who benefits from aid for trade comparing the effects on recipient versus donor exports recent studies offer an ambiguous picture on the effectiveness of foreign aid in strengthening the export capacity of recipient countries moreover the literature on aid for trade aft has often neglected that exporters in the donor countries may be among the main beneficiaries we hypothesize that aft is as much in the self interest of donor countries as it may have promoted the exports of recipient countries we simultaneously estimate and compare the effects of aft on trade in both directions we find that aft increases recipient exports to donors as well as recipient imports from donors the first effect tends to dominate the latter which contradicts the skeptical view that donors grant aft primarily to promote their own export interests

advanced pricing in electrical systems i theory this paper sets forth a comprehensive theory for the real time pricing of electricity that includes selected ancillary services and extends the theory to incorporate constraints on power quality and environment impact that often influence the operation of a power system this paper is part i of a two paper set it sets forth the mathematical development of the extended model for real time pricing the formulation is novel in that it combines the dynamic equations for load frequency control with the static equations of a constrained optimal power flow part ii derives optimal nodal specific real time prices for both real and reactive power the prices derived include additive premia or opportunity costs reflecting the effects of voltage regulation maintenance of generation and transmission reserves regulation of frequency and tie line flows removal and or control of power harmonics and others

the generalized theory of transfers and welfare bilateral transfers in a multilateral world paul samuelson s 1952 1954 classic papers on the transfer problem addressed two separate analytical issues the positive effect of a transfer on the terms of trade and the welfare effect of the transfer on the donor and the recipient since then a considerable body of literature has grown up on the positive analysis while samuelson 1954 himself had extended the 2 x 2 x 2 free trade analysis to allow for tariffs and transport costs subsequent writers have analyzed other extensions of the model for example to allow for nontraded goods as with leisure in samuelson 1971 or general nontraded goods in john chipman 1974 and ronald jones 1970 1975 remarkably however the welfare analysis of transfers has not paralleled these developments since wassily leontief 1936 produced an example of immiserizing transfer from abroad and samuelson 1947 argued that the example required market instability the proposition that has monopolized attention has been that a transfer in the conventional 2 x 2 x 2 model in its free trade version cannot immiserize the recipient or enrich the donor as long as world markets are stable in the walras sense interestingly samuelson 1954 who did extend the positive analysis to include tariffs did not go on to ask whether immiserization of the transfer recipient and hence symmetrically enrichment of the donor in a two country model could now arise consistent with market stability recently the welfare analysis of transfers has been extended in two different directions both apparently unconnected and both yielding the conclusion that transfers from abroad can be immiserizing and that the donor may improve its welfare despite market stability one route to this conclusion has been the introduction of a third economic agent or country that is outside of the transfer process in the appendix of his 1960 paper analyzing the interaction between trade policy and income distribution harry johnson discussed the possibility of welfareparadoxical redistribution between two factor income classes capital and labor in an open economy thereby providing what can be interpreted as a treatment of the threeagent transfer problem for the case in which donor and recipient are both completely specialized in the ownership of a single different factor an independent analysis of the three agent transfer problem using a restrictive model with given endowments of goods and fixed coefficients in consumption was also undertaken in an important paper by david gale 1974 2 brecher and bhagwati bhagwati department of economics columbia university new york ny 10027 brecher department of economics carleton university ottawa on kis 5b6 hatta department of political economy the johns hopkins university baltimore md 21218 we thank the national science foundation grant no 524718 for partial financial support of the research underlying this paper the paper was written when brecher and hatta were visiting columbia university 1981 82 gratefully acknowledged are helpful comments and suggestions from john chipman avinash dixit jacques dreze robert feenstra jacob frenkel ronald jones murray kemp andreu mas colell michael mussa john riley lars svensson and robert willig from anonymous referees and from seminar participants at berkeley harvard minnesota rochester chicago and the university of california los angeles after the present paper was submitted for publication and following its presentation at rochester our attention was drawn to this appendix which was noticed by a student of ronald jones subsequently we learned from makoto yano that motoshige itoh had pointed out an important related paper by ryuotaro komiya and t shizuki 1967 whose condition 11 for the johnson case anticipated our equation 12 below we are grateful for having both of these references brought to our attention 2 gale constructs an example in which the donor is enriched along with the recipient furthermore this immediately implies that a reverse transfer will immis

capital market crises liberalisation fixed exchange rates and market driven destabilisation everyone knows the epigraph to anna karenina happy families are all alike every unhappy family is unhappy in its own way tolstoy may well have been right about families but the extension of his judgement to economies hit by capital market crises distinctly fails their causes and unhappy consequences in latin america and asia over the past 20 years have many elements in common

foreign aid domestic investment and welfare this paper examines the welfare implications of temporary foreign aid in a simple two period two country model of trade domestic investment is endogenous providing an important link between aid in period one and the terms of trade in periods one and two transfer induced changes in the terms of trade redistribute present and future income between the donor and the recipient in the presence of barriers to international borrowing and lending such redistribution gives rise to the possibility of temporary aid being both potentially and strictly pareto improving

competition for aid and trade policy this paper considers the optimal allocation of a given amount of foreign aid between two recipient countries it is shown that given consumer preferences a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own welfare in allocating aid if on the other hand the donor country allocates aid in order to maximize the sum of the welfare of the two recipient countries the result is just the opposite finally we analyze the situation where the recipient countries compete with each other for the given amount of aid it is shown that this competition tends to lower the level of optimal tariffs in the recipient countries

welfare ranking ad valorem and specific tariffs under monopolistic competition actual trade and tariff policy prefers ad valorem tariffs to specific tariffs yet in this paper we show that in a setting of monopolistic competition realizing a given restriction on imports via a specific tariff would generate more consumer utility than obtaining the same restriction via an ad valorem tariff jel classification f12 un classement en terme de bien etre des droits de douane ad valorem et specifiques quand on est en regime de concurrence monopolistique les politiques commerciales en vigueur pref rent les droits de douane ad valorem aux droits de douane specifiques or ce memoire montre que dans un contexte de concurrence monopolistique reduire les importations par le truchement d un droit de douane specifique genere plus d utilite pour le consommateur que les memes restrictions obtenues par le truchement d un droit de douane ad valorem

the political economy of industrial policy in korea the article aims to provide some additional empirical support and theoretical consolidation for the emerging alternative interpretation of the korean developmental experience which emphasizes the role of the state after briefly reviewing some mainstream interpretations it presents a detailed account of state intervention in korea where it is revealed that industrial policy played the central role then it explains how the korean state was able to avoid some of the obvious dangers of such a policy which is often associated with economic failures in developing countries it then explores the basis of state power in korea which provided a background for such an outcome copyright 1993 by oxford university press

running a more complete market with the slp iv acopf the acopf is at the core of competitive electricity market design it is the only ac based algorithm that simultaneously co optimizes real and reactive power dispatch for steady state operations on ac power systems in practice independent system operators isos oversimplify the physical problem and settle the markets on locational marginal price lmps based on real power but do not price reactive power dispatch or voltage control this work proposes a market dispatch and pricing procedure based on the acopf to provide a more complete pricing mechanism we formulate the dual problem of the slp iv acopf as shown in 1 which is a successive linear program shown to solve the acopf to an acceptable quality of convergence to a best known solution with linear scaling of computational time in proportion to network size therefore the dual problem is also a linear program as a result the marginal value pricing of the optimal solution to the dual problem supports the market dispatch due to strong duality i e this solution technique results in a revenue adequate and more complete market design furthermore we show how to distribute the complete real time market settlements the analysis includes a direct comparison to dcopf based approaches similar to those applied in current iso markets

optimal lmp decomposition for the acopf calculation the objective of this work is to design a suitable rule for the energy reference selection in the ac optimal power flow acopf based locational marginal price lmp calculation in the case of the acopf model the congestion component of the lmp vector exhibits strong dependence on the energy reference this in turn makes the hourly values of financial transmission rights ftrs to be reference dependent and thus is a source of dispute in order to resolve this dispute a direct optimization framework is developed in this work exploring the interrelationship between the congestion components of locational marginal prices at individual buses the objective function and the constraints of this optimization model are carefully designed looking at the true motive of the lmp decomposition at the same time necessary attention is paid so as to ensure revenue adequacy in the ftr settlement the optimization problem that is ultimately to be solved is a simple quadratic programming problem with only one variable and two constraints the effectiveness of the proposed methodology is verified through a case study on a modified ieee 30 bus system the framework developed also unveils several interesting features of the lmp components that were under cover until now

optimal foreign aid and tariffs this paper investigates the optimal choice of foreign aid when trade policies are decided in a non cooperative fashion three alternative scenarios depending on the timing of the actions and on whether aid is tied are analyzed it is shown that in the case where aid is decided before tariffs untied aid can lead to the reduction of the recipient s optimal trade tax when the donor can tie the aid to a reduction in the recipient s tariff the optimal aid level is always positive and the world can always achieve a pareto efficient equilibrium

convexity of the set of feasible injections and revenue adequacy in ftr markets the feasible set of power injections for the constrained power flow equations is nonconvex when practical transmission capacity and bus voltage limits are imposed the projection onto the space of active power injections may be close to convex but this is not sufficient to guarantee revenue adequacy for the settlement of financial transmission rights

gatt a cooperative equilibrium in a noncooperative trading regime abstract as global tariff rates have fallen the use of nontariff barriers to trade have become more prevalent one incentive for a country to depart from free trade is to levy the optimal tariff in order to maximize domestic welfare the gatt was designed to maintain free trade through a system of managed retaliation as is well known in a game theoretic trade model of tariffs with no uncertainty free trade is an equilibrium outcome however with the introduction of uncertainty and asymmetric information it is shown that the equilibrium outcome s has each country imposing nontariff barriers to trade

the free trade area of the americas good for latin america the following sections are included introductionmercantilist bias in the effects of discriminatory liberalizationpreferential tariff liberalization the basic casebeyond the basic caseftas under quotasnon traditional gains from north south integrationnaftastatic welfare gainsnon traditional gainsmarket accessshelter from new protectionism in the united statescredibility to and lock on the reformsa digression to the european unionthe free trade area of the americasregionalism and harmonizationa summary of conclusionsreferences this abstract was borrowed from another version of this item

a thorn in the lion s paw has britain paid too much for common market membership the welfare consequence of britain s entry into the common market is studied for 1972 1980 the figures show that in some years britain would have been better off by 3 4 percent of gdp trading on its own its average losses were greater than 1 5 percent of gdp moreover a feasible alternative arrangement is described in which common market association would benefit both great britain and other common market countries without harming non common market countries the methodology involves a general equilibrium model of customs union formation which determines financial arrangements such as cross country compensation and the distribution of common tariff revenues obviously similar studies can be done for other applications such as the proposed north atlantic free trade area

paradoxes associated with the administration of foreign aid abstract this paper shows that if because of administration costs or other wastes only a proportion of an aid reaches the recipient then it is possible that the donor is enriched by its act of charity the extent of the enrichment increasing with the extent of the leakage and or that the recipient is impoverished by aid the extent of the impoverishment increasing with the extent of the leakage these outcomes are possible even when trade is optimally restricted by donor or recipient

does aid cause trade evidence from an asymmetric gravity model anderson and vanwincoop developed what has become the standard framework for framing and interpreting empirical work using the gravity model their framework relies heavily on an assumption of symmetry among countries for issues related to north south trade this assumption is problematic in this paper we develop an asymmetric extension of the anderson vanwincoop framework appropriate to the analysis of north south trade where northern countries produce differentiated goods and southern countries homogenous ones in addition we use an appropriately extended version of baier and bergtrand and taylor linear expansion thus permitting its estimation using good old ols the result is an empirical model that i is better suited to the analysis of north south trade ii is easy to estimate and compute comparative statics not requiring a customised nls routine and given the way the south is included iii provides a simple explanation of zero trade flows between some country pairs a fact still not fully explained in the literature as an illustration of its use we examine the empirical link between foreign aid and trade

a political economic analysis of the failure of neo liberal restructuring in post crisis korea this paper evaluates imf led neo liberal restructuring in post crisis korea the main conclusions are that the economic rebound in 1999 2000 was both incomplete and unsustainable restructuring created a ongoing credit crunch that continues to constrain investment spending korea may have been pushed onto a long term low investment low growth trajectory insecurity and inequality have risen substantially and the influence of foreign capital has dramatically increased the paper concludes by suggesting that koreans should reject radical neo liberal restructuring and consider instead reforms to democratise and modernise their traditional state guided growth model copyright 2002 oxford university press

welfare effects of aid under quantitative trade restrictions the paper examines the effects of tied aid on the welfare of both the donor and the recipient countries we depart from the previous literature by assuming preexistence of quantitative trade distortions to mitigate these distortions the donor country provides aid that is tied to the rationed good conditions for the presence of the transfer paradox and of the enrichment of both countries are derived and interpreted under the stability of the system furthermore we show that whereas untied aid cannot increase global welfare tied aid unambiguously does so

asymmetric tax policy responses in large economies with cross border pollution we build a model of cross border pollution between two large open economies one importing the polluting good and the other exporting it and derive their non cooperative trade and environmental tax policies we show among other things that 1 in response to a bilateral reduction in trade taxes by both countries the former country s optimal policy is to lower its nash emissions tax while the latter s is to raise it and 2 in response to an increase in emissions tax rates by both countries the former country s optimal reaction is to raise its nash import tariff while the latter s is to reduce its nash export tax that is in the present context freer trade leads the exporting country to adopt stricter while the importing country laxer environmental tax policies

income effects and paradoxes in the theory of international trade every field in economics has its paradoxes phenomena which initially are thought to confound economic sense but ultimately come to be better understood the field of international trade can claim its fair share the examples of the metzler paradox wherein a tariff fails to provide protection or that of immerising growth wherein a country suffers a loss in welfare despite an improvement in production possibilities come easily to mind more recently a reexamination of the transfer problem in the context of many country trade or of tax distortions has revealed possibilities for donor countries to gain or transfer recipients to lose results which would be considered so paradoxical in standard treatments as to be ruled out by stability arguments behind each of the examples just cited lies a rational explanation in which income effects prove crucial in supporting a paradoxical outcome in some situations the potential for paradox rests on the possibility of income redistribution nationally or internationally when tastes differ among the various trading participants paradox becomes impossible if tastes at the margin are identical in other instances income redistribution is not the crucial mechanism and paradoxical outcomes may occur even if all traders possess the same taste patterns all cases share the property that paradoxes can arise only if the terms of trade are sufficiently disturbed substitution effects high values of which serve to dampen the required adjustment of prices to a market disturbance thus work to prevent paradoxical outcomes in the first section of this paper i focus on those issues for which income effects are associated with income redistribution especially the analysis of tariffs and transfers in markets that initially are free of taxes or other distortions in the second section i analyse an issue for which income redistribution is no longer the central ingredient the welfare consequences of growth a standard technique in game theory allows for a reinterpretation of the growth case to reveal the fundamental connection between a wide variety of standard two country results in the theory of international trade and the possibility of paradoxes in the three agent transfer problem i would therefore argue that the three agent transfer literature has wider applicability than is commonly perceived in the final section i analyse briefly the frequently encountered argument that some instances of paradoxical welfare loss can be avoided by optimal tariff policy i wish to thank isaias coelho for helpful conversations makoto yano for stimulating my interest in the transfer problem with many agents and j peter neary for comments on an earlier draft useful suggestions were also received at seminar presentations at the institute for international economic studies in stockholm and the london school of economics research support was provided by the national science foundation grants ses 78o6159 and ses 8309386 i the role of substitution effects in transfer paradoxes with more than two commodities and agents is discussed by de meza 1983

decentralized intraday generation scheduling for multiarea power systems via dynamic multiplier based lagrangian relaxation due to day ahead forecast error in load demand and renewable generation there exists inevitable deviation between real time operation and day ahead generation schedules this paper introduces a decentralized multiarea intraday generation scheduling based on nonlinear ac power flow this approach allows for a more reliable and economic operation with the ability to accurately constrain power and voltage securities at a multiarea scale a dynamic multiplier based algorithm is employed for solving the nonlinear multiarea intraday dispatch model which is fully decentralized and thus preserves autonomy for each area the dynamic multiplier based algorithm presents the advantage of accelerated computation compared to conventional static multiplier numerical simulations illustrate the computational performance and practical value of the proposed multiarea intraday generation scheduling framework and dynamic multiplier based algorithm

a new methodology linking concentration dynamics to current and steady state profits examining korean industrial policy during take off abstract we model the dynamics of industrial structure and market power using korean manufacturing data during the take off period 1978 82 structure conduct performance scp methodologies have been criticized for using accounting data and because a few superior firms may have greater shares and greater profits both are argued to present possible spurious correlations between concentration and profits this paper follows earlier work which shows that market structure responds to observed accounting profits as if these were accurate indices of real profits and not as if leading firms are perceived to have unmatchable advantages the methodological contribution of this model is a new latent variable for steady state profits derived from the speed of structural adjustment long run profits are identified by the hypothesis that structural adjustment will be more rapid when industries are farther from steady state levels we analyze the long run profits latent variable finding strong support for this hypothesis the speed of adjustment is greater for positive and negative deviations from steady state structure we show that the profits and structural adjustment relationship is non monotone the scp criticisms above are based on spurious correlations which are monotone in profits and structure positing spurious correlations which are at the same time monotone in structure and non monotone in structural adjustment seems less plausible than accepting the scp results which are consistent with both our analysis also is new in that it is the first direct econometric analysis of korean industrial policy during its take off years we note that in korea unlike elsewhere industrial policy was hypothesized to lead to concentration and market power in the popular press and by professional economists ours is the first direct econometric analysis of this hypothesis and we find it supported

an extension of the kemp wan theorem on the formation of customs unions abstract kemp and wan 1976 proved that nations forming a customs union can always compensate each other so that no nation will be worse off relative to the pre union equilibrium their proof however is existential giving no clue how to construct such compensation schemes this paper proposes a particular compensation scheme which is always feasible further there are circumstances where this scheme is the only feasible one at world prices the arrangement breaks even for each nation at post union internal prices member compensations sum to the union s tariff receipts the proof that such a scheme is feasible depends upon the grandmont mcfadden theorem

foreign aid and the question of fungibility this paper analyzes whether the foreign assistance provided for specific categories of expenditure is shifted among them contrary to the wishes of donors it also considers whether aid reduces the tax effort of recipient governments econometric results are presented for the dominican republic that show that the fungibility of aid has resulted in a thwarting of the intentions of donors an attempt is made to account for the observed differences in behavior of individual countries in altering expenditures copyright 1993 by mit press

new perspectives on east asian development conventional explanations of rapid growth in east asia have focused on the efficient allocation of resources resulting from market led outward oriented strategies this study challenges that approach east asian success has centred around the accumulation dynamic both because of its direct importance to the growth process and also because of its close and interdependent linkages with exports on this basis the study considers the institutions and policies which were used to manage economic rents in support of rapid growth and to ensure a more strategic and orderly integration into the world economy the study also examines the contribution of regional trade and investment flows to east asian industrialisation the potential for replicating similar strategies is considered

trade as transfers gatt and the core abstract we show in our model of international monopoly trade that transfers proposed by grinols grinols e l 1981 an extension of the kemp wan theorem on the formation of customs unions journal of international economics 11 259 266 support the grand coalition as a core allocation we compare these transfers to those supporting the shapley value

the fungibility of u s military and non military assistance and the impacts on expenditures of major aid recipients abstract this paper examines the impact of u s military and non military assistance on the allocation of public and private sector spending for eight major recipients over the 1972 1987 period the model assumes that an aid recipient s effective post assistance budget constraint is a priori unknown and must be estimated two versions of the model are tested in version a the data is converted into real u s dollars using official exchange rates in version b the data is converted using purchasing power parity exchange rates provided by summers and heston 1991 major findings are the same for both versions u s aid is highly fungible with a significant portion channeled to the private sector where it finances current consumption relatively more than investment

do big countries win tariff wars yes it is widely believed that tariffs invite retaliation and that the postretaliation equilibrium l eaves all countries worse off than they would be at free trade the a uthors present a simple pure exchange model with two countries and t wo goods and show which endowment patterns are consistent with this belief they find that if one country is substantially bigger than th e other it can expect to gain from a tariff war despite retaliation the model can be extended to show that the advantage obtained by bei ng part of a large trading unit can help explain the formation of cus toms unions copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

explaining korea s lower investment levels after the crisis summary this paper examines the reasons for korea s lower investment levels after the crisis of 1997 98 through estimation of an error correction model of real investment the econometric results suggest that the fall in investment rates resulted from a decline in the long run equilibrium value of investment rates due to a deterioration in terms of trade they also show that recent investment levels are neither too high nor too low relative to the long run equilibrium value the variation in terms of trade seems to have pronounced effects on investment through its effect on corporate profits and cash flows in korea

optimal tariff equilibria with customs unions the authors construct a model of customs unions in which countries charge optimal tariffs customs unions internalize the externality that exists whenever two countries import the same good also customs unions make several countries into one large unit with more market power big customs unions can improve their members welfare relative to the free trade the authors model of customs unions separates the effects of tariff reduction from the effects of policy coordination the movement from nash equilibrium to a free trade association improves global resource allocations moving from a free trade association to a full customs union has ambiguous resource allocation effects

locational marginal price sensitivities within an optimal power flow market clearing framework this paper provides expressions to compute the sensitivities of locational marginal prices with respect to power demands sensitivities with respect to other parameters can also be obtained an example and a case study are used to illustrate the expressions derived

customs unions and the core abstract customs union formation is modeled as a two stage game in the first stage countries make coalitional choices according to core theory in the second stage optimal tariffs are determined this yields a theory that predicts which customs unions form an example shows that a customs union can be an equilibrium even when both member countries do better at free trade

aid allocation by german ngos does the degree of official financing matter using a new data set for 41 german non governmental organisations ngos we analyse the allocation of ngo aid across recipient countries in a tobit regression framework by identifying for each ngo the degree of official financing we address the largely unresolved issue of whether financial dependence on the government impairs the targeting of ngo aid it turns out that german ngos are more active in poorer countries while they do not complement official aid by working under difficult local conditions beyond a certain threshold rising financial dependence weakens their poverty orientation and provides an incentive to engage in easier environments in addition we find that the ngos follow the state as well as ngo peers when allocating aid this herding behaviour is however hardly affected by the degree of official financing

the asian debt and development crisis of 1997 causes and consequences abstract interpretations of the asian crisis have coalesced around two rival stories the death throes of asian state capitalism story about internal real economy causes and the panic triggering debt deflation in a basically sound but under regulated system story that gives more role to external and financial system causes the paper presents the stories and assesses the evidence the evidence in particular the chronology of the crisis supports the second rather better than the first the paper discusses the interests driving capital account liberalization without a framework of regulation the single most irresponsible act of public authorities in the whole crisis us and uk financial firms allied with their treasuries and with the imf the wto and the oecd saw themselves at a chronic disadvantage in the asian system of long term relationships and patient capital this alliance supported by segments of asian political and financial elites achieved dramatic domestic financial sector liberalization and capital account opening in asia over the 1990s setting up the conditions for crisis paradoxically the crisis may be looked back upon not as the triumph of benign globalization and neoliberal economic doctrine but as the beginning of its end

can bilateral trade agreements help induce free trade there has been growing debate about whether bilateral trade agreements are damaging multilateral efforts to eliminate barriers to international trade this paper develops a model in which trading blocs always charge optimal tariffs and make trade agreements based on strategic considerations we ask a very simple question does the fact that trading blocs can form bilateral trade agreements make free trade less likely to occur the answer is that it depends on the size distribution of the trading blocs if there is one large trading bloc along with some smaller ones then bilateral trade agreements allow the smaller trading blocs to coalesce and block the monopoly power of large trading blocs in this case bilateral trade agreements facilitate the attainment of free trade not allowing customs unions leads to more not less protection if trading blocs are of roughly equivalent size then bilateral trade agreements allow groups of trading blocs to more effectively monopolize world trade in which case they may make free trade less likely these results suggest that a policy that inhibits the formation of trading blocs may be harmful we also compute the welfare effects of trade agreements to get some idea of how empirically important these issues are

foreign aid and public goods abstract most less developed countries ldcs use foreign economic aid to finance public consumption goods or public intermediate inputs this paper constructs a two country general equilibrium trade model where an income transfer that takes place between the two countries is used by the recipient to finance a public consumption good within this framework the paper identifies the conditions under which the income transfer improves or deteriorates the donor country s terms of trade and shows that the transfer can be welfare enriching for the donor and welfare immiserizing for the recipient country the paper also demonstrates that the transfer can raise reduce world welfare in which case a welfare increase decrease in both the donor and the recipient country is possible

who is against a common market this paper develops a theory of the endogenous formation of a common market in a three country two factor political economy model in the status quo home and foreign implement nondiscriminatory policies toward international factor flows in order to maximize the domestic median voter s welfare then the two countries simultaneously hold referenda on a common market initiative leading to the removal of the pre existing policies for factor flows between the member countries while no coordination is imposed on policies vis a vis the rest of the world several interesting results emerge in a common market the returns on factors moving between the members are more likely to increase the larger is the import demand of one country relative to the factor supply of the exporting partner factors that do not relocate are more likely to see their returns decrease when flows are large and import demands are inelastic importantly for the common market to emerge as an equilibrium some factors must continue to experience enhanced protection when the integration process is completed this result highlights the potential tension between social desirability and the political feasibility of the integration process jel f1 f2 p16

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

trade taxes and subsidies with imperfect competition abstract traditional results in the theory of international trade suggest that a country large enough to influence world prices can raise its national income by levying a tariff in a partial equilibrium model brander and spencer 1984 suggest that a country facing a monopolistic supplier of importables may find it optimal to subsidize this activity rather that tax it this result is reconsidered in a general equilibrium framework it is in general correct but specific and ad valorem forms of taxation may yield different results

transfers and the generalized theory of distortions and welfare recent theoretical attention devoted to the transfer paradox has included attempts to incorporate it into the body of commercial policy in this paper the existence of a family of always feasible corrective tax policies is proved which guarantees normal welfare response the set of pol icies is shown to contain the external trade fixing tariff and the op timal tariff the set of policies is then extended to include a capit al flow fixing profits tax to deal with the problems of foreign inves tment the results are then interpreted in terms of a general proposi tion in the theory of distortions and welfare copyright 1987 by the review of economic studies limited

the hazard of moral hazard untangling the asian crisis abstract the paper critically examines the explanations of the asian crisis which emphasize the role of national policies and institutions that allegedly created moral hazard by overprotecting the investors industrial policy crony capitalism and government guarantees accorded to banks and industrial firms that are considered too important to fail we also discuss the international dimension of the moral hazard argument in the presence of international monetary fund imf bail out the paper finds these explanations theoretically ill defined and empirically weak and argues that the prescriptions for changes in policy and institutions based on them are unlikely to prevent similar kinds of crises in the future

foreign investment and economic growth characterization of a second best policy for welfare gains abstract this paper prescribes corrective taxes for immiserizing growth and customs union formation growth through removal of trade barriers when the home country and the rest of the world are financially linked through foreign investment and ownership of assets an always feasible policy which generates pareto welfare gains for home country residents and union countries residents is found with foreign ownership the policy generally requires a specific profits tax in addition to the usual taxes on traded goods and factors the policy does not harm residents in the rest of the world growth is pareto non inferior from the world point of view

interpreting the korean crisis financial liberalisation industrial policy and corporate governance as the interpretation of its economic miracle has been so the interpretation of the recent crisis in korea remains highly controversial 1 although there are many important issues which have been raised by the korean crisis such as exchange rate policy labour market policy and the architecture of the international financial system chang 1998a three issues have been especially controversial in the debate financial liberalization industrial policy and corporate governance

vulnerability to a currency crisis lessons from the asian experience are currency crises caused by manias and panics in financial markets or by unsustainable deteriorations in domestic macroeconomic conditions this question is explored in the context of the recent asian currency crisis the theoretical concept of vulnerability is used to identify three early warning indicators of susceptibility to a currency crisis rapid accumulation of mobile capital domestic lending booms and overvalued exchange rates it is shown that the crisis and noncrisis countries of asia may be distinguished empirically using these indicators over the decade preceding the crisis this exercise provides convincing evidence that the crisis emanated largely from domestic macroeconomic conditions

a comprehensive assessment of the evolution of financial transmission rights financial transmission rights ftrs are complementary to the locational marginal pricing of energy the basic aim of the ftr mechanism is to guard forward contracts from uncertain congestion charges ftrs are also useful to individual generators and loads for selling and buying power respectively at the prices of other locations the concept has evolved encompassing many features such as a simultaneous feasibility test various ways to conduct auctions and allocations and secondary trading ftrs also have a close relation to market power and transmission investment this paper reviews most of the landmark research papers on the evolution of the ftr concept it reports a comprehensive assessment of various facets of ftrs and allied issues financial transmission rights and flowgate rights fgrs are compared the concept of long term ftrs is discussed the paper also touches upon future proposals in this area

towards a competitive market for reactive power this paper presents the design of a competitive market for reactive power ancillary services generator reactive power capability characteristics are used to analyze the reactive power costs and subsequently to construct a bidding framework the reactive power market is settled on uniform price auction using a compromise programming approach based on a modified optimal power flow model the paper examines market power issues in these markets and identifies locations where strategic market power advantages are present that need to be removed through investments in reactive power devices

winners and losers from the gradual formation of trading blocs although global free trade is efficient each country s benefit from free trade depends on the path that leads to the global free trade agreement using a dynamic model of trading bloc formation we show that when global free trade is reached gradually the countries that are initially excluded gain less than the rest and may be even made worse off by the final free trade agreement than they were in the initial state of no trading blocs

debt restructuring and the politics of exclusion a case study of the daewoo motor bupyeong plants in incheon south korea this paper examines the politics of inclusion and exclusion in the debt restructuring of the south korean motor vehicle industry and shows how the contested process of exclusion operates through the politics of forgetting it focuses on the power relations among multiple actors involved in the debt restructuring of a bankrupt auto company daewoo motor company in order to understand the politics of exclusion and forgetting as a series of complex multiscalar processes in order to analyse power relations among multiple actors at different geographical scales this study examines these actors conflicting economic and political interests ideologies positions strategies resources and effectiveness of their power the study shows that the politics of inclusion and exclusion derives not only as a result of global external forces but also from conscious policy choices made by multiple actors at different geographical scales this paper offers an alternative angle to the binary view of the relationship amon

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

a penalty scheme for reducing electricity price volatility the deregulation of electric power systems in many parts of the world has changed the mechanism of electricity pricing unlike the fixed price in conventional power systems electricity price varies with time and location in the new deregulated environment electricity prices in a restructured power system can be highly volatile due to the random nature of system failures and demands it is therefore very difficult for the independent system operator iso to control the price and associated risk the high prices beyond control have resulted in significant impacts on customers as well as on system operation this paper proposes a penalty scheme for reducing electricity price volatility caused by failures in generation companies gencos or transmission companies transcos in this scheme gencos and transcos will be penalized if their equipment failures result in unexpected price changes the price decomposition technique is used to evaluate the price components caused by random failures the penalty can be calculated based on the difference of electricity price components between the normal state and the contingency states moreover a simplified schema which is based on profit analysis is also proposed in this paper the proposed penalty scheme not only gives the gencos and transcos an incentive to improve their reliabilities but also provides a flexible tool for the iso to control the system price risk the possible shortcomings of the proposed schema are also specified in the paper the ieee rts is analyzed to illustrate the technique

tied aid and the paradoxes of donor enrichment and recipient impoverishment it is part of received doctrine that in a two country world without hindrance of commodity taxes or other distortions and with market stability assured international transfers necessarily harm the donor and benefit the recipient 2 however in the case of most non private international aid those conditions fail donors often require that aid be spent in a manner not closely related to private preferences in the recipient countries indeed not closely related to any well behaved preferences and they normally finance the aid by means of distorting taxation hence one cannot rule out by appeal to standard theorems the possibility that aid perversely leaves the donor better off and or the recipient worse off let us say that aid is tied in the recipient if it is spent inefficiently in terms of individual preferences and that aid is tied in the donor if it is financed inefficiently thus whether aid is tied is a question of how it is spent or financed it is not a question of the numeraire in terms of which aid is accounted nor of the form in which it is offered 3 evidently the definition of tying is uncommonly broad for example aid may be tied in the recipient not because the donor attaches strings but because the government of the recipient is incompetent or unrepresentative moreover the definition is relevant however the aid is applied whether to private or public goods whether to consumption or investment goods we follow the literature on the transfer problem in assuming that aid is spent on private consumption goods like hospital services and powdered milk this is a matter of convenience and continuity only 4 in the present note we seek to rework the economics of foreign aid under novel assumptions in particular allowance will be made for the possibility that aid is tied in whole or in part in the donor or in the recipient it will be verified that the donor may benefit and the recipient suffer and that these outcomes are com

korea the misunderstood crisis abstract the article argues against the conventional wisdom that the current korean crisis is a crisis from underregulation rather than from overregulation it argues that ill managed financial liberalization abandonment of investment coordination and poor exchange rate management were the underlying causes of the crisis it then argues that while certain structural changes made such policy shifts somewhat inevitable there were also poor strategic choices and ideological prejudices involved the article finally discusses whether the current international monetary fund program of institutional reform in the anglo american direction will be able to revive the korean economy in the long run

the generalized theory of transfers and welfare exogenous policy imposed and endogenous transfer induced distortion this paper reconsiders the welfare effects of a transfer payment in a two commodity world with two agents countries by taking the presence of exogenous and endogenous distortions into account when there is an exogenous tax cumsubsidy on production consumption or trade the analysis demonstrates that a transfer may paradoxically enrich the donor and immiserize the recipient under certain specific conditions these welfare paradoxes are also shown to be possible if the transfer endogenously induces directly unproductive profit seeking activity of lobbyists concluding remarks emphasize the paper s relevance for policymakers

industrial targeting in free trade areas with policy independence we investigate the limits of a mechanism for free trade area fta formation that simultaneously satisfies internal industrialization targets for arbitrary targets we find necessary and sufficient conditions that guarantee that the mechanism is efficient for member countries individually even if other members do not implement the efficient policy when the objective is conservative designed to protect the level of industrialization previously achieved by the target industry member countries are guaranteed gains from the efficient policy and their fta participation the analysis covers cases with transportation costs and explains why minimally restrictive rules of origin support efficiency and policy independence on etudie les limites d un mecanisme de formation d une zone de libre echange zle qui simultanement rencontre certains objectifs internes d industrialisation pour des cibles arbitraires on definit les conditions necessaires et suffisantes qui garantissent que le mecanisme est efficient pour les pays membres individuellement meme si d autres membres ne mettent pas en place la politique efficiente quand les objectifs sont conservateurs tentant seulement de proteger le niveau d industrialisation auquel on s est donne acces anterieurement dans l industrie ciblee on peut garantir des gains pour les pays membres decoulant de la politique efficiente et de la participation a la zle l analyse examine aussi des situations avec couts de transport positifs et explique pourquoi des restrictions minimales sur l origine des produits assurent l efficacite et l independance des politiques

data perturbation based sensitivity analysis of real time look ahead economic dispatch in this paper the sensitivity of look ahead economic dispatch in real time power markets with respect to data perturbation is studied in the look ahead dispatch optimization problem a small change in the data that are used for setting the interspatial and temporal equality inequality constraints and the objective function may negatively affect normal operations such as the calculation of real time wholesale electricity prices and operating costs this could lead to more distorted prices and larger operating costs with the look ahead dispatch than with a static dispatch that use data for a single future time we perturb karush kuhn tucker conditions of the look ahead dispatch optimization formulation and then using them derive a linear sensitivity matrix that assesses the impact of data corruption on look ahead dispatch this matrix illustrates the changing optimal solution of look ahead dispatch subject to potential corruption in various types of spatial and temporal data generator s bidding cost coefficients capacity limits for generators and transmission lines ramp rates and the estimate of initial generation output with ramp constraints and multiple time series of the forecast load for the look ahead horizon the results of the simulation are illustrated with numerical examples in the ieee 14 bus system

using a system model to decompose the effects of influential factors on locational marginal prices locational marginal prices lmps are influenced by various factors such as load uncertainty thermal limit capacity reserve and market power we build a system model to quantitatively analyze the effects of these individual factors and their interactions on the mean and standard deviation of the lmps assuming that the factors are either active or inactive according to the sensitivity analysis results from convex quadratic programming lmps are piecewise linear functions of demand variation which is a key property used in the computation this paper attempts to answer the following types of questions 1 to what extent does market power raise the lmps above the marginal cost 2 what effects will generation or transmission capacity expansion have on relieving high lmps under high demand scenarios an ieee 30 bus test system is used as an example to demonstrate our approach

a strategic and welfare theoretic analysis of free trade areas abstract we construct a three country model to determine how the formation of free trade areas ftas affects optimal tariffs and welfare we find that at constant rest of the world row tariffs the adoption of internal free trade induces union members to reduce their external tariffs below the kemp wan j int econom 6 1976 95 97 level and causes row s terms of trade to improve and its welfare to rise when row also behaves optimally its policy response to the formation of the fta is to raise tariffs generally fta members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large we also demonstrate how ftas may undermine the attainment of global free trade

immiserizing transfers from abroad abstract this paper shows that an international transfer payment may paradoxically immiserize the recipient country or increase the donor country s welfare even when world markets are stable despite the traditional view that such a paradox theoretically requires market instability to demonstrate this paradoxical possibility the paper extends the conventional trade theoretic analysis to admit exogenous distortions created by tax cum subsidies in domestic production or endogenous distortions due to additionality requirements imposed by the donor on the recipient this analysis of immiserizing transfers from abroad immediately suggests significant implications for important policy issues including the evaluation of real benefits from foreign aid

stable multilateral trade agreements we analyse multilateral tariff negotiations as a game in coalition form in a model with three identical countries that produce and trade an homogeneous commodity and where countries aggregated welfare can weight differently their different components we analyse how changes in the countries objective affects the stability of coalitions in other words we characterize what tariff agreements if any are stable i e lie in the core

dynamic externalities multiple equilibria and growth abstract i consider an olg model with production and a single commodity i show that in such an environment unbounded growth of income per capita is not possible if the aggregate technology is of the constant returns to scale type i introduce an external effect in the aggregate production function and derive conditions under which persistent growth is an equilibrium outcome the introduction of an external effect also creates poverty traps and open sets of initial conditions for which there exists an infinite multiplicity of equilibria when such a multiplicity exists equilibria with the same initial position will display different asymptotic behaviors finally i show that by introducing appropriate tax schemes a unique equilibrium path can be selected

intertemporal equilibrium and the transfer paradox the transfer paradox may occur in a world with only two countries at a dynamically stable intertemporal competitive equilibrium in a framework of overlapping generations with production and investment a transfer of income may immiserize the recipient while enriching the donor away from the golden rule a transfer may result in a pareto improvement

from technological catch up to innovation based economic growth south korea and taiwan compared abstract this paper sets out to analyse the divergent models pursued by south korea and taiwan in regard to technological catching up and their ongoing transition towards innovation based economies it is found that south korea s former high debt and chaebol dominated model inclined it to pursue a schumpeterian scale based technological development while taiwan s former pro stability small and medium sized enterprise sme based model tended to favour its emphasis on a neo marshallian network based technological development it will be argued that the state s approach to economic liberalisation and firms demand for capital for technological upgrading are the major factors that have underpinned the adjustment efforts of these two countries

bureaucracy and growth a cross national analysis of the effects of weberian state structures on economic growth the role of bureaucratic authority structures in facilitating economic growth has been a sociological concern since max weber s classic contributions almost 100 years ago using a recent and original data set we examine the characteristics of core state economic agencies and the growth records of a sample of 35 developing countries for the 1970 1990 period our weberianness scale offers a simple measure of the degree to which these agencies employ meritocratic recruitment and offer predictable rewarding long term careers we find that these weberian characteristics significantly enhance prospects for economic growth even when we control for initial levels of gdp per capita and human capital our results imply that weberianness should be included as a factor in general models of economic growth they also suggest the need for more attention by policymakers to building better bureaucracies and more research by social scientists on variations in how state bureaucracies are organized

increasing returns and animal spirits the purpose of this note is to simply point out that the multiplicity intrinsic of course to the presence of non convexities characterizes the models of growth with external increasing returns which have been studied recently and more importantly to show that the many competitive equilibria which often arise in those models can be interpreted as animal spirits equilibria that is equilibria indexed by the consumers optimism or pessimism this multiplicity of competitive equilibrium paths can be viewed as providing a new foundation upon which to build a theory of self fulfilling prophecies one which relies solely on the existence of external effects and does not rest on the overlapping generation structure or on back ward bending offer curves the conclusion that multiple animal spirits competitive equilibria are likely to arise in a model of external increasing returns would survive the generalization of the framework used in this paper to many period environments be they overlapping generation or representative agent infinite horizon structures this abstract was borrowed from another version of this item

a legitimate paradox neo liberal reform and the return of the state in korea this article examines the neo liberal reforms that the kim government implemented in post crisis korea it argues that by embracing the reforms the state paradoxically re legitimised itself in the national political economy the process of enacting the reforms completed the power shift from a collusive state chaebol alliance towards a new alliance based on a more populist social contract but one that nonetheless generally conformed to the tenets of neo liberalism kim and his closest associates identified the malpractices of the chaebols as the main cause of the crisis so reforming the chaebols would be the key to economic recovery combining populism and neo liberalism they drew on support from both domestic and international sources to rein in rather than nurture the chaebols

on the tying of aid to tariff reform this paper considers the welfare effects of foreign aid that is tied to changes in the recipient s tariff by constructing a three country model with tariffs and by allowing for changes both in the amount of aid and in the tariff rates we are able to consider the welfare implications of two different rules of aid conditionality i a rule which leaves the donor s welfare unchanged and ii a rule which leaves the recipient government s total revenue unchanged it is shown that the tying of aid to a tariff reform can inter alia be used to ensure pareto improvement

increasing returns and the gains from trade it is known that gains from trade are positive in the presence of increasing returns to scale if all increasing returns industries expand in the shift from autarky sufficient conditions for gains when some increasing returns industries expand and others contract suffer from the limitations that the production frontier must be convex changes must satisfy a prespecified hierarchical pattern or that total factor supplies must be fixed between equilibria conditions which can not generally be assured this paper develops a necessary and sufficient condition for gains and from it a sufficient condition that does not depend on these restrictions copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

financial crisis in southeast asia dispelling illusion the minskyan way this paper extends minsky s financial instability hypothesis to the case of the open liberalised economy making it possible to put forward a specifically minskyan account of the road to the financial crisis in southeast asia 1997 1998 the analysis suggests that the threats to growth and employment emanating from the financial sector which minsky identified in the closed economy setting are much intensified in open liberalised developing economies financial liberalisation is an important key factor in this process rival explanations of the crisis are examined and rejected in favour of the extended minskyan explanation the policy implications are derived and discussed copyright 2002 oxford university press

advanced pricing in electrical systems ii implications part i of this paper set forth a mathematical formulation of a model for real time pricing of electricity that included selected ancillary services and extended the theory to incorporate constraints on power quality and environment impact that often influence the operation of a power system derived herein are optimal real time prices for both real and reactive power the optimal prices are temporally and spatially differentiated the prices derived include additive premia or opportunity costs reflecting the effects of voltage regulation maintenance of generation and transmission reserves regulation of frequency and tie line flows removal and or control of power harmonics and others this paper concludes with a discussion of the implications of the optimal prices for pricing of both retail and wholesale services

pareto ranking optimal tariffs under foreign monopoly abstract this paper shows that whether or not optimal ad valorem and specific tariffs can be pareto ranked for a country trading with a foreign monopoly firm depends on parameters of the economy

aid and trade this paper surveys the recent theoretical and empirical literature that explores the relations between aid and trade and asks about the complementarity or substitution effects at work we distinguish between the effects of aid on trade flows and on trade policies of the donor as well as the recipient countries special focus is given on trade facilitation or aid for trade

decomposition model and interior point methods for optimal spot pricing of electricity in deregulation environments in this paper an integrated optimal spot pricing model is presented first the proposed model includes the detailed derivation of optimal nodal specific real time prices for active and reactive powers and the method to decompose them into different components corresponding to generation loss and many selected ancillary services such as spinning reserve voltage control and security control the features of the proposed model are discussed in relationship to existing pricing models and classical economic dispatch the model is then implemented by modifying existing newton opf methods through interior point algorithms which can effectively avoid go no go gauge i e highly volatile in the calculation of spot prices case studies on 5 bus and ieee 30 bus systems are reported to illustrate the proposed method

the adjustment of external tariffs in the kemp wan grinols compensation scheme this paper considers the adjustment of external tariffs when two countries integrate and implement the kemp wan grinols compensation scheme attention is also paid to the restrictions set by article xxiv of gatt this paper shows how the external tariffs would change in a three good three country model under the assumption of gross substitutability the results are sensitive to the initial trade pattern in particular they depend on the number of goods initially traded between the member countries the analysis can be extended to a multi commodity model if the preferences of the countries have identical ces representation jel classification f11 f15 l ajustement des tarifs douaniers avec le monde exterieur dans le scheme de compensation a la kemp wan grinols ce memoire examine l ajustement des tarifs avec le monde exterieur quand deux pays forment un tout economique integre et mettent en place un scheme de compensation a la kemp wan grinols on prend en compte les restrictions imposees par l article xiv du gatt on indique comment les tarifs avec le monde exterieur changeraient dans un modele a trois pays et trois biens quand on postule un degre general de substituabilite les resultats dependent du pattern initial de commerce en particulier ils dependent du nombre de biens initialement echanges entre les pays membres l analyse peut etre generalisee a un modele a plusieurs biens si les preferences des pays ont une representation ces identique

food for education versus school quality a comparison of policy options to reduce child labour in a model in which credit markets play a crucial role we examine two policy options for reducing child labour food for education and investment in education quality with an imperfectly elastic supply of credit an increase in food subsidy is more eective in reducing child labour than an income equivalent increase in expenditures in education quality the eectiveness of the latter policy improves and the optimal share of resources devoted to this policy increases at the expense of food subsidies as the supply of credit becomes more elastic

on the provision of official and private foreign aid abstract the provision of official relative to private foreign aid varies considerably between donor countries we explain the variations in terms of country size household composition income distribution and the government s ability to commit to aid and derive inter alia the results 1 official aid crowds out private aid 2 total aid and official aid collected from each household are lower in more populous countries 3 total aid is lower if i the distribution of income favors the more altruistic households and ii the government can credibly commit to a certain level of aid evidences suggest that the theoretical results can explain stylized facts

unification of dual exchange markets abstract this paper develops the model of an economy under a dual exchange system comprising an official market with a crawling exchange rate and a free market with a floating exchange rate after analyzing the behavior of the economy under the dual system the paper discusses the effects that switching to a unified floating system or a unified crawling peg system has on the exchange rate and on the balance of payments particularly in the short run the paper shows that these effects depend on the composition of the private sector s portfolio at the time of unification which in turn depends on the various policies that were followed while the economy was under the dual system

rules of origin as commercial policy instruments this article examines the role of rules of origin as a commercial policy instrument that targets the input composition of imports using a three country partial equilibrium structure we demonstrate conditions under which the imposition of a binding rule will be welfare improving for an importer facing competitive export suppliers we further show that employing rules of origin in this way would be complementary to rather than a substitute for conventional optimal tariffs copyright economics department of the university of pennsylvania and the osaka university institute of social and economic research association