variable returns to scale in production and patterns of specialization this paper discusses some trade and welfare implications of the two sector model based on increasing returns to scale irs in one industry and decreasing returns to scale drs in the other it has been shown by horst herberg and murray kemp that given homothetic production functions with irs in one industry and drs in the other the production possibilities frontier ppf is strictly concave to the origin near the irs axis and strictly convex to the origin near the drs axis while this result constitutes an important finding and is contrary to the general impression among economists even twelve years after the publication of herberg and kemp s paper no attempt has been made to analyze its implications for welfare and patterns of specialization in this paper i consider a simple twocommodity model with irs in one industry and drs in the other and discuss some interesting implications of variable returns to scale vrs first i demonstrate that in this model if a small open economy specializes completely in production it will do so in the drs commodity and not in the irs commodity as is generally believed second if at a given price ratio an internal production equilibrium exists a welfaremaximizing small open economy will never specialize completely in production even though the ppf exhibits decreasing opportunity costs over a part of its range third given output generated economies and diseconomies of scale welfare maximization for a small country requires a permanent tax subsidy scheme encouraging expansion of the irs industry and contraction of the drs industry finally in a two country model with identical tastes and technology across the countries free trade equilibrium may result in incomplete specialization by the exporter of the irs commodity and complete specialization by the exporter of the drs commodity in the course of the analysis i argue that tinbergen s formulation of frank graham s case for protecting the irs industry is incorrect i then present a possible reformulation of it in section i the basic production model is introduced in section ii the model is analyzed and in section iii it is argued that all the results continue to hold in the multifactor case

trade migration and integration evidence and policy implications this paper takes as its point of departure the unique position recently adopted by swedish policymakers emphasizing migration as a tool to increase trade we attempt to empirically scrutinize this

the long term effects of forcible assimilation policy the case of indian boarding schools for decades in north america and australia indigenous children were forcibly removed from their homes and placed in boarding schools these schools had the stated goal of cultural assimilation and are perceived as educational failures i offer the first causal evidence on the long run effects of these schools i identify these effects using the interaction of changes in canadian national policy and regional variation in the power of the catholic church i find that the average boarding school had substantial effects on both cultural and economic assimilation however i find suggestive evidence this is not true for highly abusive schools

checkerboards and coase the effect of property institutions on efficiency in housing markets abstract in the late 1800s palm springs california was evenly divided into 1 mile square blocks like a checkerboard and property rights were assigned in alternating blocks to the agua caliente tribe and a non indian landowner by the u s federal government the quasi experimental nature of land assignment holds land quality constant across the two types of landowners sales mortgaging and leasing restrictions on the agua caliente reservation land created large transaction costs to development on those lands consequently there was very little housing investment the non indian blocks which were extensively developed provide a benchmark for efficient outcomes for the agua caliente lands once the restrictions on agua caliente lands were relaxed in 1959 the number of homes and real estate values converged to those of non indian owned lands as predicted by the coase theorem

who benefits from local job growth migrants or the original residents bartik t j 1993 who benefits from local job growth migrants or the original residents reg studies 27 297 311 this paper surveys research on whether the new jobs resulting from growth in a local economy e g a metropolitan area go to inmigrants or the original local residents the empirical evidence suggests that around one quarter of the new jobs from local growth increases the labour force participation rates of local residents in the long run these long run effects may occur because local growth provides residents with valuable employment experience research also suggests that minorities benefit most from growth and that higher wage industries provide greater employment benefits for local residents bartik t j 1993 qui est ce qui beneficie de la croissance d emploi locale les migrants ou la population autochtone reg studies 27 297 311 cet article etudie la recherche effectuee dans le but d evaluer si les nouveaux emplois dus a la croissance d une economic locale par exemple une

an economic analysis of acting white this paper formalizes a widely discussed peer eect entitled acting white acting white is modeled as a two audience signaling quandary signals that induce high wages can be signals that induce peer group rejection without peer eects equilibria involve all ability types choosing dierent levels of education acting white alters the equilibrium dramatically the possibly empty set of lowest ability individuals and the set of highest ability individuals continue to reveal their type through investments in education ability types in the middle interval pool on a common education level only those in the lower intervals are accepted by the group the model s predictions t many stylized facts in the anthropology and sociology literatures regarding social interactions among minority group members

the choice of monetary policy instruments in canada an extension w poole 1970 and gordon sparks 1979 used fixed price models to examine the relative merits of various monetary policy instruments this paper extends the discussion to a flex price model it illustrates that bank reserve accounting systems have no effect on the choice of interest rate or exchange rate instruments the author shows that income is sheltered from financial innovation when a reserve instrument is used in conjunction with lagged reserve accounting

scale economies in factor supplies international trade and migration this paper incorporates externalities generated by human capital into the heckscher ohlin samuelson framework to examine the patterns of international trade and migration individuals endowed with different levels of human capital choose to become either unskilled or skilled workers national scale economies with respect to human capital play an important role in endogenously determining these factor supplies and yield a number of interesting patterns of trade and migration migration could reinforce comparative advantage both skilled and unskilled workers could migrate in the same direction

migration dynamics growth and convergence the aim of the present paper is to analyze the impact of migration dynamics on economic growth and convergence in terms of both the capital labor ratio and wages from our results the following main conclusions can be highlighted 1 migration positively affects the sending country because of the improvement in the capital labor ratio and the savings of returning workers 2 the differences existing between countries do not necessarily disappear in the long term so the convergence that arises is limited or conditional because it does not necessarily imply an equalization of per capita income capital labor ratio and wages or the disappearance of migration and 3 the possibility of migratory flow reversion cannot be excluded in the transitory dynamics

a gravity model analysis of international migration to north america this study examines the influence of political economic and demographic factors on the size and composition of migration flows to north america a modified gravity model is specified and adjusted to include immigration regulations and characteristics specific to the origin and destination countries for empirical test of the model the time period of study is from 1976 1986 and 70 countries are covered for a total of 1540 observations of migration flows to canada and the usa the results reveal that the population of origin countries and the income of destination countries are two major determinants of migration to north america high population areas of asia and latin america provided a large share of the immigrants domestic restrictions on political and civil freedom in origin countries are found to significantly impair migration to north america

trade accumulation and uneven development abstract this paper develops a two country model of capital accumulation and growth where the industrial sector exhibits increasing returns to scale it shows that uneven development is a necessary outcome in such a model an initial discrepancy in capital labor ratios between the two countries will cumulate over time leading to the division of the world into a capital rich industrial region and capital poor agricultural region which region takes on which role depends on primative accumulation that is on which region starts with more capital if capital is mobile internationally the model can given rise to a two stage pattern of development a first stage where trade is the engine of growth in the leading country and a second in which foreign investment takes on that role which is reminiscent of the hobson lenin theory of imperialism

immigrant participation in the welfare system this paper presents a systematic analysis of immigrant participation in the us welfare system using the 1970 and 1980 us censuses in contrast to the previous studies the researchers focused on changes in welfare use across immigrant cohorts over time for a single immigrant cohort as it assimilates to the us furthermore it develops a theoretical model of the migration decision that explicitly incorporates the income insurance aspect of the us welfare system the analysis revealed that recent immigrant cohorts use the welfare system more intensively than earlier immigrant waves also the immigrant welfare participation was greater the longer an immigrant household had resided in the us and those characteristics of the immigrants country of origin were important determinants of welfare participation in addition the theoretical model of the migration decision which explicitly incorporated the presence of a welfare system in the destination country and this model could account for some of the ways in which source country characteristics were found to affect immigrant welfare participation

exchange rate rules and macroeconomic stability this paper discusses exchange rate rules in their role as macroeconomic instruments we abstract throughout from the trend part of exchange rate behaviour a crawling peg necessitated by differences in trend inflation and emphasise instead the implications of exchange rate rules in providing flexibility of real wages or in affecting the stability of output or prices

currency management and economic stability this paper considers the effects of an increase in the foreign interest rate on a small open economy with indexed wages and sticky prices it is shown that currency market interventions helps reduce fluctuations in inflation and unemployment as well as the exchange rate complete insulation however requires intervention both in the good and asset markets

real aspects of exchange rate regime choice with collapsing fixed rates abstract typical evaluations of the choice of exchange rate regime examine the performance of the real economy and assume that the regimes last indefinitely in contrast actual regimes are quite transitory this paper examines how the predictions of two popular models for the determination of some real economic variables must be modified when agents rationally perceive that a fixed rate regime will be transitory the models studied are simple stochastic versions of the models in dornbusch 1976 and flood and marion 1982

equilibrium price output dynamics and the non insulating properties of fixed exchange rates abstract this paper develops an open economy fixed exchange rate equilibrium model of the business cycle which demonstrates a new channel for output persistence the persistence or serial correlation of output arises because of persistent changes in relative prices additionally the model shows that fixed exchange rates do not insulate a small open economy from domestic monetary shocks

the impact of immigration on the human capital of natives implications of the quantity number and quality skill of immigration on the destination economy are analyzed including impacts on value added wages quasi rents rates of return and the skill distribution of the native labor force quantity quality trade offs are considered for both immigrant and native workers medium and long run labor supply responses by natives to immigrant induced changes in wage rates are shown to have second order effects which substantively affect the impacts of immigrants the impact of immigration policy depends on the quality as well as quantity of immigrants the time horizon and the speed of factor market adjustment

undocumented immigration and income inequality in the native born population of the us econometric evidence according to the theoretical models suggested by chiswick and others the growing presence of undocumented immigrants in the us should have a disequalizing effect on income distribution in the native born population however this proposition has not been subjected to empirical test here an econometric model of income inequality in native born households is constructed and census based estimates of the state distribution of undocumented immigrants are used to estimate model parameters the results show that such immigration has been disequalizing but that the impact has been small ranking behind several other socio economic variables

fixed versus flexible exchange rates in an equilibrium business cycle model abstract this essay re examines the question of which exchange rate regime is preferable using a rational expectations model that explicitly incorporates wealth and emphasizing the information signalling role of prices previous authors have stressed the argument that floating rates provide agents with an additional source of information which improves forecasting accuracy leading to more efficient allocations this paper adds the counterweighing argument that they also have the effect in contrast to fixed rates of introducing an additional source of monetary disturbances in the determination of real variables another issue addressed is the nature of exchange rate adjustments to monetary disturbances

increasing returns migrations and convergence abstract the paper investigates the link between convergence and factor mobility it contrasts the predictions of exogenous growth models where factor mobility is found to promote convergence with endogenous growth models where factor mobility invariably leads to a cumulative process of regional divergence the paper develops a simple model of regional growth with mobile factors increasing returns to scale and diminishing returns to the reproducible factor it also tries to provide more solid microfoundations to the specification of the migration choice because of diminishing returns to the reproducible factor the economy will not be able to generate endogenous self sustaining growth nevertheless the results suggest that even in the context of an exogenous growth model convergence is not warranted however convergence may occur for some particular constellations despite the presence of increasing returns to scale more precisely it is shown that convergence is more likely the greater is the scope for scale economies and somewhat paradoxically the lower is the degree of labor mobility

interest rate volatility and monetary policy in october 1979 the federal reserve shifted from an interest rate oriented operating procedure to a reserves oriented procedure it is argued in this paper that part of the very large increase in interest rate volatility which resulted from the policy switch may have been due to shifts in the parameters of the money demand equation shifts due to the adoption of a reserve aggregates operating procedure this result is derived by comparing rational expectations equilibria in a simple theoretical model under alternative policy rules this allows the variance of interest rates to be explicitly expressed as a function of the policy rule this abstract was borrowed from another version of this item

the information content of the exchange rate and the stability of real output under alternative exchange rate regimes abstract when the exchange rate is flexible and thus responds to market forces it provides agents with useful information while when it is fixed by a feedback rule it does not the implications of this asymmetry for the stability of real output under the two regimes is discussed it is shown that whenever shocks are predominantly of one variety or when domestic monetary shocks accompanied by one real shock a flexible exchange rate does a better job of stabilizing real output than does a fixed exchange rate these results undermine arguments favoring fixed exchange rates because they discipline monetary policy in addition it is demonstrated that managed floating rules and exchange rate feedback rules are irrelevant for the distribution of real output

social structure and development a legacy of the holocaust in russia we document a statistical association between the severity of the persecution displacement and mass murder of jews by the nazis during world war ii and long run economic and political outcomes within russia cities that experienced the holocaust most intensely have grown less and both cities and administrative districts oblasts where the holocaust had the largest impact have worse economic and political outcomes since the collapse of the soviet union we provide evidence that the lasting impact of the holocaust may be attributable to a permanent change it induced in the social structure across different regions of russia

income inequality and international migration the purpose of this paper is to analyse the impact of international factor movements on the personal distribution of income in order to get clearcut results we use a simple model of trade and migration in which there are two traded goods and three factors for any given country one of the traded goods corresponds to exports and the other to imports the three factors include capital and two types of labour skilled and unskilled we focus mainly on the alternative results of international migration of the two types of labour the geographical focus is worldwide excerpt

diverging patterns with endogenous labor migration abstract the standard neoclassical model cannot explain persistent migration flows and lack of cross country convergence when capital and labor are mobile here we present a model where both phenomena may take place assuming increasing returns and perfect capital mobility the driving forces behind labor migration are the size and the composition of the workforce the size of the workforce produces divergence a larger workforce in one country implies higher wages the wage gap induces in migration and this makes the wage gap even larger in this case migration is only beneficial for the labor importing country the evolution in the composition of the workforce due to migration may have opposite effects in one case in migration keeps the wage of skilled workers high enough to induce people to qualify for skilled jobs this improves the composition of labor in the receiving country only and it makes divergence a likely outcome in another case labor migration keeps the relative wage of unskilled workers in the rich country high enough to induce all migrants to take unskilled jobs and reduce the skilled to unskilled ratio in that country then migration is beneficial to the country which was first exporting labor

comparing features of convenient estimators for binary choice models with endogenous regressors abstract we discuss the relative advantages and disadvantages of four types of convenient estimators of binary choice models when regressors may be endogenous or mismeasured or when errors are likely to be heteroscedastic for example such models arise when treatment is not randomly assigned and outcomes are binary the estimators we compare are the two stage least squares linear probability model maximum likelihood estimation control function estimators and special regressor methods we specifically focus on models and associated estimators that are easy to implement also for calculating choice probabilities and regressor marginal effects we propose the average index function aif which unlike the average structural function asf is always easy to estimate

economic effects of immigrants on native and foreign born workers complementarity substitutability and other channels of influence the authors use standard metropolitan statistical area smsa data constructed from 1980 census microdata files and other sources to estimate a structural model of native foreign born labor demand and labor supply which distinguishes the effects upon real wages of each type of labor and on the employment of natives the authors specify econometrically estimate and simulate the structural model which incorporates not only a production structure channel through which immigrants influence area real wages and employment but also demand and native labor supply channels it is noted that while these are not the only channels through which immigrants may affect native workers the model nonetheless constitutes a step in the direction of a general equilibrium approach in the production structure channel immigrants and natives are found to be substitutes in production immigration lowers foreign born wage rates and leads to lower wages for natives the negative effects of the production channel usually are ameliorated through the demand channel further immigrants add to local demand through their earnings and potentially through non labor income while also lowering unit costs and local prices which enhances real incomes and potentially net exports and thus the demands for local output and area labor the author discusses findings of interest from the simulation results based upon an analysis of all areas

a theoretical explanation of some stylized facts of economic growth this paper presents a three good two country general equilibrium model that is consistent with several stylized facts of economic growth the three goods are manufactures agriculture and services manufactures are subject to economies of scale the model predicts that services a nontraded good must be more expensive in the country with higher per capita income it also shows that as per capita income increases we should expect the productivity in commodities relative to services to rise the model is able to generate many other stylized facts of economic growth

trade theory distribution of income and immigration this paper examines the impact of mass immigration utilizing the analytical framework of so called trade theory as such its emphasis is on general equilibrium effects and on the constraints imposed by the openness of the economy on such effects the analysis will center on the distributional impact of unskilled labor immigration excerpt

on the macroeconomic and welfare effects of illegal immigration abstract this paper uses a dynamic general equilibrium model with labor market frictions to explore the economic consequences of illegal immigration in the baseline model native workers and illegal foreign workers compete for jobs in the same market but serve as imperfect substitutes in production the calibrated model generates a u shaped relationship between long run domestic consumption and the population share of illegal immigrants after taking into account both consumption and leisure i found that an increase in illegal immigration can generate significant welfare gains for the natives the baseline model is then extended to include heterogeneous workers in the domestic population

increasing returns urban unemployment and international capital mobility a trade policy analysis abstract this paper compares the effects of tariffs quotas and ver both with and without international capital mobility for a small open economy facing urban unemployment of unskilled labor and external increasing returns in the manufacturing sector expressions for the shadow price of foreign exchange and capital are derived under each type of trade restriction it is shown that international capital mobility in such an economy unambiguously lowers the welfare cost of all forms of trade restriction in contrast to the existing literature on full employment crs economy where international capital mobility unambiguously raises the welfare cost of tariff protection

the performance of immigrants in the canadian labor market in this article we examine the economic assimilation of immigrants to canada we provide new evidence on immigrants who arrived in the 1970s and document an increase in the dispersion of labor market outcomes across immigrants of different vintages over time our results confirm u s evidence of permanent differences across immigrant cohorts what distinguishes the canadian experience is small or negative rates of assimilation for most cohorts over the sample period finally we test the overidentification of the assimilation process specified in previous studies and fail to reject the usual cohort fixed effect specification

migration of professionals from fiji to new zealand a reduced form supply demand model abstract in this study we estimate a reduced form equation for migration of highly skilled and professionally trained workers from fiji to new zealand during 1987 1990 explanatory variables include previous period s migrants occupational income in new zealand the supply of graduates in new zealand and political instability in fiji using a reduced form supply demand model to estimate the determinants of migration the study finds that the number of professional migrants from fiji was significantly and positively related to previous year s migrants the real income in new zealand and political instability in fiji

trade factor prices and the gains from trade with increasing returns to scale existing analyses seem to suggest that national increasing returns to scale are not a very useful tool for analysing trade owing to problems such as multiple equilibria and the tendency towards complete specialization the purpose of this paper is to construct a model in which there are in fact determinant relationships among country size the direction of trade the gains from trade and international factor price differences in the model differences in country size determine the direction of trade which in turn determines factor price differences and limits the possible distribution of the gains from trade commerce international prix des facteurs de production et les gains de l change dans un contexte de rendements croissants a l echelle les analyses conventionnelles semblent suggerer que les rendements croissants h l 6chelle au niveau national ne constituent pas une avenue prometteuse dans l analyse du commerce international parce que de tels rendements creent une presomption en faveur de la specialisation complete et conduisent a des situations d 6quilibres multiples le but de ce m6moire est de construire un mod le dans lequel il existe des rapports determinants entre la dimension du pays la direction des 6changes les gains de l echange et les differentiels internationaux entre les prix des facteurs de production dans ce mod le les differences entre les pays en termes de dimension d6terminent la direction du commerce international laquelle d6termine le differentiel entre les prix des facteurs de production et limite l eventail des r6partitions possibles des gains de l echange

reversal of migration flows a fresh look at the german reunification we investigate the dynamic effects of interregional labor market integration on migration flows capital formation and the price for housing services the co evolution of these variables depends on initial conditions at the time of labor market integration in an initially capital poor economy there may be a reversal of migration flows during the transition to the steady state while housing costs are increasing over time although capital may accumulate while labor emigrates early in the transition the causal effect of immigration on capital investments and housing costs is positive we present new data on the evolution of net migration flows and rental rates for housing in east germany after 1990 our results are consistent with the presented evidence in the reverse migration scenario

time preference and international labor migration abstract this paper analyzes the pattern and welfare implications of international labor migration within a dynamic general equilibrium model in a two country overlapping generations world labor migrates unilaterally from the high low to the low high time preference country if both countries under over invest relative to the golden rule bilateral migration a theoretical novelty occurs if the countries are on opposite sides of the golden rule steady state welfare analysis is conducted where in contrast to existing results unilateral migration immiserizes non migrants in the immigration country while making non migrants in the immigration country at least as well off bilateral migration may improve world welfare

factor intensities and factor substitution in general equilibrium abstract this article examines how factor intensity rankings between industries and the economy wide asymmetry in the degree of factor substitution combine to influence the manner in which changes in relative commodity prices affect the factoral distribution of income the reciprocal influence of factor endowment changes on the composition of outputs is also discussed the analysis is undertaken in a general three factor two commodity framework the minimal sized model that allows both influences to affect factor prices and admits of the possibility of complementarity between factors factors which are good substitutes find their returns behave somewhat similarly when commodity prices change while factors which are complements experience strongly asymmetrical fortunes a crucial role is played by a comparison of the share of the middle factor in each sector

the long term effects of africa s slave trades can part of africa s current underdevelopment be explained by its slave trades to explore this question i use data from shipping records and historical documents reporting slave ethnicities to construct estimates of the number of slaves exported from each country during africa s slave trades i find a robust negative relationship between the number of slaves exported from a country and current economic performance to better understand if the relationship is causal i examine the historical evidence on selection into the slave trades and use instrumental variables together the evidence suggests that the slave trades have had an adverse effect on economic development

inflation tax rules and investment some econometric evidence this paper presents econometric evidence on the effect of tax incentives on business investment in the united states in the period from 1953 through1978 the analysis emphasizes that the interaction of inflation and existing tax rules has contributed substantially to the decline of business investment since the late 1960 s because the investment process is far too complex for any simple econometric model to be convincing i have estimated three quite different models of investment behavior the strength of the empirical evidence rests on the fact that all three specifications support the same conclusion more generally the analysis and evidence show that theoretical models of macroeconomic equilibrium should specify explicitly the role of distortionary taxes especially taxes on capital income the failure to include such tax rules can have dramatic and misleading effects on the qualitative as well as the quantitative properties of macroeconomic theories this paper was presented as the fisher shultz lecture at the fourth world congress of the econometric society 29 august 1980 in aix en province this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this abstract was borrowed from another version of this item

brain drain and ldcs growth winners and losers we present an empirical evaluation of the growth e ects of the brain drain for the source countries of migrants using recent us data on migration rates by education levels carrington and detragiache 1998 we nd empirical support for the bene cial brain drain hypothesis in a sample of 50 developing countries at the country level we distinguish between winners and losers among source countries while the number of winners is smaller these include nearly 80 of the total population of developing countries jel classi cation f22 j24 o15

optimal foreign exchange rate policy for a small open economy abstract this paper examines optimal exchange rate policy for a small open economy which faces temporary and pemanent real and nominal disturbances it demonstrates that exchange rate stabilization is desirable if most diturbances are nominal if most disturbances are real then stabilization should be greater 1 the greater the fraction of exchange rate variance accounted for by permanent disturbances 2 the greater the information available to firms in setting the wage 3 the greater the fraction of exchange rate variance attributed to domestic productivity shocks compared with foreign relative price shocks and 4 the more elastic is labor supply

output variability under monetary policy and exchange rate rules this paper examines the controversy concerning the relative desirability of fixed versus flexible exchange rates by examining whether a country can achieve a smaller variance of domestic output around its full employment path operating under an exchange rate rule or under a money supply rule the paper finds that neither policy will always dominate the other however it does find that if shocks in one market of the economy are large relative to shocks to other markets then one type of rule can be shown to dominate the other

stabilization with wage indexation and exchange rate flexibility abstract this survey examines the role of wage indexation and exchange rate policy in dampening fluctuations in output around its target level it is demonstrated that the appropriate choice for wage indexation and exchange rate flexibility is highly sensitive to the nature and the relative importance of the shocks impinging upon the economy as well as to the relevant parameters in the economy moreover the question of the desired flexibility of the exchange rate should be studied in the context of wage indexation and vice versa this interdependence raises the possibility of both policies being complements or substitutes to each other depending on the number of shocks that perturb the economy

exchange rate determination an equilibrium approach with imperfect capital substitutability abstract two stylized facts of the open economy are often considered prima facie evidence of goods market disequilibrium persistent deviations of relative prices from purchasing power parity and the higher variability of the nominal exchange rate relative to price levels we develop an equilibrium model characterized by imperfect goods and asset substitutability across countries and show how it is consistent with the aforementioned stylized facts we also show that increases in the degree of risk aversion of speculators leads to higher exchange rate variance if shocks are monetary

flexible exchange rates and stabilizing speculation abstract this paper re establishes the superiority of flexible exchange rates in small open economy models characterized by an efficient foreign exchange market and short run imperfections in the product labor market

scale economies wage differentials and north south trade abstract this paper attempts to isolate the effect of external economies of scale in production on the pattern of north south trade the results show that when the relative wage is higher in the north and only the north innovates the south produces and exports those goods with the lowest economies of scale while the remaining set of goods is produced and exported by the north production subsidies offered by the south raise southern income and welfare but if the north introduces a new set of goods the benefits of the subsidies to the south dissolve

assimilation changes in cohort quality and the earnings of immigrants this paper reexamines the empirical basis for two facts that seem to be found in most cross section studies of immigrant earnings 1 the earnings of immigrants grow rapidly as they assimilate into the united states and 2 this rapid growth leads to many immigrants overtaking the earnings of the natives within 10 15 years after immigration using the 1970 and 1980 u s censuses this paper studies the earnings growth experienced by specific immigrant cohorts during the period 1970 80 it is found that within cohort growth is significantly smaller than the growth predicted by cross section regressions for most immigrant groups this differential is consistent with the hypothesis that there has been a secular decline in the quality of immigrants admitted to the united states

the ramaswami proposition and the choice among labor capital and technology flows abstract this paper examines the choice between labor and capital flows in the context of a one good two country model where the two countries differ in their levels of disembodied technology in contrast to the ramaswami proposition it is shown that a country may prefer an optimal outflow of its abundant factor to an optimal inflow of its scarce factor it is also shown that for sufficiently small differences in technology the labor rich technology inferior country will benefit more from an optimal outflow of labor than from a gift of superior technology

factor movements and commodity trade as complements abstract several models are presented in which factor mobility leads to an increase in the volume of world trade the models share the common characteristic that the basis for trade is something other than differences in relative factor endowments these alternative bases for trade include returns to scale imperfect competition production and factor taxes and differences in production technology taken together the models suggest a more general idea the widely held notion that trade in goods and factors are substitutes is in fact a rather special result which is a general characteristic only of factor proportions models

the causes and consequences of distinctively black names in the 1960s blacks and whites chose relatively similar first names for their children over a short period of time in the early 1970s that pattern changed dramatically with most blacks particularly those living in racially isolated neighborhoods adopting increasingly distinctive names but a subset of blacks actually moving toward more assimilating names the patterns in the data appear most consistent with a model in which the rise of the black power movement influenced how blacks perceived their identities among blacks born in the last two decades names provide a strong signal of socioeconomic status which was not previously the case we find however no negative relationship between having a distinctively black name and later life outcomes after controlling for a child s circumstances at birth

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

on the optimal combination of commercial and exchange rate policies the adoption of managed float by major countries during the seventies renewed the debate about optimal exchange rate regimes despite continuous research on this question the answers are still far from reflecting a coherent unified view indeed the spectrum of such views still ranges from those that support pure float to those that view a modified gold standard as the preferred regime a growing body of literature points out however that the choice among the regimes might depend on the nature of the shocks facing the country as well as on the structure of the economy most of the studies of this question did not deal with issues related to the choice of commercial policy but concentrated instead on comparing the performance of each regime when subject to a given commercial policy 2 independently of this debate contributions in the theory of commercial policies have studied the non equivalence of quotas and tariffs as alternative means of commercial policy 3 the stimulus for this research came from bhagwati s study on the non equivalence of the two policies 2 most of the discussions of this question were conducted in a pure exchange economy and omitted issues related to the choice of exchange rate regimes in trade theory there has been limited discussion of issues related to the interaction between commercial and exchange rate policies 4 and most writers have not studied the optimal coupling of exchange rate and commercial policies the purpose of this study is to analyze these issues in the case of an economy facing

immigration and wages evidence from construction to identify relative wage impacts of immigration we make use of certification and licensing requirements in the norwegian construction sector that give rise to exogenous variation in immigrant employment shares across trades individual panel data reveal substantially lower wage growth for workers in trades with rising immigrant employment than for other workers selective attrition from the sector masks the causal wage impact unless accounted for by individual fixed effects for low and semi skilled workers effects of new immigration are comparable for natives and older immigrant cohorts consistent with perfect substitutability between native and immigrant labor within trade finally we present evidence that immigration reduces price inflation as price increases over the sample period were significantly lower in activities with growth in the immigrant share than in activities with no or small change in immigrant employment

book reviewinequality poverty and history jeffrey g williamson basil blackwell cambridge ma 1991 isbn 1 55786 118 8 pp vii 151 19 50

the demand for international reserves in a regime of floating exchange rates some empirical evidence in this note the demand for international reserves during the recent float is analysed using a pooled cross section time series data base the main objective of the analysis is to demonstrate the importance of stochastic shocks in determining the demand for international reserves in a regime of floating exchange rates

forced coexistence and economic development evidence from native american reservations there are large differences in economic development across native american reservations today this paper asks whether these differences can be in part explained by the forced integration of historically autonomous sub tribal bands in the 19th century to measure forced integration i combine anthropological data on intra tribal political integration in pre reservation times with historical information on the constituent bands of each reservation exploring variation in how politically integrated tribes were before reservations and variation in how politically integrated reservations were at the time of their formation i find that forced integration lowers per capita incomes today by about 30 percent to account for potential selection into forced integration i exploit historical mining rushes as a source of exogenous variation in the government s incentive to combine bands onto reservations the iv strategy confirms the baseline results i also provide quantitative evidence on the channels through which forced integration affects incomes today

increasing returns dynamic stability and international trade abstract a simple two country two good model in which economies of scale form the basis of international trade is presented it is shown that the larger country exports the good characterized by increasing returns and imports the good subject to constant returns a key feature of the paper is a comprehensive stability analysis it turns out that a normal output price response is necessary for d stability furthermore the marshall lerner condition must be satisfied in terms of the short run import demand elasticities for local dynamic stability finally if international factor mobility is permitted cross hauling of specific factors may be observed

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

factor rewards and the international migration of unskilled labor a model with capital mobility abstract conventional economic wisdom holds that the migration of unskilled labor from less developed countries to neighboring developed countries should be expected to narrow the wage gap between those countries and thereby reduce the incentive for further migration if capital is mobile internationally this reasoning may be inappropriate instead emigration of unskilled labor out of the less developed country provides an incentive for capital to leave the country too as a consequence wage rates move in the same direction in each country and the gap between wage rates across countries even may increase

factor mobility trade and welfare abstract the paper develops a north south model which is driven by scale economies in the modern sector the model predicts that skilled and unskilled labor migrate from south to north and capital migrates from north to south migration of skilled labor and capital exhibits complementarity with trade while migration of labor may exhibit complementarity or substitutability if the terms of trade effects are ignored small movements of all factors affect the welfare of the population in south negatively and of that in north positively the effects of migration on the terms of trade are ambiguous in general

the medium run effects of educational expansion evidence from a large school construction program in indonesia this paper studies the medium run consequences of an increase in the rate of accumulation of human capital in a developing country from 1974 to 1978 the indonesian government built over 61 000 primary schools the school construction program led to an increase in education among individuals who were young enough to attend primary school after 1974 but not among the older cohorts 2sls estimates suggest that an increase of 10 percentage points in the proportion of primary school graduates in the labor force reduced the wages of the older cohorts by 3 8 10 and increased their formal labor force participation by 4 7 i propose a two sector model as a framework to interpret these findings the results suggest that physical capital did not adjust to the faster increase in human capital

job search and immigrant assimilation an earnings frontier approach this study examines labor market assimilation by measuring the information utilized by immigrants during job search assimilation is assumed to occur whenever such information increases with length of residence in the united states and repeated job searches the authors assert that information utilized during job search reduces differentials between actual and potential maximum attainable earnings coauthors are henry w herzog jr richard a hofler and alan m schlottmann copyright 1992 by mit press

the parallel market of illegal aliens a computational approach abstract this paper develops the notion of illegal aliens as a parallel market in coexistence with the regular market of legal labor in the presence of both price controls on legal labor by minimum wage legislation and quantity controls on illegal aliens by immigration laws illegal aliens involve not only rural urban migration but also tax evasion and deportation costs we develop an analytical equilibrium structure which links markets for legal labor and illegal aliens illustrate how much an equilibrium can be computed and explore some implications of the linkage using united states data

national sovereignty and international monetary order abstract the choice of exchange rate regime is examined in a three country model in which the regime chosen by one country affects other countries opportunities it is shown that the interaction of different countries choices of exchange rate regime may be characterized by either strategic complementarity or strategic substitution as a result if each country pursues its national interest independently either nonexistence or nonuniqueness of equilibrium among different countries regime choices is possible the model therefore provides an alternative rationale for international policy coordination

the use of transfer payments by immigrants this paper uses data from the 1976 survey of income and education to compare the receipt of transfers by families headed by male and female immigrants and those headed by native born americans the average level of transfers is found to be considerably higher among families headed by immigrants but this is almost entirely the result of the higher average age of family members among the immigrant group a reflection of the large inflows of immigrants into the u s during the pre 1924 period when age and other factors are held constant immigrant families are found to be considerably less likely to rely on welfare than native families and their receipts from social insurance programs are found to be only slightly higher

an empirical analysis of acting white abstract using a newly available data set which allows one to construct a novel measure of a student s social status we demonstrate that there are potentially important racial differences in the relationship between social status and academic achievement the effect is concentrated among students with a grade point average gpa of 3 5 or higher and more pronounced in schools with more interracial contact earlier studies showing a positive relationship between popularity and academic achievement for blacks are sensitive to the inclusion of more continuous achievement measures we argue that the data are most consistent with a model of acting white in which investments in education are taken as a signal of one s opportunity costs of peer group loyalty though imprecise estimates make definitive conclusions difficult

exchange rate policy and monetary information this paper develops a model of a small open economy in which the presence of local deviations from purchasing power parity give rise to differential information it is assumed that the monetary authorities are committed to buy and sell foreign exchange in order to support an exchange rate policy rule it is demonstrated that exchange rate policy can influence the distribution of real output i if agents possess incomplete and differential information and ii if they have contemporaneous money supply or balance of payments information it is also shown that exchange rate policy can be effective because of its ability to influence the information content of available monetary data the argument is turned around and used to support the frequent release of monetary data

estimating average and local average treatment effects of education when compulsory schooling laws really matter the change to the minimum school leaving age in the united kingdom from 14 to 15 had a powerful and immediate effect that redirected almost half the population of 14 year olds in the mid twentieth century to stay in school for one more year the magnitude of this impact provides a rare opportunity to a estimate local average treatment effects late of high school that come close to population average treatment effects ate and b estimate returns to education using a regression discontinuity design instead of previous estimates that rely on difference in differences methodology or relatively weak instruments comparing late estimates for the united states and canada where very few students were affected by compulsory school laws to the united kingdom estimates provides a test as to whether instrumental variables iv returns to schooling often exceed ordinary least squares ols because gains are high only for small and peculiar groups among the more general population i find instead that the benefits from compulsory schooling are very large whether these laws have an impact on a majority or minority of those exposed

new developments in trade theory and ldcs abstract this paper surveys the new literature on international trade relevant to the north south controversy in the first part two types of north south models are considered the unequal exchange theory of lewis and emmanuel and the models of dynamic interaction of findlay taylor and others the analysis focuses on the determinants of growth the terms of trade and relative employment in the world economy in the second part the paper reviews the empirical literature on south north and south south trade and the theories of north south technological gaps intra industry trade and external economies finally we analyze the literature on exports and economic growth and the neo classical keynesian and disequilibrium approaches to the theory of import controls

ageing migration and endogenous public pensions abstract this paper analyses migration behaviour of mobile workers in reaction to population ageing we show that the conventional wisdom that a decrease in fertility will lead to a rise in wages and thus to an inflow of immigrants that mitigates the adverse effects of ageing on public pensions may not hold if labour is heterogeneous moreover we demonstrate that if public pensions are endogenous i e if ageing leads the elderly to successfully lobby for higher taxes it may take several generations before a steady state is reached and the initial migration flow may be opposite to the steady state migration