sequential formation of coalitions in games with externalities and fixed payoff division this paper analyzes a sequential game of coalition formation when the division of the coalitional surplus is fixed and the payoffs are defined relative to the whole coalition structure gains from cooperation are represented by a valuation which maps coalition structures into payoff vectors i show that any core stable coalition structure can be attained as a stationary perfect equilibrium of the game if stationary perfect equilibria may fail to exist in general games a simple condition is provided under which they exist in symmetric games furthermore symmetric stationary perfect equilibria of symmetric games generate a coalition structure which is generically unique up to a permutation of the players a general method for the characterization of equilibria in symmetric games is proposed and applied to the formation of cartels in oligopolies and coalitions in symmetric majority games journal of economic literatureclassification numbers c78 c71 1996 academic press inc

different paths to free trade the gains from regionalism we compare free trade reached through expanding regional trading blocs to free trade accomplished by multilateral negotiation with sunk costs the outcomes are different trade in an imperfectly competitive good flows disproportionately more between the original members of a regional agreement even after free trade is reached they secure a higher welfare level from regionalism than from free trade achieved multilaterally nonmembers however reach a lower welfare level a surprising result is that world welfare during free trade is greater when it is achieved by the regional path we conclude with some empirical evidence from the european union that is consistent with the model

a welfare decomposition in quasi linear economies abstract we propose a decomposition of social welfare when consumers have quasi linear utility functions under certain conditions satisfied in many models of imperfect competition our decomposition is useful especially when we assess the impact of trade liberalization on individual countries

place to place migration in colombia the determinants of lifetime and recent place to place migration in colombia are investigated using unpublished data from the 1973 census the data cover 12 zones rural and urban segments of 6 regions and are analyzed for the population as a whole and for eight specific demographic groups including four educational categories and the two sexes the basic proposition is that areas economic opportunities play a central role in determining the spatial allocation of the population the results give strong support to the economic model of migration overall and in explaining differences in migration behavior among demographic groups excerpt

real options approach to inter sectoral migration of u s farm labor the core of the literature on inter sectoral labor migration is based on net present value models of investment in which individuals are assumed to migrate to take advantage of positive wage differentials in this article we argue that a real options approach taken together with the adjustment costs associated with sectoral relocation may provide a basis for explaining the migration of farm labor out of the agricultural sector given the irreversibility of migration decisions and uncertainty in the economy potential migrants might choose to postpone migration even in the face of positive wage differentials using annual u s employment data from between 1948 and 2009 our results indicate that large elasticities between economic incentives and out farm migration are observed after a high threshold of wage differentials between farm and off farm sectors is surpassed

endogenous free trade agreements and the multilateral trading system i evaluate in this paper the impact of free trade areas ftas on the world trading system i use an oligopolistic political economy model where the external tariffs of fta members as well as the decision to form ftas are endogenously determined in this context i show that ftas are primarily beneficial to the multilateral trading system this conclusion is based first upon the finding that ftas induce their member governments to lower their external tariffs and to do so deeply enough to enhance trade even between fta members and non members while this ensures gains for the latter in general fta members may not gain i show however that governments will endorse only welfare improving arrangements in spite of their political motivations as a result fta members benefit from ratified arrangements as well finally i find that ftas by reducing the role of special interests criteria in governments trade regime decisions also tend to enhance support for further liberalization at the multilateral level

some welfare effects of sequential customs union formation this paper deals with the effects on world welfare of sequential customs union formation a computational model of customs union formation is developed and simulated under a variety of assumptions these assumptions concern various characteristics of the world the pattern of customs union formation and gatt restrictions on common external tariffs the results show that unrestricted customs union formation is likely to result in successive deterioration of world welfare despite gains for the member countries collectively an examination of the current gatt guidelines however suggests that if they were vigorously enforced world welfare would rise with customs union formation

a theory of endogenous coalition structures consider an environment with widespread externalities and suppose that bind ing agreements can be written we study coalition formation in such a setting our analysis proceeds by defining on a partition function an extensive form bargaining game we establish the existence of a stationary subgame perfect equilibrium for such a game our main results are concerned with the characterization of equilib rium coalition structures we develop an algorithm that generates under certain conditions an equilibrium coalition structure our characterization results are especially sharp for symmetric partition functions in particular we provide a uniqueness theorem and apply our results to a cournot oligopoly journal of economic literature classification numbers c71 c72 c78 d62 q 1999 academic press

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

migratory labor and agriculture farm workers are shown to respond strongly to economic incentives to seasonally migrate for work the economic model is specified with separate earnings structures for migratory and nonmigratory work and a reservation wage for migration is specified to reflect the choice between migratory and nonmigratory work the empirical model adjusts for self selectivity in the sample and demonstrates that domestic farm workers sort themselves into migratory and nonmigratory workers in a manner consistent with the theory of comparative advantage implications for immigration and government employment and training programs are considered

bilateralism and free trade we study a setting with many countries in each country there are firms that can sell in the domestic as well as foreign markets countries can sign bilateral free trade agreements that lower import tariffs and thereby facilitate trade we allow a country to sign any number of bilateral free trade agreements a profile of free trade agreements defines the trading regime our principal finding is that in symmetric settings bilateralism is consistent with global free trade we also explore the effects of asymmetries across countries and political economy considerations on the incentives to form trade agreements

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

migration theories and evidence an assessment abstract this paper presents a critical survey of theories of migration their welfare and policy implications and their empirical relevance we also develop some extensions to the theory beginning with the harris and todaro ht model in particular the ht model is extended to examine risk averse behaviour within families where the migration of members of families serves to diversify risk the welfare implications of the individual migration decision and government intervention in the form of employment subsidies are examined recent evidence on international migration is presented it is shown that migration does not flow automatically in response to wage differentials characteristics of migrants and the process of self selection are found to be important determinants of the rate of migration

a declining farm workforce analysis of panel data from rural mexico analysis of nationally representative individual level panel data from 1980 to 2010 reveals a significant negative trend in the agricultural labor supply from rural mexico which is the primary source of hired workers for u s farms these findings offer an explanation for the rise over time in u s farm wages concomitants of the agricultural transformation including growth in the non farm economy falling birth rates and an increase in rural education accelerate the transition of rural mexicans out of farm work higher u s farm wages and increased border enforcement slow the transition but the combined impact of these offsetting variables is relatively small a diminishing farm labor supply has far reaching implications for farmers farm labor organizers rural communities and agricultural workers

preferential versus multilateral trade liberalization and the role of political economy abstract in this paper we analyze the effect of the freedom to pursue preferential trade liberalization permitted by article xxiv of the gatt on country s incentives to participate in multilateral negotiations and on feasibility of global free trade we present a model in which countries choose whether to participate in preferential or multilateral trade agreements under political pressures from domestic special interest groups we show that heterogeneity in political preferences across countries plays an important role in determining the relative merits of preferential and multilateral approaches to trade liberalization on one hand the opportunity to liberalize preferentially may be necessary to induce countries with strong political motivations to participate in multilateral free trade negotiations on the other hand when countries share similar political preferences multilateral free trade that would have been politically supported otherwise becomes unattainable if countries can pursue preferential liberalization

motivations to remit evidence from botswana in this article a theory of motivations to send remittances is described and tested with data from botswana altruism is one of the motivations tested and found to be an insufficient explanation for remittances among migrants in botswana a refinement of the model stipulates a modified altruism or enlightened self interest in this model the relationship between the migrant and family is tempered by an implicit understanding of mutual benefit the household strategy may be to encourage some members to migrate as a means of spreading risk and sharing gains the household strategy is similar to an insurance policy where migration is to places where market potential is high the risks incurred might be high the example is given of migration during a drought in botswana migrant remittances were greater in households with more cattle or households with more to lose drought alone was not statistically related to remittances increases in remittances were related to increased levels of education it is suggested that repayment was the motive for parents investment in migrants education migrants gains are identified as the potential for an inheritance the security of channeling investments through a trusted family member and security in having a home to return to it is pointed out that the altruism and family remittances from urban migration were strategies that bridged the simple dynamic of either urban development or rural development impacting on family welfare it is suggested that household models of economy adopt some measure to express the relationship of household wealth to remittances from urban migrants

rent destruction and the political viability of free trade agreements this paper studies the political viability of free trade agreements ftas the key element of the analysis is the rent destruction that these arrangements induce by eliminating intrabloc trade barriers an fta lowers the incentives of import competing industries to lobby for higher external tariffs thereby inducing a reduction of the rents created in the lobbying process using a conventional competitive model i show that the prospect of rent destruction can critically undermine and in some cases rule out entirely the political viability of welfarereducing ftas this result contrasts sharply with findings from the earlier regionalism literature

selective intervention and internal hybrids interpreting and learning from the rise and decline of the oticon spaghetti organization infusing hierarchies with elements of market control has become a much used way of simultaneously increasing entrepreneurialism and motivation in firms however this paper argues that such internal hybrids particularly in their radical forms are inherently hard to successfully design and implement because of a fundamental incentive problem of establishing credible managerial commitments to not intervene in delegated decision making this theme is developed and illustrated using the case of the world leading hearing aids producer oticon in the beginning of the 1990s oticon became famous for its radical internal hybrid the spaghetti organization recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by organizational means neglecting however that about a decade later the spaghetti organization has given way to a more traditional matrix organization in contrast an organizational economics interpretation of oticon organizational changes is developed this lens suggests that a strong liability of the spaghetti organization was the above incentive problem frequent managerial meddling with delegated rights led to a severe loss of motivation and arguably caused the change to a more structured organization refutable implications are developed and the discussion is broadened to more general issues of economic organization

a nested logit migration model with selectivity in this paper we specify a multiple choice migration model with selectivity we estimate this model using observations on individuals drawn from the 1971 census of venezuela there are two main innovations in this paper we apply a correction for the presence of selectivity in wage equations in the context of a multiple choice migration model and we apply a less restrictive technique for modelling multiple discrete choices than in previous studies we study the choices of individuals among 23 states of venezuela each individual is observed to have chosen one state so one wage is observable per person our hypothesis is that individuals choose where to locate on the basis of an evaluation of costs and benefits associated with choosing each state we measure the benefits associated with choosing a given state by means of the wage a person could earn in this state since we observe only one wage for each person we have to impute the unobserved wages for the states this person did not choose in order to study the role of wages in migration however it is possible that unobserved factors which affect both an individual s choice of location and his wages may result in sample selection bias if we try to estimate state specific wage equations by ols on the basis of the self selected samples we apply an estimator proposed by lee 1983 to estimate state specific wage equations free from sample selection bias the wage equations permit us to investigate whether individuals who choose particular states earn different wages from observationally identical individuals drawn from the population at random in the context of a developing country where internal migration flows are large evidence on the selectivity of migration will enhance our understanding of an important labor market adjustment mechanism evidence that people who choose particular locations earn more in those locations than would observationally identical individuals drawn at random from the population positive selection will suggest that migration decisions are made according to the principle of comparative advantage in modelling the choice of location we test whether subsets of states are more highly similar to each other than to other states unobserved similarities between states may arise because of similar amenities or economic conditions which are not otherwise explicitly controlled for in the model we implement the

migration of seasonal agricultural workers nearly half of all seasonal farm workers migrate at least 75 miles in a given year an expected earnings differential from migration weakly induces migration a 10 earnings differential raises the probability of migrating by slightly more than 1 this result indicates that there are substantial costs to migrating and that employers must offer large earnings premia to induce a substantial number of workers to move to their jobs some demographic groups earn substantially higher earnings by migrating these higher earnings from migration are primarily due to higher wages rather than more hours of work

multilateral tariff cooperation during the formation of free trade areas we consider the impact of the formation of free trade agreements on multilateral tariff cooperation we assume that countries are limited to selfenforcing multilateral arrangements that balance the gains from deviating against the costs of an ensuing trade war we find that the emergence of free trade areas will be accompanied by a temporary retreat from liberal multilateral trade policies as the initial balance supporting multilateral cooperation is upset eventually however as the full impact of the emerging free trade agreement on multilateral trade patterns is felt this initial balance tends to reemerge and liberal multilateral trade policies can be restored

do south south preferential trade agreements undermine the prospects for multilateral free trade due to trade diversion there has been concerns expressed over the proliferation of preferential trade agreements ptas between south countries in this paper we compare welfare across the various forms of bilateral free trade agreements ftas and customs unions cus and examine their implications for the stability of multilateral free trade while north north ptas tend to yield higher welfare we fi nd certain cases where south south agreements are more likely to lead to global free trade than north north or north south agreements but other cases where multilateral cooperation over free trade is the least likely under south south agreements we also examine how the expansion of existing agreements or the combination of separate agreements affects the potential for free trade

multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

multilateralism and the endogenous formation of preferential trade agreements abstract this paper examines the interaction between preferential trade agreements ptas and multilateral tariff reduction in a model of imperfect competition a growing literature finds that the formation of ptas alters the incentives for and the sustainability of multilateral tariff reduction we show that the causation is not one sided multilateral tariff reduction also affects the formation of ptas specifically tariff reduction enhances the incentives to form a pta and increases the likelihood that it is self enforcing thus each round of multilateral tariff reduction should lead to a new wave of ptas this may help to explain the current trend towards regionalism

the size of trading blocs market power and world welfare effects abstract we construct an n country n commodity trade model to analyze the implications of bloc size for nash equilibrium tariffs and welfare the relationship between the absolute size of symmetric trading blocs and their market power is ambiguous and we illustrate how this relationship varies with model parameters in contrast sufficiently large increases in the relative size of a bloc enhance its relative market power and cause the welfare of its country members to rise above the free trade level we establish the existence of an optimal bloc size and study the dependence of optimal size on the parameters of the model

a test of dual labor market theory despite substantial differences in their views of the appropriate policy response to the existence of poverty neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis this paper presents a test of the two central propositions of dual market theory 1 the existence of two distinct labor markets with different wage setting mechanisms and 2 the existence of barriers to mobility between the labor markets we find considerable support for both hypothesis estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations the one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience the other equation is flat with no returns to human capital these two equations resemble the predictions of dual market theory for the primary and secondary markets respectively further we present evidence that at least some non white workers are involuntarily confined to the secondary market this crowding of minority workers into the low wage labor market accounts for a substantial portion of white non white wage differences we interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels in addition combining the efficiency wage argument with the observation that much of the white non white wage difference is explained by the exclusion of non whites from the primary sector suggests an explanation for the persistance of wage differences this abstract was borrowed from another version of this item

multilateral tariff cooperation during the formation of customs unions abstract we study the implications of customs union formation for multilateral tariff cooperation we model cooperation in multilateral trade policy as self enforcing in that it involves balancing the current gains from deviating unilaterally from an agreed upon trade policy against the future losses from forfeiting the benefits of multilateral cooperation that such a unilateral defection would imply the early stages of the process of customs union formation are shown to alter this dynamic incentive constraint in a way that leads to a temporary honeymoon for liberal multilateral trade policies we find however that the harmony between customs unions and multilateral liberalization is temporary eventually as the full impact of the emerging customs union becomes felt a less favorable balance between current and future conditions re emerges and the liberal multilateral policies of the honeymoon phase cannot be sustained

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

farsighted network formation this paper studies a model of dynamic network formation when individuals are farsighted players evaluate the desirability of a current move in terms of its consequences on the entire discounted stream of payoffs we define a concept of equilibrium which takes into account farsighted behavior of agents and allows for limited cooperation amongst agents we show that an equilibrium process of network formation exists we also show that there are valuation structures in which no equilibrium strategy profile can sustain efficient networks we then provide sufficient conditions under which the equilibrium process will yield efficient outcomes

regionalism in a multilateral world recent regional initiatives have been addressed from a vinerian perspective of trade creation and trade diversion this is true of both policy oriented economists who tend to be critical of the initiatives and theorists who have added dynamic and gametheoretic elements to the vinerian structure this paper describes the stylized facts of much recent regional integration and develops an alternative model the analysis suggests that regional integration far from threatening multilateral liberalism may in fact be a direct consequence of the success of past multilateralism and an added guarantee for its survival

erratum to multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

free trade networks abstract the paper examines the formation of free trade agreements ftas as a network formation game we consider an n country model in which possibly asymmetric countries trade differentiated industrial commodities we show that if all countries are symmetric the complete fta network is pairwise stable and it is the unique stable network if industrial commodities are not highly substitutable we also compare ftas and customs unions cus as to which of these two regimes facilitates global trade liberalization noticing that unlike cus each signatory of an fta can have another fta without consent of other member countries

undocumented mexico u s migration and the returns to households in rural mexico this paper presents estimates of net income gains to a sample of households in rural mexico from sending migrants illegally to the united states correcting for sample selectivity bias and it examines the role of expected income gains in driving illegal mexico u s migration there is no evidence that people who migrate illegally to the united states are above average contributors to household income either as workers in mexico or as mexico u s migrants however other things being equal villagers who are in the best position to contribute to household income as workers in mexico are positively selected not to migrate to the united states

effect of u s immigration reform on labor intensive agricultural commodities a major concern in development of the 1986 immigration reform and control act was the potential for reductions in seasonal farm labor supply although the act appears to have increased farm labor supply future immigration policy will likely be affected by similar concerns muth s model of industry supply and factor demand is adapted to analyze effects of labor supply reductions on selected u s crops labor factor share and output demand elasticity are the most important factors influencing the impact of labor supply on production and effects of moderate supply decreases will be small if recent output demand conditions continue