast when regulatory diversity exhibits low legitimacy states establish only a weakly legalized linkage in the absence of meaningful externalities they do not establish any linkages the author evaluates this argument in two ways he provides an overview of eleven issue areas about which there have been some debates or conflicts about linkages to the gatt wto in addition he carries out in depth case studies of three issue areas labor standards environmental standards and health safety standards the findings of this article contribute to a better understanding of international institutions and cooperation as well as of the evolution of the multilateral trade institution

managing domestic differences in international negotiations the strategic use of internal side payments when nations negotiate often the toughest bargaining is not between nations but within them the reason is simple proposed international agreements no matter how much in the national interest inevitably have differential effects on factional concerns threatening to make winners of some and losers of others potential losers often have the power to prevent agreements not to their liking thereby limiting what is possible in international negotiations this article uses a negotiation analytic framework to analyze the consequences of such limits it argues that limits need not be a liability for a divided country under some circumstances they may provide a bargaining advantage and demonstrates circumstances under which intracountry differences are desirable and undesirable from a national perspective more specifically the article shows that the effect of domestic differences on international negotiations depends on the configuration of domestic interests on the nature of domestic political processes and on characteristics of the international bargain it then explores a particular dimension of the domestic process the ability to link issues which allow factions to make internal side payments it demonstrates that internal issue linkage can have profound effects on the external bargain and explores the strategic implications of side payments for those who would manage domestic differences in international negotiations

correlations in price changes and volatility across international stock markets the short run interdependence of prices and price volatility across three major international stock markets is studied daily opening and closing prices of major stock indexes for the tokyo london and new york stock markets are examined the analysis utilizes the autoregressive conditionally heteroskedastic arch family of statistical models to explore these pricing relationships evidence of price volatility spillovers from new york to tokyo london to tokyo and new york to london is observed but no price volatility spillover effects in other directions are found for the pre october 1987 period article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the dynamics of stock index and stock index futures returns in rational efficiently functioning markets the returns on stock index and stock index futures contracts should be perfectly contemporaneously correlated this study investigates the time series properties of 5 minute intraday returns of stock index and stock index futures contracts and finds that sp however the effect is not completely unidirectional with lagged stock index returns having a mild positive predictive impact on futures returns

the incidence of indirect taxes on low income households in jamaica it is generally understood that the main concern of tax policy in developing countries with respect to the poor is that the poor not be made poorer the usual aim of tax reformers is thus either to avoid regressivity in tax design or to reduce regressivity through tax reform measures more positive actions to reduce poverty are it is usually argued best left to government expenditure policies in recent years however skepticism has grown as to the effectiveness of conventional public expenditure policy in reaching the very poor 2 in addition the potential scope for tax policy to affect factor prices and hence income distribution in developing countries has been stressed 3 the distributional effects of taxes thus continue to be of interest in most developing countries in the developed countries advances in modeling the effects of taxation have shed light on the complex relationships between taxation and income distribution and new approaches to incidence analysis have cast doubt on the earlier consensus as to the relative regressivity of various taxes 4 a few applications of these new ideas and techniques to developing countries are now available 5 in this article we contribute to this literature by making use of a new data set to analyze the incidence of indirect taxes on the poor in jamaica a decade ago a comprehensive review of fiscal incidence studies concluded that in only two of the 44 studies examined covering 22 developing countries was the tax system basically regressive that is in only two countries did the poor broadly defined appear to pay a larger proportion of their incomes in tax than did the rich 6 in a number of other cases however there was evidence of some regressivity to

volatility persistence and stock valuations some empirical evidence using garch summary in this paper issues of volatility persistence and the changing risk premium in the stock market are investigated using the garch estimation technique we get a point estimate of the index of relative risk aversion of 4 5 and confirm the existence of changing equity premiums in the us during 1962 1985 the persistence of shocks to the stock return volatility is so high that the data cannot reject a non stationary volatility process specification the results of this paper are consistent with malkiel and pindyck s hypothesis that it is the unforseen rise ini the investment uncertainty during 1974 that causes the market to plunge

the temporal price relationship between s p 500 futures and the s p 500 index this paper empirically examines the intraday price relationship between s p 500 futures and the s p 500 index using minute to minute data three stage least squares regression is used to estimate lead and lag relationships with estimates for expiration days of the s p 500 futures compared with estimates for days prior to expiration the results suggest that futures price movements consistently lead index movements by twenty to forty five minutes while movements in the index rarely affect futures beyond one minute

a further analysis of the lead lag relationship between the cash market and stock index futures market the intraday lead lag relation between returns of the major market cash index and returns of the major market index futures and s p 500 futures is investigated empirical results show strong evidence that the futures leads the cash index and weak evidence that the cash index leads the futures the asymmetric lead lag relation holds between the futures and all component stocks including those that trade in almost every five minute interval evidence indicates that when more stocks move together market wide information the futures leads the cash index to a greater degree this suggests that the futures market is the main source of market wide information article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

interests power and multilateralism multilateralism characterizes to varying degrees patterns of interaction among states and the formal organizations they construct the utility of multilateral norms or organizations varies with the type of cooperation problem states confront thus the functional logic of international cooperation leads to hypotheses about the conditions under which the institution of multilateralism may be a feasible and efficient solution as in coordination problems and those under which it will not as in collaboration problems within these constraints powerful states choose institutions that will serve their interests with multilateral arrangements becoming more attractive as the future is valued more highly multilateral institutions should be stable in circumstances of changing distributions of power relative to more hierarchical institutions the vulnerability of patterns of international cooperation to various exogenous changes depends on the type of strategic interaction underlying state behavior

guns butter and anarchy a state in the international system implicit in realism must allocate its limited resources between satisfying its intrinsically valued ends and the means of military power i formalize this guns versus butter problem in a simple infinite horizon model in which two states must continually decide how to allocate their resources and whether to attack the other state the analysis establishes sufficient conditions to ensure the existence of an equilibrium in which neither state attacks shows that there is a strictly pareto dominant pair of peaceful equilibrium payoffs characterizes the unique peaceful markov perfect equilibrium that yields them and describes the comparative statics of the equilibrium allocations more broadly the analysis also suggests that the notion of anarchy has little if any substantive significance distinctively related to international politics and that the problem of absolute and relative gains is superfluous

the war trap revisited a revised expected utility model the expected utility framework developed in the war trap is revised to correct several deficiencies risk taking orientations are now treated as an integral part of the model by introducing concavity or convexity into the utility functions the zero sum properties of the theory are largely eliminated and the tendency toward interpersonal comparisons of utility is removed several earlier results are replicated with the new model and with annual capabilities data new propositions are deduced that identify important limitations on conflict initiation and relationships resulting from differences in perceptions are tested support is found for the contention that the revised version of the theory of which the original model is a special case is a powerful tool for integrating many extant hypotheses about conflict and for explaining a substantial portion of the tendency for some threats to escalate to violence or warfare and for others to be resolved peacefully

productivity change and dynamic comparative advantage this paper proposes a simple decomposition of the widely used drc measure of international competitiveness into three distinct elements 1 changes in international prices 2 changes in production techniques and 3 total factor productivity change the decomposition provides a clear analytical link between two largely separate methodologies for assessing economic performance cost benefit indicators based on the world price rule and total factor productivity analysis the methodology is applied to evaluate changes in measured comparative advantage of industries in thailand for the period 1963 76 the results broadly indicate that changes in price competitiveness and in total factor productivity are the major sources of changes in drc ratios for thai industries

negotiation analysis a characterization and review negotiation analysis seeks to develop prescriptive theory and useful advice for negotiators and third parties it generally emphasizes the parties underlying interests as distinct from the issues on the table and the positions taken alternatives to negotiated agreement approaches to productively manage the inherent tension between competitive actions to claim value individually and cooperative ones to create value jointly as well as efforts to change perceptions of the game itself since advice to one side does not necessarily presume the full game theoretic rationality of the other side s negotiation analysts often draw on the findings of behavioral decision analysts and economists further this approach does not generally assume that all the elements of the game are common knowledge thus the negotiation analytic approach tends to de emphasize the application of game theoretic solution concepts or efforts to find unique equilibrium outcomes instead to evaluate possible strategies and

domestic opposition and signaling in international crises this article explores the effect of domestic political competition on the escalation of international crises it combines an incomplete information model of crisis bargaining with a simple model of two party electoral choice one state has two strategic actors a government and an opposition party both of which declare openly whether they support the use of force to alter the status quo the rival state updates its beliefs and selects its strategy in response to both signals the parties payoffs depend upon a retrospective evaluation by the domestic electorate the model shows that the inclusion of a strategic opposition party decreases the ex ante probability of war by helping to reveal information about the state s preferences this finding has important implications for research on democracy and international conflict since it suggests a mechanism through which democratic states can overcome informational asymmetries which have been identified as a central obstacle to negotiation

weekly patterns in japanese stock returns this study investigates the day of the week effect in the japanese stock returns low tuesday and high wednesday returns are observed most of the positive returns arise during the nontrading period the monday effect is also observed in the week whose previous week is closed by friday trading low tuesday returns appear to be related to low monday returns in the u s the weekly pattern is more pronounced for the returns of smaller firms a reverse size effect is observed during the trading period

determining the need for issue linkages in multilateral trade negotiations in multilateral trade negotiations trade offs usually are made within the issue areas that are on the agenda in the absence of cross issue trade offs linkages agreement may not be possible to maximize both the potential gains from trade and the scope for agreement negotiators need to be willing and able to consider the feasibility of issue linkages this raises the practical problem of determining when such trade offs are likely to be necessary although quantitative methods of policy analysis have been developed they have not been widely used by policymakers in part owing to the fact that negotiations focus largely on nontariff measures this article proposes a qualitative approach to the problem and applies it to the tokyo and uruguay round negotiations on safeguards to protect domestic industries from problems related to increases in imports

does issue linkage work evidence from european alliance negotiations 1860 to 1945 though scholars widely claim that issue linkage the simultaneous negotiation of multiple issues for joint settlement can help states conclude international agreements there exist some notable skeptics resolving this debate requires empirical evidence however beyond a few case studies there exists no direct and systematic evidence that issue linkages actually increase the probability of agreement i address this lack of direct and systematic evidence by combing original data on failed alliance negotiations with data from the alliance treaty obligations and provisions atop database using matching techniques i find that for alliance negotiations between 1860 to 1945 offers of trade linkage did substantially increase the probability of agreement besides confirming issue linkage s ability to help clinch an agreement this article s research design and evidence have far reaching implications for the study of negotiations and alliances the research design illustrates the value of considering the dogs that didn t bark as it identifies both successful and failed negotiations the article s evidence explains the high rate of alliance compliance identified by previous scholars and highlights a need to rethink the alliance formation process

a strategic theory of regime integration and separation states frequently disagree on the importance of cooperation in different issue areas under these conditions when do states prefer to integrate regimes instead of keeping them separated we develop a strategic theory of regime integration and separation the theory highlights the nature of spillovers between issues positive spillovers exist when cooperation in one issue area aids the pursuit of objectives in another issue area negative spillovers exist when cooperation in one issue area impedes this pursuit in another issue area conventional wisdom suggests that both positive and negative spillovers foster greater integration we argue that negative spillovers encourage integration while positive spillovers do not states integrate not to exploit positive spillovers between issues but to mitigate negative spillovers to test our theory we examine the degree of integration or separation among environmental regimes

the politics of international regime formation managing natural resources and the environment why do actors in international society succeed in forming institutional arrangements or regimes to cope with some transboundary problems but fail to do so in connection with other seemingly similar problems this article employs a threefold strategy to make progress toward answering this question the first section prepares the ground by identifying and critiquing the principal models embedded in the existing literature on regime formation and the second section articulates an alternative model called institutional bargaining the third section employs this alternative model to derive some hypotheses about the determinants of success in institutional bargaining and uses these hypotheses in a preliminary way to illuminate the process of regime formation in international society to lend empirical content to the argument the article focuses throughout on problems relating to natural resources and the environment

heteroskedasticity in stock return data volume versus garch effects this paper provides empirical support for the notion that autoregressive conditional heterqskedasticity arch in daily stock return data reflects time dependence in the process generating information flow to the market daily trading volume used as a proxy for information arrival time is shown to have significant explanatory power regarding the variance of daily returns which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns furthermore arch effects tend to disappear when volume is included in the variance equation the autoregressive conditiqnal heteroskedasticity arch process of engle 1982 has been shown to provide a good fit for many financial return time series 1 arch imposes an autoregressive structure on conditional variance allqwing volatility shocks to persist over time this persistence captures the propensity of returns of like magnitude to clu ter in time and can explain the well documented nonnormality and nonstability of empirical asset return distributions see especially fama 1965 an appealing explanation for the presence of arch is based upon the hypothesis that daily returns are generated by a maiture of distributions in which the rate of daily information arrival is the stochastic mixing variable as suggested by diebold 1986 gallant hsieh and tauchen 1988 and stock 1987 1988 arch might capture the time series properties e g serial correlation of this mixing variable hqwever this linkage has not been broadly documented with the datia the objective of this study is to examine the validity of this explanation for daily stock returns the empirical strategy exploits the implication of the mixture model that the variance of daily price increments is heteroskedastic specifically positively related to the rate of daily information arrival using daily trading volume as a proxy for the mixing variable we show that for a sample of 20 common stocks arch effects vanish when volume is included as an explanatory variable in the conditional variance equation

from unanimity to consensus an analysis of the negotiations at the eu s constitutional convention disputes filed at the world trade organization wto are attracting a growing number of third parties most observers argue that their participation influences the institution s rulings the authors argue that third parties undermine pretrial negotiations their influence on rulings is conditioned by this selection effect they test their hypotheses along with the conventional wisdom using a data set of wto disputes initiated through 2002 consistent with the authors argument they find that third party participation lowers the prospects for early settlement controlling for this selection effect the evidence also suggests that third party support increases the chances of a legal victory at the wto

two level games and bargaining outcomes why gaiatsu succeeds in japan in some cases but not others one of the strengths of robert putnam s two level bargaining game model is its ability to capture how international negotiations make it possible for negotiators to pursue synergistic strategies aimed at improving their prospects for a favorable deal by reshaping politics in both their own and their counterparts domestic arenas while reaffirming the utility of this approach this article argues that putnam describes only some of the synergistic strategies available to negotiators in addition to reverberation and synergistic linkage a negotiator can also reshape politics in his or her counterpart s domestic arena in two other ways 1 by transforming decision making in ways that expand elite participation and bring the weight of public opinion to bear on policies that were previously dictated by small groups of privileged domestic actors and 2 by influencing the way in which policy alternatives are considered in the decisionmaking process through an examination of the structural impediments initiative a set of negotiations through which the united states applied a great deal of foreign pressure gaiaisu on japan the article makes the case for the above modifications to the putnam model and argues that participation expansion strategies are most likely to be successful when involvement in decision making before foreign intervention is limited and latent support for foreign demands exists outside the privileged elite while alternative specification is most likely to work when opportunities exist to link favored policy proposals to already recognized domestic problems

power politics and the free trade bandwagon what explains the world s newfound enthusiasm for free trade are government leaders integrating their economies to achieve pareto improving gains or is it because a critical mass of pro free trade governments has acquired the capacity to go it alone leaving would be protectionists with a choice between a bad option opening their markets at very high political cost and an even worse alternative incurring the still higher political costs of exclusion this article suggests that in practice mutual gains seeking motivations are frequently dominated by defensive ones the north american free trade agreement is a case in point without in any way being bullied or coerced the mexican and canadian governments agreed to take part in a multilateral arrangement that the evidence suggests neither much liked although hard to reconcile with the political economy literature s positive sum model of international cooperation this finding is consistent with the broader power politics model introduced here

estimating strategic models of international treaty formation this article develops an empirical framework for analysing the timing of international treaties a treaty is modelled as a dynamic game among governments that decide on participation in every period the net benefit of treaty membership increases over time spillovers among members and non members accelerate or delay treaty formation by transforming participation into a strategic complement or substitute respectively the predictions of the model inform the estimation of the structural parameters based on a cross section of treaty ratification dates with this approach i estimate the sign and magnitude of strategic interaction in the ratification of the montreal protocol in the formation of europe s preferential trade agreements and in the growth of germany s network of bilateral investment treaties through a series of counterfactual experiments i explore different mechanisms that give rise to strategic interaction in the formation of these treaties

a new look at indirect taxation in developing countries abstract this paper reconsiders some of the traditional arguments made against indirect taxes on consumption such taxes despite the extensive criticism to which they have been subjected in the academic literature remain the mainstay of public finance in most developing countries and are likely to continue to do so brief discussions of the design of excise taxes and the incidence of indirect taxes on the poor illustrate the sorts of issues where more detailed tax specific and country specific research is needed to replace conventional generalizations about the effects of indirect taxes

the information content of end of the day index futures returns international evidence from the osaka nikkei 225 futures contract abstract employing a generalized autoregressive conditional heteroskedastic garch time series model this study investigates the relationship between end of the day eod osaka nikkei index futures returns and overnight spot returns for the period september 1988 through june 1991 a statistically significant positive relationship is found between the unexpected component of eod futures returns and overnight spot returns in addition the unexpected component of eod futures returns is positively related to trading period spot returns over the next two trading days these results suggest that eod futures returns reflect the information of informed traders which is partially revealed through trading the recent elimination of eod osaka nikkei futures trading has removed an important source of information dissemination

three s a crowd third parties and wto dispute settlement in spite of the recent failure of two referendums the drafting of a constitution for the second biggest economic power in the world the european union eu remains a major event in the history of european integration whether the constitution or a revised version of it will come into force or not several important questions emerge how did an increased number of twenty five member states reach a conclusion whereas a lower number of fifteen had failed at previous intergovernmental attempts in particular how did the constitutional convention differ from previous intergovernmental conferences igcs at which the eu exclusively bargained its treaty documents in the past how can one explain the outcomes of the convention which proposes redistribution of power and resources among twenty five or more member states this article uses the positions of the delegates of the eu s constitutional convention to examine bargaining in a setting with few formal rules the authors use theoretical insights from a spatial model and new survey data to determine the implicit voting rule used at the convention they find that the convention differed from previous igcs because the convention was governed by consensus whereas previous eu bargains on treaties had always required unanimous support the level of consensus was higher than simple majority rule but lower than unanimity since this threshold impacted who won and who lost at the convention the authors also examine the sources of bargaining power such as delegates distance to the status quo distance to the median population size and domestic constraints the results confirm several findings in the eu bargaining and two level game literature for example that actors closer to the status quo hold a stronger bargaining position and that actors from larger member states are neither more likely nor less likely to win at the negotiating table than are actors from smaller states the findings on the irrelevance of domestic constraints also indicate why the popular votes in france and the netherlands failed

the week end effect in common stock returns the international evidence this paper examines the daily stock market returns for four foreign countries we find a so called week end effect in each country in addition the lowest mean returns for the japanese and australian stock markets occur on tuesday the remainder of the paper answers four questions are seasonal patterns in foreign stock markets independent of those previously reported in the u s do japan and australia exhibit a seasonal one day out of phase due to different time zones do settlement procedures across countries bias week end effects does the seasonal pattern in foreign exchange offset the week end effect in stocks for americans investing overseas some of the most anomalous empirical findings in finance are associated with the sample distributions of daily common stock returns cross 1 french 2 gibbons and hess 3 and keim and stambaugh 4 have documented that the average return on friday is abnormally high and the average return on monday is abnormally low to our knowledge this so called day of the week effect or week end effect has yet to be explained because this anomaly has been reported primarily for u s stock returns it is appropriate to investigate whether similar results occur for other countries positive findings would strongly support the proposition that the weekly seasonal effect is a general world wide phenomenon rather than the result of a special type of institutional arrangement in the u s to shed more light on this proposition our paper examines stock market returns in the u k japan canada and australia since we find a week end effect in each country we can examine a set of interesting questions for example are these seasonals independent of the previously reported seasonal in the u s due to different time zones do far eastern countries exhibit a seasonal one day out of phase do different settlement procedures across countries influence weekend effects does the seasonal in foreign exchange fluctuations see mcfarland pettit and sung 7 and levi 6 offset the week end effect in stock market returns for americans investing overseas

negotiation arithmetic adding and subtracting issues and parties students of international negotiations often examine strategic interactions among a given set of parties dealing with a specified group of issues the issues and parties themselves are often choice variables whose ultimate configuration can have decisive effects on a bargain s outcome using a variety of international cases i investigate the properties of several classes of moves that are intended to alter the issues and parties of an original negotiation a unified approach to the analysis of such situations suggests numerous distinct means by which the addition or subtraction of issues can yield one sided gains to the use of power can yield joint gains that create or enhance a zone of possible agreement and can reduce or destroy a zone of possible agreement the effects of adding or subtracting parties are similarly analyzed however unintended complexity unforeseen interrelationships organizational considerations transactions costs and informational requirements may alter the analysis of such moves

building climate coalitions on preferential free trade agreements in this paper we discuss the endogenous formation of climate coalitions in an issue linkage regime in particular we propose a preferential free trade agreement on which a climate coalition should be built the basic idea is that the gains of free trade can provide strong incentives for countries to join the coalition as a framework a multi stage strategic trade model is employed in which each country may set an emission cap being effective on a permit market in addition a discriminatory import tariff may be imposed on dirty goods however at the heart of our approach is a preferential free trade arrangement among the members of a climate coalition leading to a favourable shift in the terms of trade as a main result trade liberalisation is found as an institution highly effective in building climate coalitions in particular the parametrical simulation of the model shows that participation in joint emission reduction is higher consumption patterns are more environmentally friendly and coalitional welfare is much more improved than in case of a single issue environmental agreement

power and interdependence revisited ten years ago we published power and interdependence 1 the passage of a decade makes this an appropriate time to reread and reevaluate that book and to take stock of the research program to which it contributed in doing this we hope to deepen and enrich scholarly understanding of the politics of interdependence and to stimulate reflection on directions for the field of international relations over the next decade 2 such a reappraisal seems particularly opportune given the changes in world politics and especially in american policy that have marked the intervening years stanley j michalak commented in 1979 that the authors may cringe from the analogy but power and interdependence may well become the politics among nations of the 1970s 3 but from the perspective of the late 1980s the world may look different while the 1970s were seen as the decade of interdependence many observers regard the use of force and concern for security as characteristic of the 1980s indeed the view is widespread in some circles that the 1980s resemble the 1950s more than the 1970s and that hans j morgenthau s work is more relevant to contemporary issues of world politics than power and interdependence

the effects of structures and power on state bargaining strategies when and why will states adopt more or less cooperative bargaining strategies standard answers to this question focus on the role of state power other scholars highlight socialization effects i argue that in most international negotiations the institutional bargaining structure will mitigate the effects of power and socialization and drive state bargaining behavior factors highlighted by formal models of international bargaining should therefore best explain the variation in the strategies states adopt i introduce empirical measures of these abstract concepts and test their effects against those of power and socialization using an original dataset of state bargaining strategies in the european union eu the results show that structural factors best explain variation in the eu states bargaining strategies i conclude by highlighting the conditions under which these effects should explain state bargaining behavior in other international negotiations and discuss the implications of this argument for the study of international bargaining

war and expected utility theory in his book the war trap bruce bueno de mesquita claims to offer a deductive theory of international conflict based on the assumption that foreign policy makers attempt to maximize their expected utility the theory is subjected to a systematic empirical test that seems to provide impressive confirmation the first part of this article examines bueno de mesquita s theory and argues that it cannot be derived from his assumptions the second part examines the operational version of the theory which was the one actually tested and argues that it can be more plausibly interpreted as a version of a different theory one that bueno de mesquita claims to have discredited the essay concludes by discussing the significance of this book with regard to the question of whether theories of individual rational choice can explain foreign policy decisions

international technology oriented agreements to address climate change much discussion has surrounded possible alternatives for international agreements on climate change particularly post 2012 among these alternatives technology oriented agreements toas are perhaps the least well defined we explore what toas may consist of why they might be sensible which toas already exist in international energy and environmental governance and whether they could make a valuable contribution to addressing climate change we find that toas aimed at knowledge sharing and coordination research development or demonstration could increase the overall efficiency and effectiveness of international climate cooperation but are likely to have limited environmental effectiveness on their own technology transfer agreements are likely to have similar properties unless the level of resources expended is large in which case they could be environmentally significant technology specific mandates or incentives could be environmentally effective within the applicable sector but are more likely to make a cost effective contribution when viewed as a complement to rather than a substitute for flexible emissions based policies these results indicate that toas could potentially provide a valuable contribution to the global response to climate change the success of specific toas will depend on their design implementation and the role they are expected to play relative to other components of the policy portfolio