profit shifting and trade agreements in imperfectly competitive markets governments have a reason to form a trade agreement when an international externality is associated with their trade policy choices when countries are large if a government raises its import tariff the world offshore price of the imported good is reduced the importing country then enjoys an improvement in its terms of trade and the exporting country suffers a negative terms of tradeexternality asjohnson 1954 argues whengovernmentsmaximizerealnational income and markets are perfectly competitive the associated noncooperative equilibrium is inefficient and governments can achieve greater welfare by forming an appropriately designed trade agreement bagwell and staiger 1999 and grossman and helpman 1995 extend the modeling framework to allow that governments have political economic preferences allowing for a wide range of possible political economic motivations bagwell and staiger 1999 show that the noncooperative equilibrium is inefficient if and only if governments are motivated by the terms of trade consequences of their trade policies building from this finding they then characterize the form that an efficiency enhancing trade agreement might take they show that the principles of reciprocity and nondiscrimination the latter embodied in the most favorednation mfn obligation play a useful role in guiding governments toward efficient policies in this article we move beyond the competitive markets paradigm and expand the analysis to markets with imperfect competition thereby introducing the realistic possibility that firms have market power a firm with market power is itself large in the sense that it does not regard the market price as fixed instead such a firm recognizes that its decisions may influence the price at which its output sells the terms of trade externality is still present in markets with imperfectcompetition butthewell known profit shifting rolefortradepoliciesinimperfectly competitive markets suggests that other international externalities might also be present for a sequence of workhorse models with imperfectly competitive markets we examine the rationale foratradeagreementandconsidertheformthatanefficiency enhancingtradeagreementmight take

political economic markets perts and pests in food and agriculture j i lyniversity of california berkeley jjept of agricultural and resource economic l working paper al cljdare i lorking paper 0 231 politic eco lic l rxets a d pests i j food l ti achiculture by per ts cordon c rausser ja nlnl tt junot tlon a riii ent st ticn giannini fou 1cl itiol1of ar ricultllrnj econo ll i cs july 11 w

is protection for sale evidence on the grossman helpman theory of endogenous protection grossman and helpman 1994 present a theory of endogenous protection by explicitly modeling government industry interactions for which mere black box models previously existed they obtain a ramsey pricing type solution to the provision of protection which emphasizes the role of inverse import penetration ratios and import elasticities on the lobbying side the model makes predictions about lobbying competition and lobbying spending according to deadweight costs from protection the model not only makes for richer theory in terms of rigor and elegance but its predictions are directly testable whether the grossman helman model stands up to real world data is investigated in this paper predictions from both the protection side and lobbying side are tested using cross sectional u s nontariff barrier data we also compare the second generation grossman helpman model with a more traditional specification our results call for serious consideration of this model in the political economy literature

political instability and debt maturity i introduction political instability has been blamed for many poor macroeconomic outcomes such as high inflation unemployment low growth and large debts for example alesina 1989 shows that political instability is positively related to okun s misery index inflation plus unemployment for twenty industrialized countries grilli masciandaro and tabellini 1991 find that the oecd countries with the highest debt gdp ratios also tend to be those with the most unstable political systems barro 1991 shows for a sample of ninety eight industrialized and developing countries that political instability is inversely related to growth 1 kwasi fosu 1992 shows that political instability adversely affects economic growth by reducing the availability of factors of production in sub saharan african countries 2 finally cukierman edwards and tabellini 1992 illustrate a positive relationship between political instability and seigniorage for a sample of seventy nine countries 3 4 i examine yet another negative consequence of political instability because political instability generates inflation uncertainty that causes the yield curve to steepen such instability increases the cost and reduces the average maturity of debt a relatively short average debt maturity may be undesirable as the cost of future debt service becomes highly uncertain when debt is refinanced frequently 5 this paper examines the relationship between political instability i e uncertainty about who will be in power next period and polarization i e the difference between the orientations of the active political parties and the maturity composition of the public debt the analysis borrows from the partisan theory of economic policy first popularized by hibbs 1977 1987 and then extended to incorporate rational expectations by alesina 1987 and alesina and sachs 1988 partisan theorists argue that as different political parties have different preferences over trade offs between inflation and tin employment these two variables tend to be systematically related to the political orientation of the party in power 6 the consequence of such partisan effects is that electoral uncertainty generates inflation uncertainty which will be greater the more polarized the political system i illustrate that as inflation uncertainty makes it difficult to predict inflation in the future risk averse lenders require greater compensation to lend for long periods the more uncertain inflation is thus since political instability and polarization together translate into inflation uncertainty we should observe steeper term structures in countries with more unstable and polarized political systems as a steep term structure implies a high marginal cost of financing debt with long maturity bonds a cost minimizing fiscal authority in a highly unstable and polarized political system should find it optimal to have a relatively low average debt maturity in other words political instability and polarization should be inversely related to average debt maturity however in spite of a shorter average debt maturity the minimum expected cost of servicing debt will still be greater the more unstable and polarized the political system to my knowledge there has been no study of the relationship between political instability polarization and debt maturity in the academic literature yet the relationship is worthy of analysis for if political instability and polarization can be shown to reduce average debt maturity and increase the cost of debt finance then yet another argument can be made for insulating monetary policy from the political process 7 by credibly separating monetary and fiscal decisions policymakers can prevent such partisan effects from adversely affecting the expected cost and maturity of debt finally the real costs of inflation uncertainty in terms of lost output are by now well documented 8 it is therefore important to identify the causes of such uncertainty in order to abate it

agricultural export subsidies as a tool of trade strategy before and after the federal agricultural improvement and reform act of 1996 if the main justification for agricultural export subsidies is that they reduce government costs of deficiency payments then the 1996 farm legislation would make u s export subsidies largely unnecessary an additional argument advanced in favor of export subsidies is that their aggressive use by one country will cause competing countries to reduce or discontinue their own subsidies this argument is explored by means of a nash equilibrium in which countries choose both a base subsidy level and a response to competitors and by a consistent conjectures equilibrium little support is found for the argument during the period of the mid 1980s to the mid 1990s export subsidies became an increasingly important part of u s farm policy in fact expenditures on the export enhancement program eep exceeded 1 billion in fy 1993 the enduring popularity of export subsidies has been a source of puzzlement to economists see r paarlberg for example economists argue that governments could provide more assistance to farmers at the same cost to consumers if the money spent on export subsidies were spent instead on direct subsidies to farmers anania bohman and carter present a strong argument along these lines several papers have found circumstances under which export subsidies might be justified abbott paarlberg and sharples show that export subsidies can improve welfare in the exporting country if they are implemented in a discriminatory way reducing prices in countries with relatively elastic demands abbott and kallio show how export subsidies may complement other policies intended to support producers when the exporting country has market power in the world market another possible explanation for the popularity of export subsidies is advanced by alston carter and smith 1993 1995 they show that export subsidies may be justified because they reduce the budgetary costs of the price support program there is an additional argument which is frequently heard in debates about agricultural export subsidies but which has not been fully analyzed by economists supporters of the eep program argue that to discontinue its use would be tantamount to unilateral disarmament in the war for international market share in agricultural trade in other words export subsidies are a useful tool of

residual supplier model of coarse grains trade the influence of domestic agricultural policies on trade in agricultural commodities has been discussed at length by economists some have emphasized the interaction of policy determined residual supplies and demands of all participants in world trade for example mccalla concludes therefore the international market in grains is the interaction of policy induced residuals from national markets and the principal objective is to export domestic instability mccalla 1980 p 39 other analyses have emphasized the role of the united states in world trade in this context the united states often has been described as the residual supplier for example kelly harrison then general sales manager of the u s department of agriculture usda presented the following view of the united states as the residual supplier

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

property rights and consumption volatility evidence from a land reform in vietnam summary during vietnam s transition from a socialist to a market economy household s property rights over agricultural land were considerably strengthened through a land certification program this resulted in active formal credit and land markets either of which potentially affects consumption levels and volatility this article evaluates the program impact with respect to consumption outcomes in particular it identifies the channel of impact through which improved property rights affect consumption volatility we find that land certification increases consumption levels for rural households but also consumption volatility for a subgroup of households identified by an instrument we show that the certification program affects consumption outcomes of this subgroup through presumably more risky credit based agricultural investment at the intensive margin

financial risk management when does independence fail the recent turmoil on credit markets has drawn attention to the risk management function on many trading oors around the world traders have been writing insurance against rare events examples include keeping long positions on cdo tranches or selling protection against default cds in normal times it is the role of risk management to ensure that the received insurance premia are not entirely considered as income and that enough capital is set aside to protect the institution against the risk that it is taking in the period that led to the current crisis however risk management has failed to play this role 1 this is particularly troubling as the nance industry is one that has embraced the notion of using counter powers to limit risk and the importance of dissent within organizations for instance the head of risk management at kfw a german bank argued for the superiority of having a central risk management function independent of the business units the great advantage of central risk management is the absence of conict of interest the central risk management is not driven by the market we look at the business from a different angle we are not involved at the personal level quoted by pricewaterhousecoopers 2007 the purpose of this paper is to study when such virtuous organizational design may fail we rst propose a model of risk management following augustin landier et al forthcoming we model the trading oor as a simple hierarchy the role of the trader t is to select an asset to invest in while the risk manager rm can decide to approve or not due to his

credibility of policies versus credibility of policymakers standard models of policy credibility defined as the expectation that an announced policy will be carried out emphasize the preferences of the policymaker and the role of tough policies in signaling toughness and raising credibility whether a policy is carried out however will also reflect the state of the economy we present a model in which a policymaker maintains a fixed parity in good times but devalues if the unemployment rate gets too high our main conclusion is that if there is persistence in unemployment observing a tough policy in a given period may lower rather than raise the credibility of a no devaluation pledge in subsequent periods we test this implication on ems interest rates and find support for our hypothesis

how is the debt managed learning from fiscal stabilizations this paper provides evidence on the behavior of public debt managers during fiscal stabilizations such episodes provide valuable information on the way debt instruments are chosen because they allow to overcome the problem that policymakers expectations of interest rates are generally not observable we find that governments increase the share of fixed rate long term debt denominated in the domestic currency the higher is the conditional volatility of short term interest rates the lower are long term interest rates and the stronger is the fall in long term rates that follows the announcement of the stabilization program by contrast conventional measures of the relative cost of issuing long term debt such as the long short interest rate spread are not significant this evidence suggests that debt managers tend to prefer long to short maturity debt because they are concerned about the risk of refinancing at higher than expected interest rates however when long term rates are high relative to their expectations they issue short maturity debt to minimize borrowing costs

endogenous price policies and international wheat prices vanzetti and kennedy s herein vk comment on our earlier paper sarris and freebairn gives us the opportunity first to clarify the differences in the models to present a generalization of the analysis that includes their results as well as ours as special cases and then to point out some salient features of our model that seem to have been unnoticed by them consider our model of a homogenous commodity produced consumed and traded by n countries which are characterized by the following linear demand and supply curves notation follows vk except that we maintain the additive random variables and hence keep the time subscript

managing the public debt the optimal taxation approach this paper examines research on public debt management focusing on debt structure by denomination indexation features and maturity the optimal taxation approach is reviewed and its policy implications are related to the trade off between minimization of the expected cost of debt servicing and minimization of budgetary risk strong arguments are provided for debt instruments which yield low returns when output and hence revenues are lower and public spending higher than expected this debt design minimizes tax distortions and provides flexibility in conducting fiscal policy the exact characterization of the debt composition which supports efficient taxation depends on the stochastic structure of the economy long term nominal debt is a hedge against supply shocks affecting revenues and inflation and makes the government budget insensitive to interest rate risk however at high levels of debt the extent of insurance or flexibility that governments can obtain by issuing long term nominal debt is limited by the need to maintain the credibility of the anti inflation stance

rain agriculture and tariffs this paper examines whether and how rainfall shocks affect tariff setting in the agricultural sector in a model of strategic trade policy the authors show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous depending on the weight placed by the domestic policy maker on tariff revenue profits and the consumer surplus the more weight placed on domestic profits the more likely it is that the policy maker will respond to a rainfall shortage by reducing import tariffs these findings are robust to alternative assumptions about market structure and the timing of the game using detailed panel data on applied tariffs and rainfall for 70 nations the authors find robust evidence that rainfall shortages generally induce policy makers to set lower tariffs on agricultural imports

climate shocks and exports this paper uses international trade data to examine the effects of climate shocks on economic activity we examine panel models relating the annual growth rate of a country s exports in a particular product category to the country s weather in that year we find that a poor country being 1 degree celsius warmer in a given year reduces the growth rate of that country s exports by between 2 0 and 5 7 percentage points with no detectable effects in rich countries we find negative effects of temperature on exports of both agricultural products and light manufacturing products with little apparent effects on heavy industry or raw materials the results confirm large negative effects of temperature on poor countries economies and suggest that temperature affects a much wider range of economic activity than conventionally thought this abstract was borrowed from another version of this item

oligopolistic behavior by public agencies in international trade the world wheat market a model of the world wheat market is presented which treats public policies as endogenous the oligopolistic nature of international wheat trade is captured by assuming policy makers form conjectures on the slope of the excess demand function they face and use that information to determine domestic and trade policies the policies reflect differing influences of political interest groups a u s crop shortfall scenario illustrates the different results with endogenous policies compared to the traditional model

industrial output fluctuations in developing countries general equilibrium consequences of agricultural productivity shocks abstract this paper shows that a negative shock to agricultural productivity may increase food prices and labor and capital can move away from manufacturing into agriculture to meet the subsistence requirement for food this effect depends on income levels and openness to trade using annual manufacturing data and rainfall shocks as the instrument for crop yields proxy for agricultural productivity i find that an exogenous decline in yield decreases manufacturing output as well as employment and capital investment in manufacturing overall crop yield variation can explain up to 44 of industrial output fluctuations in developing countries rainfall shocks cause 31 of the fluctuations lastly this paper shows that such perverse phenomena in which resources move toward the sector with declining productivity can lead to a significant reduction in aggregate productivity

the economic impacts of climate change evidence from agricultural output and random fluctuations in weather fisher et al 2012 hereafter fhrs have uncovered coding and data errors in our paper deschenes and greenstone 2007 hereafter dg we acknowledge and are embarrassed by these mistakes we are grateful to fhrs for uncovering them we hope that this reply will also contribute to advancing the literature on the vital question of the impact of climate change on the us agricultural sector fhrs main critiques of dg are as follows i there are errors in the weather data and climate change projections used by dg ii the climate change projections are based on the hadley 2 model and scenarios rather than the more recent hadley 3 model and scenarios iii standard errors are biased due to spatial correlation iv the inclusion of state by year fixed effects does not leave enough weather variation to obtain meaningful estimates of the relationship between agriculture profits and weather v storage and inventory adjustment in response to yield shocks invalidate the use of annual profit data and vi fhrs argue that a better specified hedonic model produces robust estimates unlike the results reported in dg four of these critiques have little basis and we respond to them here in the introduction specifically with respect to ii the more recent daily climate predictions were not available when we wrote dg nevertheless the most important issue is providing the reliable estimates of climate change and in this note we report estimates based on the climate model we used in dg and a more recent one that we gained access to in the meantime iii in the primary table on agricultural profits dg reports two sets of standard errors with the first clustered at the county level and the second based on a variance covariance matrix that accounts for spatial correlation using the method proposed in conley 1999 thus the claim of fhrs 2012 seems overblown nevertheless to ease comparisons of papers in this literature this note will adopt the fhrs convention of reporting estimated standard errors clustered at the county and state levels we find that inference is largely unaffected by the choice between these different assumptions about the variance covariance matrix

impact of the us ec price war on major wheat exporters shares of the chinese market abstract china is both the world s largest producer and consumer of wheat in an attempt to gain a larger slice of the important chinese market both the european community and the united states have offered china subsidised wheat in addition other exporters have offered attractive credit arrangements to china the objective of this paper is to measure the overall impact of these policies on each exporter s share of the chinese market to that end an improved version of the constant market shares model is applied to data on chinese wheat imports in the 1980 s the results indicate that the united states has been outperforming the other exporters since subsidised us wheat sales were authorised for china in 1987 the implications of the analysis for the smaller exporters and international wheat trade are discussed

optimal policies and marketing board objectives abstract in this paper we examine optimal tax subsidy policies with export marketing boards that compete as oligopolists in world markets by taking a targeting approach to identifying optimal policies we are able to show how optimal policies vary with the objectives of board the nature of competition in world markets as well as assumptions about market segmentation and regulation in none of the cases examined does a marketing board without tax subsidy policy replicate the social optimum moreover we show that the policies necessary to attain the social optimum are quite different with the institutional variation considered arbitrage and regulation is the only case considered in which the optimal export policy is definitely a tax and in which the marketing board s objective does not affect policy

seniority and maturity of debt contracts abstract this paper provides a model of how borrowers with private information about their credit prospects choose seniority and maturity of debt increased short term debt leads lenders to liquidate too often it also increases the sensitivity of financing costs to new information although better than average borrowers desire information sensitivity the model implies that short term debt will be senior to long term debt and that long term debt will allow the issue of additional future senior debt the model also has implications on the structure of leveraged buyouts and on how various types of lenders respond to potential defaults

remittances and income smoothing due to inadequate savings and binding borrowing constraints income volatility can make households in developing countries particularly susceptible to economic hardship we examine the role of remittances in either alleviating or increasing household income volatility using mexican household level data over the 2000 through 2008 period we correct for reverse causality and endogeneity and find that while income smoothing does not appear to be the main motive for sending remittances in a non negligible share of households remittances do indeed smooth household income on average other variables surrounding income volatility are also considered and evaluated

the term structure spread and future changes in long and short rates in the g7 countries abstract according to the expectations hypothesis when the spread between long and short rates widens next quarter s long rate should rise in the united states however long rates decline instead of rising this anomaly is also present in canada the uk germany and japan four of the additional six g7 countries nevertheless in contrast to the us where long rates appear to overreact to expected future developments the anomalous short run movement of long rates in these other g7 countries is caused by an additive white noise error on long rates that does not materially affect the information in their term structure

credibility and stabilization the paper deals with stabilization as a one shot problem to ask what credibility means in a world where programs will succeed with probability one a model is spelled out where the equilibrium program has some ex ante probability of failure the model draws attention to the factors that raise or lower the probability of success of a stabilization program and thus offers a positive theory of stabilization reputation that emerges as a central element in repeated games has no role in this model

a political economic analysis of u s rice export programs to japan and south korea a game theoretic approach the uruguay round agreement on agriculture ur has contributed to the increase in u s and world rice trade since 1994 despite this the japanese and korean rice markets continue to be characterized by high levels of trade intervention this paper attempts to analyze both import markets incorporating econometric estimates and public choice theory in a game theoretic framework various scenarios are analyzed the results show that the overall nash equilibrium occurs with a 4 tariff reduction for japan and korea under the u s market development program which includes the market access program and foreign market development program

remittances entrepreneurship and employment dynamics over the business cycle abstract we incorporate remittances and micro entrepreneurship self employment into a small open economy business cycle model with capital and labor market frictions countercyclical remittances moderate the decline of households consumption during recessions these remittances also are used to finance the start up costs of microenterprises that bolster households income during economic downturns we show that the positive income effect from countercyclical remittances also leads to a decrease in salaried labor supply which generates offsetting upward pressure on wages during recessions and adversely affects the recovery of the economy consistent with the microeconomic evidence the behavior of remittances decisively affects labor force participation and the composition of employment between non salaried and salaried employment over the business cycle the model delivers labor market and aggregate cyclical dynamics that are consistent with the mexican data including a highly volatile and countercyclical unemployment rate

profit shifting and trade agreements in imperfectly competitive markets profit shifting and trade agreements in imperfectly competitive markets do new rationales for trade agreements arise once imperfectly competitive markets are allowed we consider several trade models that feature imperfectly competitive markets and argue that the basic rationale for a trade agreement is in fact the same rationale that arises in perfectly competitive markets in all of the models that we consider and whether or not governments have political economic objectives the only rationale for a trade agreement is to remedy the inefficient terms of trade driven restrictions in trade volume we also show that the principles of reciprocity and nondiscrimination continue to be efficiency enhancing in these settings

effect of flood on agricultural wages in bangladesh an empirical analysis summary this paper analyzes the effects of riverine floods on agricultural wages in bangladesh drawing upon the district wise monthly data over 1979 2000 we model wages as a dynamic process we find that floods have positive implications for wages in the long run in flood months however agricultural wages decline in the inundated districts we obtain difference in difference estimates to show that the magnitude of impact of flood depends on the relative flood proneness of a district and the relative severity of flood conditions our results indicate that favorable demand and supply conditions in the agricultural labor market can mitigate the impact of disasters on wages in bangladesh

can openness mitigate the effects of weather shocks evidence from india s famine era transformation of countries throughout history rural citizens in developing countries today however remain highly exposed to fluctua tions in the weather this exposure affects the incomes these citizens earn and the prices of the foods they eat recent work has documented the significant mortality stress that rural house holds face in times of adverse weather robin burgess olivier deschenes dave donaldson and michael greenstone 2009 masayuki kudamatsu torsten persson and david stromberg 2009 famines times of acutely low nominal agricultural income and acutely high food prices are an extreme manifestation of this mapping from weather to death lilian c a knowles 1924 describes these events as agricultural lockouts where both food sup plies and agricultural employment on which the bulk of the rural population depends plummet the result is catastrophic with widespread hun ger and loss of life though now confined to the world s poor est countries food shortages and famines were features of most preindustrial societies over time there has been intense debate over what role openness to trade in food might play in

trade wars and trade talks when governments meet in the international arena their actions reflect the political situations at home previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest here we introduce domestic politics into the analysis of international economic relations we study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups our analysis sheds light on the determinants of the structure of protection in non cooperative and cooperative policy equilibria

producer consumer trade offs in export cartels the wheat cartel case since the formation of the organization of petroleum exporting countries opec several models of cartel competitive fringe markets for an exhaustible resource have been developed derivations of nash cournot equilibrium price paths under such a regime and insightful behavioral descriptions of limit pricing by monopolists facing potential competition have enriched the literature concerning this market structure salant and gilbert and goldman in addition the gains to producers from cartelization in the oil copper and bauxite industries have been derived empirically pindyck largely in reaction to opec numerous discussions have focused on an important but different commodity than those mentioned above several proposals supported by many producers and consumers have been put forth to form a cartel in wheat among the major exporters the united states canada australia and argentina 1 if such a cartel were organized which group or groups have the most to gain the above studies on exhaustible resources do not distinguish between producer and consumer effects in the exporting countries largely because domestic demand for this type of good is small relative to the total amount exported in oil for example there is little need to distinguish between a producer export cartel which maximizes producer returns and a government cartel which maximizes the welfare of all groups since the solutions would be very similar however this is not necessarily the case for other commodities where domestic demand is an important component of market structure e g in wheat the domestic demand is large relative to total wheat exports 2 the purpose of this paper is to consider a market in which the commodity in question has a relatively large domestic demand component and to demonstrate that a sharp distinction has to be made between a producer export cartel and a government export cartel this paper shows abstracting from implementation issues raised by caves pindyck and mccalla and schmitz that producers actually may lose from a government cartel the conditions under which this can happen are derived theoretically the model is then applied to the world wheat economy and interestingly the empirical results suggest that there is a strong possibility that producers would in fact lose from a government wheat cartel if there are decreasing returns in production unless compensated by a tax on consumers this result raises several important policy issues

the economics of trade agreements in the linear cournot delocation model abstract existing theories of trade agreements suggest that gatt wto efforts to reign in export subsidies represent an inefficient victory for exporting governments that comes at the expense of importing governments building on the cournot delocation model first introduced by venables 1985 we derive new results from this model and use these results to develop a more benign interpretation of efforts to restrain export subsidies in trade agreements and we suggest that the gradual tightening of restraints on export subsidies that has occurred in the gatt wto may be interpreted as deriving naturally from the gradual reduction in import barriers that member countries have negotiated together with existing theories the cournot delocation model may help to provide a more nuanced and complete understanding of the treatment of export subsidies in trade agreements

the competitive structure of u s agricultural exports the competitive structure of u s agricultural exports is examined using a model of exporter behavior based on pricing decisions across destination markets market power is revealed in the adjustment patterns of export prices in response to exchange rate movements the results reject the hypothesis that the export pricing decisions by u s firms are consistent with price discrimination across destination markets for cotton corn and soybeans the strongest evidence against the competitive market structure is obtained for international trade in wheat where results indicate that the two largest importers soviet union and prc may exert market power to obtain lower prices

the grain sector of the european community policy formation price determination and implications for trade a coresponsibility levy was added to high domestic prices and export subsidies in the ec levels for policy instruments could result from negotiations which favor producers but are acceptable to the public higher domestic prices and levies but lower export subsidies would occur if levy exemptions cover domestic marketings if exemptions are excluded low domestic prices producer subsidies and export taxes would occur with exemptions improved farm income and treasury surpluses would be achieved without injury to the public exemptions might be excluded because producers are better off and public cost is about the same with either program but producer subsidies require expanded public financing export reductions would occur under either program given prevailing market conditions

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

a conjectural variation approach to strategic tariff equilibria abstract this paper examines tariff equilibria in a static two country trade model under a general class of conjectures regarding foreign retaliation we assume that each country chooses its optimum tariff given some conjecture in this class and derive the associated conjectural tariff equilibrium which can be thought of as a nash equilibrium conditional on each country s conjecture about how the foreign country will retaliate our main contribution is to show that when marginal propensities to consume imports are sufficiently small increased expectation of retaliation results in lower equilibrium tariffs for both countries since countries in general probably do expect some retaliation it therefore appears that the traditional cournot nash analysis probably overstates the trade restrictiveness of tariff wars

why a government might want to consider foreign currency denominated debt abstract as the real value of foreign currency denominated debt is not affected by domestic inflation such debt eliminates the discretionary incentive to inflate this in turn will reduce the expected and thus equilibrium rate of inflation however as foreign currency debt is affected by foreign inflation such debt could be an attractive alternative to indexed bonds if the foreign country inflates when the domestic one would like to

optimal time consistent government debt maturity this paper develops a model of optimal debt maturity in which the government cannot issue statecontingent debt as the literature has established if the government can perfectly commit to fiscal policy it fully insulates the economy against government spending shocks by purchasing short term assets and issuing long term debt these positions are quantitatively very large relative to gdp and do not need to be actively managed by the government our main result is that these conclusions are not robust when lack of commitment is introduced under lack of commitment large and tilted debt positions are very expensive to finance ex ante since they ex post exacerbate the government s problem stemming from a lack of commitment in contrast a flat maturity structure minimizes the cost entailed by a lack of commitment though this structure also limits the ability to insure against shocks and increases the volatility of fiscal policy distortions we show that the optimal time consistent maturity structure is nearly flat because reducing average borrowing costs is quantitatively more important for welfare than reducing fiscal policy volatility thus under lack of commitment the government actively manages its debt positions and can approximate optimal policy by confining its debt instruments to consols

optimal maturity of nominal government debt abstract we report a first set of empirical results obtained from estimating on u s data a model of the optimal maturity structure of nominal government debt in a context where there is no full policy precommitment and markets are incomplete

imperfectly competitive equilibria in international commodity markets the simple model of perfect competition in spatial markets has been widely applied in analyzing international agricultural trade yet many markets do not appear to be perfectly competitive this paper offers a new and efficient method for computing spatial equilibrium in oligopolistic or oligopsonistic markets the authors apply the technique to an analysis of several hypotheses of market conduct in the international wheat market that have been put forward by other authors they conclude that a cournot nash duopsony model does not perform well in explaining trade

the debt burden and debt maturity at low and moderate levels of government debt there appears to be little relation between the level of debt and its maturity but at high levels of debt a strong inverse relation emerges we start the paper by documenting this inverse relation for those oecd countries which have reached very high levels of debt we then provide a theory of the joint movements of debt and maturity which can explain both sets of facts it is based on the idea that at high levels of debt the government may need to decrease the maturity of the debt as debt increases in order to maintain the credibility of its anti inflation stance this abstract was borrowed from another version of this item

the financial structure of government debt in oecd countries an examination of the time consistency issue abstract this paper analyzes the financial structure of government debt in the oecd countries from the perspective of time consistency problems with a focus on debt held by financial institutions testable implications from a theoretical time consistency model are derived and incorporated into the framework of a cost minimizing model for public debt service the approach is tested for a sample of 15 oecd countries over the period 1974 1989 the theoretical analysis and the empirical results show how in addition to maturity ownership of government debt in those oecd countries with debt accumulation problems can be related to time consistency considerations

agricultural policy adjustments in the korean rice economy abstract a political preference function is used to endogenize government actions in a simultaneous equation model for south korean rice policy the effects of economic changes on rice pricing decisions through estimated political weights are tested to improve our understanding of policy adjustments in that country and open the way for further research in east asia

dynamic games and international trade an application to the world corn market dynamic games are a conceptually useful way of analyzing imperfect markets where both buyers and sellers have potential market power previous analysis of imperfect markets was static and limited to either exporters or importers a dynamic game allows the inclusion of both importers and exporters in a multiperiod framework allowing the derivation of reaction functions a nash noncooperative difference game is applied to the international corn market to explore the plausibility of numerical results the results are reasonable and show that the game approach based on a more comprehensive econometric model has a promising future in policy analysis

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

are remittances insurance evidence from rainfall shocks in the philippines several facts motivate this study first life in developing countries is prone to many kinds of risk such as crop and income loss due to natural disasters weather insect infestations and fire and civil conflict second international migration and remittance flows are substantial and growing between 1965 and 2000 individuals living outside their country of birth grew from 2 2 to 2 9 percent of the world population totaling 175 million people in 2000 the remittances that these migrants send to their countries of origin are an important but poorly understood type of international financial flow this article examines a mechanism for coping with shocks ex post on which previous micro level studies have not focused remittances from family members overseas at the international level it is commonly posited that remittance flows from overseas buffer economic shocks in migrants home countries but there have been relatively few empirical tests of this claim with micro level household data related research on the role of domestic migration in pooling risk within extended families includes lucas and stark 1985 rosenzweig and stark 1989 and paulson 2000

under the weather health schooling and economic consequences of early life rainfall life in rural areas of developing countries is prone to many kinds of risk such as illness or mortality of household members crop or other income loss due to natural phenomena weather insect infestations or fire for example and civil conflict in addition to their contemporaneous effects the effects of certain types of shocks may still be felt many years or even decades later from a public policy standpoint it is particularly important to identify shocks that have large long run effects moreover the mechanics underlying the persistence of shocks may be of con siderable interest for example a health shock may have a long run effect simply because the health shock itself persists over time alternately the health shock may not directly affect long run outcomes but it could affect some other outcome such as educational attainment that helps determine long run well being in this paper we focus on shocks that occur at the very beginning of life we ask how sensi tive long run individual well being is to environmental conditions around the time of birth in particular we examine the effect of weather shocks around the time of birth on the adult health education and socioeconomic outcomes of indonesian women and men born between 1953 and 1974 in addition we attempt to shed light on the intervening pathways connecting early life rainfall to adult outcomes illuminating the roles of health and educational attainment in deter mining adult socioeconomic status this investigation has considerable data requirements it necessitates information on weather shocks experienced by individuals several decades earlier as well as detailed current informa tion on adult outcomes we use information in the indonesian family life surveys ifls on an individual s year and location of birth and link each individual in that survey to locality specific rainfall data for their birth year for individuals born in rural areas on whom we focus rainfall variation across space and time should generate corresponding variation in agricultural output and thus household income to deal with measurement error in the rainfall data we run instrumental variables regressions where variables for rainfall measured at slightly more distant rainfall stations serve as instruments for rainfall in the individual s birthplace and birth year we examine the impact of early life rainfall on a range of adult outcomes observed in 2000 we find that higher early life rainfall leads to improved health schooling and socioeconomic status for women women with 20 percent higher rainfall relative to normal local rainfall in their year and location of birth are 3 8 percentage points less likely to self report poor or very poor health they attain 0 57 centimeters greater height attain 0 22 more completed grades of

remittance income volatility and labor supply in mexico author affiliation catalina amuedo dorantes camuedod mail sdsu edu corresponding authorsusan pozo susan pozo wmich edu acknowledgment we would like to thank the anonymous referees and the editor for their comments and suggestions on how to improve the manuscript 1 background and significancea significant body of academic and policy research analyzes the impact of international remittances the earnings that emigrants send home in economies around the globe studies have been carried out to ascertain the effect of remittances on a wide range of economic outcomes including household decisions concerning capital accumulation health and housing expenditures country exchange rates economic growth income distribution poverty rates and as we do in this study labor supply evidence of the impacts of remittances on the well being of recipients and on economic progress is mixed some studies find that countries and households reap positive benefits from these resource transfers e g adam and page 2005 while others find negative or ambiguous effects e g narayan narayan and mishra 2011 an overall consensus on the impacts of remittances is unlikely to emerge for some time given the complexity of this research topic not to mention the varying characteristics of countries under analysis 1we propose to contribute to this important debate using an expanded approach for assessing the effects of remittances on individual and household decision making our contribution is to note that while the level of resource transfers received by the household is likely to influence individual and household behaviors volatility with regard to the stream of inflows is also likely to play an important role to date research on the impact of remittances on remittance receiving households has tended to focus on the way in which the level of remittance inflows affects either individual or household behavior without considering the volatility surrounding these inflows however if the volatility that surrounds remittance inflows influences individual and household behaviors a strategy that only examines the level of inflows is likely to miss out on a more complete understanding of the effects of remittances on individual and household decision making and therefore of their impacts on remittance receiving economies amuedo dorantes and pozo 2010 in this study we focus on the labor market and investigate how volatility of remittance inflows influences male and female labor supply a crucial dimension in the influence of remittances on remittance receiving countries limited numbers of studies have examined the impact of the incidence and level of remittance income on labor supply patterns although conclusions differ owing in part to the various data sources and methodological approaches being used a majority of the studies have concluded that the receipt of remittances results in labor supply reductions for instance rodriguez and tiongson 2001 report that remittances lower employment in the philippines while funkhouser 1992 estimates that remittances reduce the employment likelihood of nicaraguan men and women by 2 and 5 percentage points respectively studies by amuedo dorantes and pozo 2006 and hanson 2007 found that the impact of remittances on the labor supply of mexicans is conditioned on gender they conclude that mexican women reduce labor supply on account of remittance inflows whereas men do not in contrast limiting their study to mexican households that receive persistent remittances cox edwards and rodriguez oreggia 2009 conclude that remittances have no impact on the labor supply of household members remaining in mexico with the exception of urban women in traditionally low migration states for whom labor supply rises however we still lack an understanding of the ways in which the volatility in remittance inflows can impact labor supply in remittance receiving countries

germany and the cap a bargaining model of ec agricultural policy formation a bargaining model of ec agricultural policy formation is formulated the model allows for more explicit consideration of political factors than is possible in standard political economy models it shows how the political system in germany has increased the power of german farm interests relative to farm interests elsewhere in the ec the paper recognizes cap negotiations are an on going process results of the previous bargaining round form the basis for the current round and give momentum to price changes understanding this momentum provides insight into the fluctuating price supports that have characterized the cap

fishing and nonfishing income decisions the role of human capital and family structure resource dependent households often diversify their income we model demand for remittances and supply of off resource labor as a joint decision and discuss household trade offs we extend the off farm labor supply literature to a rural fishery contrasting our results to common findings in the farm literature and providing empirical evidence of the interdependence between education and family structure in determining income diversification using a unique dataset from malaysia we find that more educated households are less likely to diversify their income with caveats depending on family composition policy implications for resource management in a remittance economy with alternative livelihoods are discussed

a positive theory of foreign currency debt abstract this paper makes a case for foreign currency debt as a hedging device in an open economy subject to stochastic shocks to output a government can reduce uncertainty in wealth and in consumption by issuing foreign or domestic currency debt if unexpected domestic and foreign inflation are negatively correlated with domestic output foreign currency debt is desirable in comparison to domestic currency debt if growth rates of output of both countries are closely related and if domestic inflation is relatively uncertain it has an additional advantage if domestic debt creates time consistency problems

remittances and social spending remittances are a significant source of foreign exchange for developing economies i argue that remittances due to their compensation and insurance functions will increase the general income level and economic security of recipients thereby reducing their perceived income risk over time this will dampen demand from recipients for government taxation and social insurance therefore i expect increases in income remitted to an economy to result in reduced levels of social welfare transfers at the macro level this dynamic can help us to understand spending patterns in developing democracies and the absence of demand for social security transfers in countries with high levels of inequality and economic insecurity i test this argument with a sample of 18 latin american states over the period 1990 to 2009 and subject the central causal mechanism to a battery of statistical tests the results of these tests provide strong support for this argument