house price recovery and stigma after a failed siting the costs of siting a locally undesirable facility include those borne by developers local government and those homeowners whose houses decline in value when a siting fails developer and government costs are still incurred in addition to the costs of community opposition however the impact of a failed siting on residential real estate prices has not been assessed in this study house prices in a market surrounding a failed incinerator are examined while proposing an incinerator did negatively impact house values prices rebounded after the facility was cancelled residents did not attach any stigma to the site

tourism welfare and de industrialization in a small open economy this paper investigates the effects of an expansion of tourism on welfare output and factor prices in the host country using a general equilibrium international trade model in the absence of taxes foreign ownership and distortions an increase in foreign visitors will increase welfare only if the price of nontradables increases factor mobility and foreign ownership tend to reduce the gains from tourism while commodity taxes tend to increase them conditions under which an increase in tourism can lead to deindustrialization are also discussed copyright 1991 by the london school of economics and political science

immigrant specificity and the relationship between trade and immigration theory and evidence studies routinely document that immigrant employment concentrates in non traded goods sectors and that many immigrants have low inter sectoral mobility we consider these observed characteristics of immigrant employment with regard to the question of how immigration affects a nation s pattern of production and trade we model an economy producing three goods one is non traded domestic labor and capital are domestically mobile but internationally immobile allowing that some new immigrants will become specific to the non traded goods sector the model indicates that the effects of immigration on output and trade depend importantly on the sectoral pattern of employment of both new and existing immigrants empirical investigation in a panel data set of oecd countries supports the model s prediction that immigration raises the output of non traded goods consistent with the model we also find that immigration and trade are complements given its empirical support the model s implications for immigration policy are then discussed

agricultural productivity and structural transformation evidence from brazil we study the eects of the adoption of new agricultural technologies on structural transfor mation to guide empirical work we present a simple model where the eect of agricultural productivity on industrial development depends on the factor bias of technical change we test the predictions of the model by studying the introduction of genetically engineered soybean seeds in brazil which had heterogeneous eects on agricultural productivity across areas with dierent soil and weather characteristics we nd that technical change in soy production was strongly labor saving and lead to industrial growth as predicted by the model

structural adjustment and the construction sector abstract this paper adds a construction sector to a dynamic dependent economy model equipped with consumer tradeables and non tradeables sectors the model is used to study the response of the production structure relative prices and the trade balance to a favorable terms of trade shock under the benchmark assumptions of perfect intersectoral factor mobility a perfect international capital market and no adjustment costs for realistic relative capital intensities the model predicts a boom in the construction and consumer non tradeables sectors a contraction of the tradeables sector and no relative price changes the implications of relaxing those benchmark assumptions are discussed separately

the complex attitudes to alcohol taxation alcoholic beverages are taxed at very different rates across the eu which implies extensive cross border shopping therefore there is an ongoing debate about harmonization of alcohol taxes among countries sweden with a tradition of high alcohol taxes due to public health arguments has the highest excise duties on spirits in the eu but because of this the occurrence and possible problems caused by cross border shopping are also extensive using a questionnaire survey i analyse the swedes attitudes to alcohol taxation and find that these two sides of the coin are important determinants many respondents want to decrease the alcohol tax while some even want to increase it those most positive to alcohol taxation are those who regard increased alcohol consumption as a worrying problem and those living in areas where many adults are treated for alcohol related diseases however the ordered probit analysis also shows that those who support the eu membership are more supportive of reduced taxation to

absorbing a windfall of foreign exchange dutch disease dynamics abstract the permanent income rule is seldom the optimal response to a windfall of foreign exchange such as that from a resource discovery absorptive capacity constraints require domestic investment and investment in structures requires non traded inputs the supply of which is constrained by the initial capital stock this particularly when combined with intra sectoral capital immobility delays adjustment and creates short run dutch disease symptoms as the real exchange rate sharply appreciates and overshoots its long run value optimal revenue management requires investing in the domestic non traded goods sector and a slow build up of consumption accumulation of foreign assets adjusts to accommodate the time paths of domestic consumption and investment

macroeconomic effects of terms of trade fluctuations in commodity exporting advanced economies the paper examines the impact of world commodity prices on national output and trade balances in australia canada new zealand and norway oecd economies that unlike other advanced economies are heavily dependent on commodity exports contrary to dutch disease theory based on real exchange rate adjustment it highlights the relative price effects of terms of trade tot changes on gross domestic product and net exports with reference to the experience of this unique set of oecd countries the econometric analysis verifies key predictions of this alternative perspective that tot fluctuations should i have no significant short run impact on gdp and that ii due to relative price effects a strong positive relationship between the tot and net exports is unlikely

the effects of mongolia s booming mining industry on its agricultural sector a test for dutch disease dutch disease occurs when currency strengthening associated with a booming sector of an economy crowds out a lagging trade dependent sector in this study a keynesian style model is specified to deduce hypotheses about how increased foreign direct investment fdi aimed at mongolia s mining sector affects its agricultural sector a key finding is that while econometric results suggest the increased fdi strengthened mongolia s currency its adverse effect on mongolia s trade sensitive agricultural sector is not sufficiently strong to cause the sector to decline although dutch disease was not detected the posited mechanism clearly is important specifically when currency strengthening is ignored the reduced form elasticity of agricultural value added with respect to fdi is 2 7 times larger than when currency strengthening is taken into account 0 103 vs 0 038 also fdi induced currency strengthening causes the keynesian multiplier y g to drop from 2 40 to 2 00 and the fdi multiplier y fdi to drop from 3 05 to 1 89

the ex ante impact of conflict over infrastructure settings on residential property values the case of paris s suburban zones the presence of nearby public facilities has an impact on real estate values for this reason the market may reasonably anticipate that public infrastructure projects will affect house prices but undesirable and semi desirable facility location choices may be contested by nearby residents as they are a source of negative externalities or expectations in paris s suburban zones opposition to these infrastructures is frequent and the official announcement of a project does not automatically mean it will be implemented through three case studies we explore the way in which the expectation mechanism is affected by legal conflicts driven by nearby residents we suppose that expectations depend on the probability that a given project will be realised the variation is captured by a hedonic model as conflicts amplify or reduce the certainty of the new facility s arrival market perceptions of the infrastructure vary

resource curse or not a question of appropriability this thesis presents three self contained essays focusing on empirical questions in growth and development economics each article addresses specific questions on why countries perform differently in particular i analyse the effect of democracy on economic development the relationship between natural resources and growth and the efficiency of foreign development assistance in the first essay democracy consolidation and growth i analyse the effect of democracy on economic growth in this context i argue that an important aspect to consider is how consolidated political systems are put simply i find that it is not only a question of how democratic countries are but also how long they have been democratic in other words economic performance tends to improve with the duration of uninterrupted democracy the performance of autocracies on the other hand tends to deteriorate over time however for newly established political systems there seems to be a cost of being democratic this implies that democracies only bear their fruit after some time the analysis has important policy implications to overcome initial straits international assistance focused on democratic consolidation may be important and a very good investment in fostering long run development the second essay resource curse or not a question of appropriability together with anne boschini and jesper roine is concerned with the relation between natural resources and economic development for most laymen as well as for most economists it would seem reasonable that countries richly endowed in natural resources also benefit from this wealth however a large literature has found a systematic negative effect of natural resource abundance on economic growth we suggest that this so called resource curse is not determined by resource endowments alone but rather by the interaction between the type of resources a country possesses and the quality of institutions in the country this combination of factors determines what we call the appropriability of a resource the concept of appropriability captures the likelihood of natural resources leading to rentseeking corruption or conflicts which in turn will harm economic development our results suggest that if institutions are good enough the curse may be turned into a blessing this may explain why some countries such as norway and botswana tend to benefit from their resources while others such as angola and sierra leone do not the third and final essay of this thesis foreign sectoral aid fungibility growth and poverty reduction is a contribution to the aid efficiency literature which is concerned with the question of whether aid helps or hinders economic development foreign development assistance is often targeted on specific public expenditure sectors if this aid is not used in the sector for which it was granted e g health education it is said to be fungible and donors may end up financing something completely different from what they intended e g military expenditures the major concern about sectoral fungibility is that the alternative use of aid may be less productive or less socially useful however measuring fungibility is not sufficient to determine whether foreign sectoral aid fungibility is actually harmful what is important is how the funds treated as fungible are used the essay starts by obtaining estimates of fungibility for 57 countries the results suggest that sectoral aid is indeed largely treated as fungible by recipient countries next to assess the economic and health effects of fungibility these estimates are incorporated into an empirical model of aid and growth as well as into a model of aid and infant mortality altogether i find no evidence of more fungible sectoral aid leading to worse performance

macroeconomic policy in an oil exporting economy with foreign exchange controls the sudden and sharp increases in oil prices during the past decade and the discovery and extraction of oil in the north sea have recently contributed to a renewal of interest in the macroeconomic problems of oil exporting countries in general and those of industrialized and semi industrialized oilexporting countries such as the uk and mexico in particular the economic implications of the north sea oil revenues for the british economy have been hotly debated by forsyth and kay 1980 1981 worswick 1980 barker 1981 corden 1981 and byatt et al 1982 the effects of oil and gas revenues on the economies of canada mexico the netherlands norway and the uk have also been the subject of analysis and discussion in barker and brailovsky 1981 despite their important contribution these studies fall short of formulating a comprehensive theoretical framework for the study of macroeconomic policy in oil exporting countries in general the resurgence of interest in the macroeconomics of oil exporting economies and the lack of a satisfactory theoretical framework emphasize the need for the explicit introduction of an oil sector into macroeconomic models of the open economy the more recent studies by buiter and purvis 1983 eastwood and venables 1982 corden and neary 1982 and neary and purvis 1982 have gone some way towards meeting this need but they are better suited to the study of macroeconomic policy in developed oil exporting countries such as the united kingdom where highly developed financial markets already exist 1 without exception all these studies assume that the economy under consideration operates with a floating exchange rate and that the private capital is internationally mobile they also invariably ignore the short term and the long term financial repercussions of changes in oil income that operate via the government budget constraint and the asset position of the private sector these assumptions are however inappropriate for most oil exporting countries in the middle east africa and latin america the purpose of this paper is to examine the short run and long run macroeconomic consequences of an increase in oil revenues in an oil exporting country characterized by strict foreign exchange controls on private capital flows we attempt to do this in the context of a keynesian underemployment model of the type analysed for example by turnovsky and kaspura 1974 branson 1976 and argy and salop 1979 but with domestic prices set according to a mark up rule along the lines advocated for example by fetherston and godley 1978 1981 unlike argy and salop but in line with other recent contributions to the macroeconomic theory of open economies the present paper explicitly allows for the existence of the government budget constraint and analyses the macroeconomic effects of changes in oil revenues both in the short run when

the effects of oil price shocks on the iranian economy abstract the iranian economy is highly vulnerable to oil price fluctuations this paper analyzes the dynamic relationship between oil price shocks and major macroeconomic variables in iran by applying a var approach the study points out the asymmetric effects of oil price shocks for instance positive as well as negative oil price shocks significantly increase inflation we find a strong positive relationship between positive oil price changes and industrial output growth unexpectedly we can only identify a marginal impact of oil price fluctuations on real government expenditures furthermore we observe the dutch disease syndrome through significant real effective exchange rate appreciation

business cycles in an oil economy abstract the recent oil price fall has created concern among policy makers regarding the consequences of terms of trade shocks for resource rich countries this concern is not a minor one the world s commodity exporters combined are responsible for 15 20 of global value added we develop and estimate a two country new keynesian model in order to quantify the importance of oil price shocks for norway a large prototype petroleum exporter domestic supply chains link mainland non oil norway to the off shore oil industry while fiscal authorities accumulate income in a sovereign wealth fund oil prices and the international business cycle are jointly determined abroad these features allow us to disentangle the structural sources of oil price fluctuations and how they affect mainland norway the estimated model provides three key results first oil price movements represent an important source of macroeconomic volatility in mainland norway second while no two shocks cause the same dynamics conventional trade channels make an economically less significant difference for the transmission of global shocks to the oil exporter than to oil importers third the domestic oil industry s supply chain is an important transmission mechanism for oil price movements while the prevailing fiscal regime provides substantial protection against external shocks

measuring the social value of local public goods an empirical analysis within paris metropolitan area a non linear hedonic model is used to estimate the implicit marginal prices of 17 local public goods in a paris suburban area on an original data set of some 8200 housing units the results reveal a robust effect of local public school quality measured both by the fraction of junior high school students that are at least two years behind grade level and the student teacher ratio on house prices it is observed that housing owners marginal willingness to pay for reducing commuting time is roughly similar for public transportation than for car transportation another noticeable result is the complete capitalization of local taxes at a discount rate of 3 5 an illustration of the potential usefulness of the results for cost benefit analysis is also provided

the structure and policy implications of a macroeconomic model of ghana abstract to avoid the ad hoc use of abstract theoretical specifications and disjointed statistical data for policy analysis an internally consistent macro framework is indispensable the absence of a forecasting macro model of ghana is the reason for the use of the international monetary fund and the world bank models for policy analysis and forecasting after having reviewed the relevant literature we construct a macro model we divide our macroeconomic system into three blocks of eight sectors the full model consists of 47 identities and 50 behavioural equations we also analyzed the policy implications of the empirical model

policy adjustments to the oil boom and their evaluation the dutch disease in indonesia abstract this paper analyzes the effects of two policy adjustments namely exchange rate devaluation and the accumulation of budget surpluses to the oil export boom in indonesia by using a simple simulation model our results indicate that exchange rate adjustment had a significant impact on expansion of tradable sectors especially the manufacturing sector by reversing the real exchange rate while officially maintaining the balanced budget principle the government exercised delicate operations whereby the budget surpluses were covertly accumulated as government deposits such operations were executed as a necessary demand management policy to ensure that the effect of devaluation was persistent these policy adjustments were consistent from a macroeconomic management point of view and have contributed to avoiding the dutch disease that indonesia otherwise might have suffered because of its oil bonanza

commodity tax competition between member states of a federation equilibrium and efficiency we first describe regional market equilibria whereupon consumers of each region allocate their purchases of private goods between domestic and nondomestic ones according to the structure of relative prices taxes and transportation costs next regional optimal tax levels and public good quantities are derived the tax of the other region being held constant fiscal competition arises from the ability of one region in choosing its tax to alter the tax base of the other

demand and distance evidence on cross border shopping while many studies have documented deviations from the law of one price in international settings evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping we use data from 287 swedish municipalities to estimate how responsive alcohol sales are to foreign prices and relate the sensitivity to the location s distance to the border typical results suggest that the elasticity with respect to the foreign price is around 0 4 in the border region moving 200 400 kilometers inland reduces it to 0 2 0 1 given that cross country price differences for alcohol and other products are often caused by taxes our evidence has implications for the debate on tax competition harmonization

nontax revenue social cleavages and authoritarian stability in mexico and kenya internationalization institutions and political change revisited what determines how authoritarian regimes use internationally attained revenues such as natural resource rents to stay in power the answer this article argues lies partly in the nature of the so

toward an understanding of economic growth in africa a reinterpretation of the lewis model summary we develop a model economy that has many of the features of lewis 1954 but that also includes an in between sector as described by lewis 1979 our model underscores the importance of the following determinants of structural change i productivity growth in the agricultural sector ii productivity growth in the nonagricultural sector and iii the terms of trade public investment enhances productivity growth in all sectors but when it is financed by foreign inflows it also causes a real exchange rate appreciation leading to a contraction in the open modern sector these results provide a partial explanation for recent patterns of growth in rwanda and elsewhere in africa where the nontradables or what we call the in between sector has expanded more rapidly than the tradable sector our results also highlight the dilemma faced by poor countries in dire need of public investment with a very limited tax base

aid policy and the macroeconomic management of aid summary this is an introduction to the unu wider special issue of world development on aid policy and the macroeconomic management of aid we provide an overview of the 10 studies grouping them under three sub themes the aid growth relationship the supply side of aid including its level volatility and coordination of donors and the macroeconomic framework around aid the studies in the special issue demonstrate the centrality of research methodology the importance of disaggregation and the need to account for country specific situations and problems this introduction concludes that the sometimes over heated debate on aid needs redirecting toward more rigorous analysis in which the advantages and disadvantages of using aid for development can be evaluated in a calmer manner

a model of aid impact in some south pacific microstates abstract this paper investigates the impact of foreign aid on the economic structure of the recipient economy using a two sector general equilibrium model underlying assumptions are designed to mirror a number of stylized facts about a group of south pacific microstates known as mirab countries two variants of the model are constructed to reflect these countries unequal access to overseas labor markets qualitative results reveal the likelihood of a structural transformation of the economy akin to that known as dutch disease namely the relative contraction of the tradables sector quantitative results confirm the plausibility of this outcome

house prices during siting decision stages the case of an incinerator from rumor through operation abstract the impact of an undesirable land use on house prices is not constant over time previous proximity studies which employed only discrete changes in information such as an epa superfund site announcement ignored potentially important phases of the adjustment process this study explicitly measures how the effects of an undesirable land use evolve over the siting process and life of the disamenity some price response to rumors of a facility is indicated and the evidence that prices respond at groundbreaking before operation is strong the distance premium persists at least 7 years after the facility begins operations

in a world without borders the impact of taxes on internet commerce the rapid rise in sales over the internet and the fact that most internet buyers pay no sales tax has ignited a considerable debate over taxes and the internet this paper uses new data on the purchase decisions of approximately 25 000 online users to examine the effect of local sales taxes on internet commerce the results suggest that controlling for observable characteristics people living in high sales taxes locations are significantly more likely to buy online the results are quite robust and cannot be explained by unobserved technological sophistication shopping costs or other alternative explanations the magnitudes in the paper suggest that applying existing sales taxes to internet commerce might reduce the number of online buyers by up to 24 percent

interaction between federal taxation and horizontal tax competition theory and evidence from canada the aim of this paper is to determine to what extent and how federal taxes affect local tax decisions testing the impact of an increase in the federal tax on horizontal tax competition with canada us data for 1984 1994 it finds evidence that an increase in federal tax makes horizontal tax reactions weaker this is because an increase in federal tax raises the cost in terms of utility of income of a unit increase in the province s tax rate on the methodological side it is possible to estimate the impact of the federal tax on the fiscal policy of the province without neglecting control for year effects which cannot be used in the empirical literature because they are perfectly collinear with the federal tax

heterogeneity in the tax pass through to spirit retail prices evidence from belgium abstract on 1st november 2015 the belgian government increased the excise tax on alcoholic beverages for spirits with 40 of alcohol and bottle size of 70 cl this tax change is equivalent to an amount of 2 43 per bottle of spirits this paper studies the impact of this tax reform at the store level on the posted retail price of six major brands of spirits using a difference in differences method the estimation is based on a balanced panel of scanner data from a major supermarket chain with a 33 market share and uses the retail prices of the same brands sold in france by the same supermarket chain as a control group having information on each store location we show spatial variations in the tax pass through for homogeneous products we find that these variations are strongly related to the intensity of local competition and to a lesser extent to the proximity to the borders mainly with luxembourg which is the low price country we find that the tax was quickly passed through during the first month of tax implementation and that it was mostly over shifted however we also find that both the border and the competition effects are not instantaneous but arise several months after the tax reform these findings have important implications for alcohol control policies as they highlight that the incidence of alcohol taxation can vary greatly across space and affect differently households depending on where they live

commodity price volatility with endogenous natural resources abstract natural resource reserves are exogenous in models of small commodity exporters changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility trade dynamics or exchange rate volatility we consider richer supply dynamics and model exploration and depletion we show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency the crowding out of non commodity activity dutch disease and a volatile business cycle we also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies when natural resource reserves are held fixed monetary policy is an efficient tool for stabilising the effects of commodity price shocks however when exploration and depletion are accounted for using interest rates to stabilise the effects of commodity price changes becomes inefficient using taxes on the resource sector specifically an ad valorem royalty remains efficient

external disturbances domestic policy responses and debt accumulation in nigeria abstract this paper provides a case study of the link between external shocks domestic policy responses and external debt accumulation in nigeria the indonesian experience during 1970 1989 is provided as a contrast for policy comparison a significant part of the increase in external debt in the two countries corresponds to financing of capital flight after 1981 current account deficits assumed greater importance in the accumulation of external debt the growth in external debt was caused in part by adverse external conditions the results of this study show that the nigerian debt crisis was exacerbated by inappropriate policy responses indonesia avoided a crisis by applying prudent real exchange rate management and fiscal restraint

industrial policy and exchange rate scepticism the aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies the first section focuses on the thought of the so called pioneers of development economics specifically their preference for protectionism and their belated recognition that an exchange rate policy could act as a substitute to it in the second one we analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth in addition to the one revealed by the pioneers the third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short run contractionary effects of a devaluation reinforcing the skepticism in question in the fourth section we discuss the revival of development thinking in the 1980s and its discussion about east asian trajectories a literature that placed great emphasis on industrial policy finally in the fifth section we discuss the new historical facts and the new development macroeconomics models that are putting an end to exchange rate skepticism

trade and payments regime and the balance of payments in ghana abstract by 1982 the ghanaian economy was in the doldrums facing a severe foreign exchange constraint this state of the economy was attributed partly to the trade and exchange rate policies which had created distorsions and disincentives against exporting in particular and production in general since 1983 ghana has for the second time embarked on a trade and payments liberalization program this study examines the effect of the changing trade and payments regime on the balance of payments of ghana it provides some answers as to why the first liberalization episode was not sustained it also contrasts the experience of controlled and liberalized trade regime episodes the paper concludes by providing some lessons from the ghanaian experience

price elasticity of gasoline smuggling a semi structural estimation approach abstract we estimate the price elasticity of the demand for gasoline smuggling in iran for this purpose we employ a detailed panel of monthly gasoline consumption data from 160 distribution hubs during the period 2005 2014 we apply two different approaches which are diff in diff and panel data estimations the results suggest that the foreign to home gasoline price ratios have a significant impact on the time varying elasticity of demand this finding supports the hypothesis that an increase in domestic gasoline prices will significantly reduce the demand for smuggling in addition as the distance of a region from its closest higher price neighboring country diminishes the price elasticity of demand for gasoline smuggling for that region declines as well finally we find that when the ratio of foreign to domestic prices is higher the gasoline demand sensitivities to price in neighboring countries go up our work offers new insights regarding the welfare impact of removing fuel subsidies and modifying fuel pricing policies

mighty oaks from little acorns can microenterprise serve as the seedbed of industrialization abstract how can microenterprises foster the development of an industrial sector featuring a dynamic medium or large enterprise sector we propose two possible mechanisms graduation of microenterprises and savings by microentrepreneurs we examine the barriers to both mechanisms and reexamine policies designed to aid the sector projects aimed at the enterprise level are not likely to remove barriers to firms graduating or saving changes in macro policy may have a positive effect reforms of the legal and regulatory environment may be very important and should be rethought with the mechanisms of the seedbed role specifically in mind

south african manufacturing industries catching up or falling behind this article argues that intra industry trade with developed countries is an important source of technology transfer south africa has an industrial structure that is suited to such trade but high costs and weak social capacity to assimilate new technology therefore reintegration into the world economy is likely to reinforce dependence on resource intensive industries in the short run this need not adversely affect economic growth but unless the quality and quantity of education and training are improved the prospects for rebuilding the technological capacity and catch up with oecd countries are bleak

drunk driving after the passage of smoking bans in bars abstract using geographic variation in local and state smoke free bar laws in the us we observe an increase in fatal accidents involving alcohol following bans on smoking in bars that is not observed in places without bans although an increased accident risk might seem surprising at first two strands of literature on consumer behavior suggest potential explanations smokers driving longer distances to a bordering jurisdiction that allows smoking in bars and smokers driving longer distances within their jurisdiction to bars that still allow smoking perhaps through non compliance or outdoor seating we find evidence consistent with both explanations the increased miles driven by drivers wishing to smoke and drink offsets any reduction in driving from smokers choosing to stay home following a ban resulting in increased alcohol related accidents this result proves durable as we subject it to an extensive battery of robustness checks

agricultural tradables and economic recovery in uganda the limitations of structural adjustment in practice abstract uganda s economic reform program has been widely regarded as a success story for structural adjustment nevertheless a large trade deficit persists shored up by inflows of aid and private remittances the poor performance of the agricultural tradables sector is presented as the key explanation for this trade imbalance two main reasons for this poor performance are found to be the failure to liberalize producer prices quickly and the failure to overcome early institutional resistance to reforms of marketing arrangements uganda s recovery is therefore much less impressive than it appears and the sustainability of the now heavily aid dependent economy must remain in serious doubt

the impact of fuel tourism on retailers diesel price in spanish neighbouring regions since 1986 car fuel consumption in spain has been subject to the special hydrocarbons tax and the value added tax in addition since 2002 regional governments have been able to apply a regional excise duty on hydrocarbons this article analyses the impact that such a regional tax has on the retailer s diesel price at the border of the province of lugo in the region of galicia and the province of leon in the region of castile leon only the former region has the regional tax evidence shows that variations in the price of diesel at the border of lugo are of the same sign but of lower intensity than at the border of leon the price price elasticity is 0 8060 these results suggest that service stations located in regions with higher excise duties use their price policy to lessen the negative effects generated for fuel tourism

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

aid the real exchange rate and why policy matters the cases of morocco and tunisia abstractevery form of foreign exchange inflow including aid can potentially cause real exchange rate appreciation with adverse consequences for the production of tradables dutch disease whether it does so depends on the policy response to the inflow this paper investigates the issue for morocco and tunisia over 1980 2009 we find that aid led to a real appreciation in morocco but had no effect on tunisia s real exchange rate this confirms the importance of the macroeconomic framework in which aid is provided and the key role for infrastructure and other supply side improvements in determining the final real economy impact of aid and other inflows

resource abundance growth and welfare a schumpeterian perspective abstract this paper takes a new look at the long run implications of resource abundance it develops a schumpeterian model of endogenous growth that incorporates an upstream resource intensive sector and yields an analytical solution for the transition path it then derives conditions under which as the economy s endowment of a natural resource rises i growth accelerates and welfare rises ii growth decelerates but welfare rises nevertheless and iii growth decelerates and welfare falls which of these scenarios prevails depends on the response of the natural resource price to an increase in the resource endowment the price response determines the change in income earned by the owners of the resource the households and thereby the change in their expenditure on manufacturing goods since manufacturing is the economy s innovative sector this income to expenditure effect links resource abundance to the size of the market for manufacturing goods and drives how re source abundance affects incentives to undertake innovative activity

endogenous growth with a limited fossil fuel extraction capacity campbell 1980 and following authors have discussed a limited resource extraction capacity as an augmentation of the well known hotelling model we integrate a limited extraction capacity and related investments in the endogenous growth model of tsur and zemel 2005 to study its effect on economic development the capacity constraint gives rise to three effects on the one hand higher energy costs and the reallocation of production towards capacity investments decrease production available for consumption research and or capital investments energy costs and reallocation effect on the other hand research investments may increase which boosts available production research effect depending on the capital endowment and the strength of the effects long run consumption may be boosted or depressed in particular the capacity constraint may render everlasting consumption growth non optimal in a resource rich economy furthermore we find that capacity investments may be postponed to later points in time if the capital endowment is high

a simple model of commodity taxation and cross border shopping this paper sets up a simple model in which two countries differing in geographical extent engage in commodity tax competition originating in opportunities for cross border shopping the non cooperative tax equilibrium and various coordination initiatives are examined in the benchmark model and in two model extensions incorporating i costs of transportation for goods and ii border inspection among the more surprising results are the following with i pure profits accrue to sellers near the border but subjecting them to tax may lower the country s total tax revenue with ii the volume of cross border shopping may well increase jel classification h20 h87 h26

aid and the dutch disease macroeconomic management when everybody loves you abstract countries that undertake serious and sustained programs of stabilization and structural adjustment should expect to attract significant new inflows of capital from donor countries and international institutions while apparently beneficial those flows can work at crosspurpose with other goals of the policy reforms in particular abundant foreign exchange loans can force an appreciation of the real exchange rate often through domestic inflation rather than a nominal appreciation in addition since the government is almost always the recipient of these loans it can crowd out the private sector if it increases its aggregate demand for domestic goods and services if the crowding out is accomplished by tight monetary policy it will fall primarily on private investment rather than consumption this paper shows that both of these problems have surfaced in ghana a country that has become a favorite of donors after demonstrating a serious commitment to policies promoted by the world bank and international monetary fund the paper also suggests modifications in macroeconomic policy that would help lower inflation and boost private investment

cross border commuting and consuming an empirical investigation abstractthis article contributes to our understanding of cross border activity in general and the determinants of cross border trade in particular by focusing on the part of cross border sales that arise due to work related cross border crossings of households we analyse empirically how cross border consumption expenditures vary across product and services categories as well as household characteristics using representative household survey data of cross border commuters to luxembourg in total these households spend an estimated 17 of their gross annual income across the border contributing about 10 to the total household final consumption expenditure hfce in luxembourg cross border expenditure is linked to individual and household related characteristics and to distance between home and work cross border commuters systematically exploit arbitrage opportunities that arise because of existing price level index differences between the country of work and the country of residence

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

the effects of a natural gas boom on employment and income in colorado texas and wyoming improvements in technology have made it profitable to tap unconventional gas reservoirs in relatively impermeable shale and sandstone deposits which are spread throughout the u s mostly in rural areas proponents of gas drilling point to the activity s local economic benefits yet no empirical studies have systematically documented the magnitude or distribution of economic gains i estimate these gains for counties in colorado texas and wyoming three states where natural gas production expanded substantially since the late 1990s i find that a large increase in the value of gas production caused modest increases in employment wage and salary income and median household income the results suggest that each million dollars in gas production created 2 35 jobs in the county of production which led to an annualized increase in employment that was 1 5 of the pre boom level for the average gas boom county comparisons show that ex ante estimates of the number of jobs created by developing the fayetteville and marcellus shale gas formations may have been too large

the aid effectiveness literature the sad results of 40 years of research abstract the aid effectiveness literature ael consists of empirical macroeconomic estimates of the effects of development aid by the end of 2004 it comprised 97 econometric studies of three families of related effects each family has been analyzed in a separate meta analysis the ael is an ideal subject for meta analysis as it uses only a few formally similar models to estimate the same underlying effects it is also an area with strong beliefs often generated by altruism when this whole literature is examined a clear pattern emerges after 40 years of development aid the preponderance of the evidence indicates that aid has not been effective we show that the distribution of results is significantly asymmetric reflecting the reluctance of the research community to publish negative results the dutch disease effect on exchange rates provides a plausible explanation for the observed aid ineffectiveness

stigmatized asset value is it temporary or long term stigma is a negative attribute of real estate acquired by environmental contamination and reflected in its value elliot jones 1996 using a model of neighborhood turnover with external economies we show that both temporary stigma and long term stigma are possible equilibrium outcomes after the discovery and cleanup of a hazardous waste site the existence and duration of stigma are examined using hedonic price techniques with data from housing sales prices in dallas county texas we find that results depend critically on distance from the hazardous waste site neighborhood turnover due to changes in the level of poverty also appears likely

unit tax versus ad valorem tax a tax competition model with cross border shopping abstract within the framework of spatial tax competition with cross border shopping we examine the choice of tax method between ad valorem tax and unit specific tax this study shows that governments endogenously choose the ad valorem tax method not because of a classic welfare reason but because it is a good strategy to compete for mobile consumers another key finding is that while governments are committed to the ad valorem tax method the choice leads to inferior outcome tax cutting competition becomes more serious when countries adopt ad valorem tax and competition in ad valorem tax results in smaller tax revenue than competition in unit tax

comparative advantage and bilateral foreign aid policy this paper formulates the problem of bilateral aid allocation in terms of the comparative advantage framework it is argued that the adaptability of this framework to foreign aid critically depends on the assumption that each donor s aid budget is spent to a large extent on its home market this assumption is not contradicted by empirical evidence an analysis of swiss foreign aid data then suggests that there is scope for considerable gains from specialization we conclude that donors should coordinate their behavior according to their comparative advantage to achieve an optimal allocation of global aid resources

do large capital inflows hinder competitiveness the dutch disease in ethiopia this article investigates whether large inflows of foreign aid and remittances have had a damaging impact on the ethiopian real exchange rate rer we improve the current empirical literature by i compiling a unique quarterly dataset to provide a larger sample size and enable the modelling of important intra year dynamics which should lead to better model specifications ii providing a new empirical approach unobserved components uc to test the dutch disease hypothesis and iii using several cointegration approaches to further test the robustness of our conclusions our results suggest that there are two main long run determinants of the rer in ethiopia trade openness is found to be correlated with rer depreciations while a positive shock to the terms of trade tends to appreciate the rer foreign aid is not found to have a statistically significant impact while there is only weak evidence that remittances are associated with rer appreciations the lack of empirical support for the dutc

oil and women a re examination abstract in a seminal article ross 2008 reports a negative correlation between oil production and women s representation in the labour force and politics across countries this article re examines these relationships exploiting variations in oil endowments to address endogeneity concerns we confirm that oil production causes decline in women s representation additionally we show that consistent with dutch disease effects oil production decreases women s employment in the traded sector however it also leads to an increase in women s employment in the nontraded sector we explore some social consequences of oil production and show that it results in women marrying earlier and having more children

riding the wave monetary responses to aid surges in low income countries abstract we focus on the management of highly persistent shocks to aid flows in the presence of currency substitution by the domestic private sector such shocks have beneficent long run effects but when currency substitution is high they can produce dramatic macroeconomic management problems in the short run what is the appropriate mix of money and exchange rate targeting in such cases and the role of temporary sterilization we analyze these and related issues in an intertemporal optimizing model that allows a portion of aid to be devoted to reducing the government s seigniorage requirement our results show that a managed float with little or no sterilization of increases in the monetary base supports the smooth absorption of the increased aid without incurring higher inflation higher real interest rates or overshooting of the real exchange rate

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

halving poverty by doubling aid is there reason for optimism this paper criticises the world bank as overly optimistic with respect to its ability to fine tune development aid and to focus it on countries with good policies rather than on countries with poor policies in order to raise its effectiveness it is shown that recipient regions showed very different patterns of aid inflows and economic growth in the past and that aid flows yielded the highest correlation to growth when their magnitudes shrank it is furthermore argued that categorising countries by quality of domestic policies is not only questionable at a given point of time especially in countries with failing governmental institutions and open borders as in many african countries it suffers also from incentive problems so that countries receiving more aid can become victims of changes in their domestic policies which are more permissive and etatist to the disadvantage of private agents the paper instead pleads for a shift to aid policies decoupled from country specifics and more oriented to fundamental beyond border problems of the well being of the poor an international endowment fund under supranational law should finance research and implementation of research findings related to common international goods as it was suggested by sachs concerning aids and tropical disease research

real exchange rate fluctuations and the dynamics of retail trade industries on the u s canada border consumers living near the u s canada border can shift their expenditures between the two countries so real exchange rate fluctuations can act as demand shocks to border areas retail trade industries using annual county level data we estimate the effects of real exchange rates on the number of establishments and their average payroll in border counties for four retail industries in three of the four industries we consider the number of operating establishments responds either contemporaneously or with a lag of one year to real exchange rate movements for these industries the response of retailers average size is less pronounced the rapid response of net entry is inconsistent with any model of persistent deviations from purchasing power parity that depends on retailers costs of changing nominal prices

spatial price competition a semiparametric approach we investigate the nature of price competition among firms that produce differentiated products and compete in markets that are limited in extent we propose an instrumental variables series estimator for the matrix of cross price response coefficients demonstrate that our estimator is consistent and derive its asymptotic distribution our semiparametric approach allows us to discriminate among models of global competition in which all products compete with all others and local competition in which products compete only with their neighbors we apply our semiparametric estimator to data from u s wholesale gasoline markets and find that in this market competition is highly localized

international redistribution of income summary how do international policies on aid trade and factor movements affect the international distribution of income we calculate the impact by world decile of the actual level of aid flows and the effect on income of merchandise trade restrictions by high income countries we find that aid s distributional impact is equality enhancing extremely small in terms of changes in inequality measures but of some importance for the lowest decile of the distribution we also find that some of this impact is counteracted by lost potential income in the lower deciles from merchandise trade barriers imposed by high income countries

taxing to control social costs the case of alcohol whether taxation of alcoholic beverages is an appropriate means of reducing social costs of alcohol consumption is a continuing public policy issue some argue that the public health costs and other external costs associated with the consumption of alcoholic beverages are so significant as to justify substantial excise taxes on those beverages others counter that a tax on alcohol would reduce consumption indiscriminately and therefore reduce the satisfaction experienced by millions of sensible drinkers without necessarily reducing the harm caused by a few excessive drinkers 2 this paper presents and applies a framework for evaluating these two views of the efficiency welfare effects of alcohol taxes determining the efficiency implications of alcohol taxes is complicated by the question of whether and how much abusers especially alcoholics benefit from alcohol consumption standard welfare theory assumes that all consumers of alcohol enjoy positive net benefits consumer surplus however it is possible that alcoholics over consume in the sense that consumer surplus from their

a dynamic demand model for liquor the case for pooling this paper estimates a dynamic demand model for liquor in the united states using panel data from 43 states because of taste changes over time and between states in liquor consumption purely time series or cross sectional studies do not elicit reliable price elasticity estimates this study makes the case for pooling and shows how one can control for individual state effects and endogeneity of the regressors using estimators suited for a dynamic demand model our results indicate that the long run price elasticity is in the 0 7 range the findings also support strong habit persistence a small positive income elasticity and very weak evidence of bootlegging from adjoining states the magnitude of the long run price effect suggests that sin taxes can serve not only as an important income source but also as a significant deterrent effect copyright 1995 by mit press

resource boom wages and unemployment theory and evidence from the norwegian petroleum experience the effects of norwegian petroleum activities on nominal wages and the rate of unemployment are analyzed in this paper the theoretical model is based on standard theory of segmented labor markets increased nominal wages in the petroleum sector will unambiguously increase the wage level and the rate of unemployment increased petroleum employment will under realistic assumptions also raise the wage level the effect on the rate of unemployment in this case is ambiguous the empirical model is embedded in reduced forms of the theoretical model and the estimated parameters are consistent with the theoretical results

macro policy responses to natural resource windfalls and the crash in commodity prices policy prescriptions for managing natural resource windfalls are based on the permanent income hypothesis none of the windfall is invested at home and saving in an intergenerational swf is dictated by smoothing consumption across different generations furthermore with dutch disease effects the optimal response is to intertemporally smooth the real exchange rate smooth public and private consumption and limit sharp fluctuations in the intersectoral allocation of production factors we show that these prescriptions need to be modified for the following reasons first to cope with volatile commodity prices precautionary buffers should be put in a stabilisation fund second with imperfect access to capital markets the windfall must be used to curb capital scarcity invest domestically and bring consumption forward third with real wage rigidity consumption must also be brought forward to mitigate transient unemployment fourth the real exchange rate has to temporarily appreciate to signal the need to invest in the domestic economy to gradually improve the ability to absorb the extra spending from the windfall fifth with finite lives the timing of handing back the windfall to the private sector matters and consumption and the real exchange rate will be volatile finally with nominal wage rigidity we show that a taylor rule is a better short run response to a crash in commodity prices than a nominal exchange rate peg

aid dutch disease and manufacturing growth abstract we examine the effects of aid on the growth of manufacturing using a methodology that exploits the variation within countries and across manufacturing sectors and corrects for possible reverse causality we find that aid inflows have systematic adverse effects on a country s competitiveness as reflected in the lower relative growth rate of exportable industries we provide some evidence suggesting that the channel for these effects is the real exchange rate appreciation caused by aid inflows we conjecture that this may explain in part why it is hard to find robust evidence that foreign aid helps countries grow

natural disasters and labor markets abstract while it is clear that natural disasters have serious welfare consequences for affected populations less is known about how local labor markets in low income countries adjust to such large shocks combining data from the indonesia family life survey the desinventar database the u s geological survey and district level employment indicators this paper explores how a large earthquake in indonesia affected labor market outcomes in particular the evolution of wages across sectors i find that the earthquake had a positive effect on wage growth for workers who were employed in the agricultural sector at baseline i propose two mechanisms for this result a higher growth rate of the price of rice and a downward shift in the supply of workers in the agricultural sector i show that evidence mainly supports the latter labor shifted out of the agricultural sector into the construction sector raising the marginal product of labor in agriculture

prices taxes and automotive fuel cross border shopping abstract the aim of the present paper is to determine whether differences in automotive fuel prices among neighboring autonomous communities i e spanish political administrative regions affect the decisions taken by individuals regarding the region in which to purchase fuel in particular the intention is to discover if price increases in certain autonomous communities as a result of the application of the regional tranche of the hydrocarbon retail sales tax hrst has affected fuel purchases in neighboring communities in order to achieve the above mentioned objectives the monthly purchases of automotive diesel in aragon between january 2001 and march 2007 is estimated from the fuel price in aragon the relation between prices in each of the bordering communities and aragon weighted by density of traffic the number of vehicles registered in that community and three dummy variables representative of the implementation of the regional tranche of the hrst in madrid catalonia and valencia the paper finds empirical evidence to demonstrate a positive effect of the relative prices in the neighboring communities and vehicle registrations and also a negative effect of prices in aragon upon the acquisition of diesel in this region in the case of catalonia some evidence suggests that the price effect may have been strengthened following the introduction of the regional tranche of the hrst in august 2004

commodities and development some issues abstract this paper provides a review of a range of issues relating to the relationship between primary commodity markets and the process of economic development as such it provides a backdrop against which the various essays contained in this special issue may be seen

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77

oil windfalls and export diversification in oil producing countries evidence from oil booms abstract this paper examines the factors behind export diversification in oil countries specifically we investigate the impact of oil booms on export diversification through an empirical framework the paper finds that economy s export structure before the oil boom determines whether oil windfalls might affect the diversification process thus an oil boom negatively affects export diversification only if countries initially exhibit low levels of diversification in countries with a high level of diversification before the boom an oil boom has no impact on diversification these results are based on a large sample of 134 countries and are robust to various sensitivity analyses they are corroborated with data from the manufacturing sector which show that oil booms only reduce diversification in countries with a small manufacturing sector prior to the boom

natural resources democracy and corruption we study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions our game theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor but not otherwise we use panel data covering the period 1980 to 2004 and 124 countries to test this theoretical prediction our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions our main results hold when we control for the effects of income time varying common shocks regional fixed effects and various additional covariates they are also robust across different samples and to the use of various alternative measures of natural resources democracy and corruption

the economics of cross border travel abstract we model the decision to travel across an international border as a trade off between benefits derived from buying a range of products at lower prices and the costs of travel we estimate the model using microdata on canada united states travel price differences motivate cross border travel a 10 home appreciation raises the propensity to cross by 8 to 26 the larger elasticity arises when the home currency is strong a result predicted by the model distance to the border strongly inhibits crossings with an implied cost of 87 cents per mile geographic differences can partially explain why american travel is less exchange rate responsive

hazardous waste sites and property values in the state of new jersey the polluter pays principal is justified as a deterrent to future pollution however the us experience suggests that it has considerably reduced the clean up rate of existing hazardous waste sites coaseapos s theorem is used as basis to propose that a partnership between the polluters and property owners near these sites will not only ease financial burden but will also speed up the pace of cleanup a hedonic price model is used to empirically estimate the impact of siting of hazardous waste sites on property values and determine the economic feasibility of the proposed partnership the empirical estimates are based on municipality level data from the state of new jersey the benefis from speedy clean up of hazardous waste sites to new jersey property owners are observed to exceed the cleanup cost of these sites

commodity currencies and the real exchange rate abstract this paper shows that a change in the terms of trade of a commodity exporting country could cause the relative price of nontraded goods to rise or fall depending on the strength of income and substitution effects