quantitative restrictions and the welfare effects of capital inflows abstract this paper explores the welfare effects of capital inflows when some imports are subject to quantitative restrictions it is shown that in a heckscher ohlin model where all imports are restricted by quotas and some fraction of the initial domestic capital stock is foreign owned a capital inflow is welfare improving regardless of the ranking of sectoral factor intensities with sector specific capital stocks and both tariff ridden and quota restricted imports the consequences of direct foreign investment in any sector are uncertain and depend upon whether the two imports are compensated substitutes or complements as well as the characteristics of production

a simple model of sectoral adjustment despite the significance of limited labour mobility across sectors few attempts have been made to produce dynamic models of sectoral adjustment which are consistent with perfect foresight and yet flexible enough to allow for a variety of dynamic experiments this paper proposes a simple perfect foresight model of two sector economies in which aggregate sectoral movement of labour takes place through the process of demographic change the model is tractable enough that one can easily examine the effects of intertemporally complicated relative price shocks both exogenous and endogenous under a variety of assumptions on technology

sluggish intersectoral factor movements and alternative trade policies one of the basic assumptions of the standard two sector two factor general equilibrium model of production and trade is that factors are perfectly mobile between two sectors if a policy induced or policy independent change in a parameter of the model leads to an inequality in the price of a factor as between two sectors movement of the factor from the lower price sector to the higher price one will take place under the assumption of perfect mobility and that will eventually eliminate the intersectoral difference in factor prices at the new equilibrium this assumption of perfect mobility of factors has recently been a topic of further research in the two sector production and trade literature questions have been raised about the validity of this assumption see e g mussa 5 125 41 yu 7 387 93 casas 2 747 61 yu and parai 8 601 09 and parai and yu 6 842 52 in the context of labor it is argued that a policy induced increase in the wage rate in one sector does not necessarily lead to a movement of enough labor from the other sector so as to re establish the equality between sectoral wage rates even in the long run geographical or locational preferences of individuals for living in one area over another serious attachments of workers to one region due to strong family ties or high costs of moving from one place to another have usually been the reasons for the sluggish movement of labor from one sector to the other on the other hand the sluggishness in the mobility of physical capital is explained by the investors attitude towards uncertainty in other sectors and also the high cost of moving and adjusting to the need of the new industry given this imperfect mobility the net rental rates would not equalize between two sectors even in the long run mussa and casas separately modeled the imperfect labor mobility problem whereas grossman 3 1 17 modeled the case of imperfect capital mobility hill and mendez 4 19 25 however developed a general model incorporating the imperfect mobility of both capital and labor in the two sector general equilibrium model of production parai and yu have used the both factors are imperfectly mobile the purpose of the present paper is to extend the parai yu analysis further to investigate the implications of imperfect factor mobility in the analysis of standard gains from trade issues in the literature specifically we intend

the distribution of talent and the pattern and consequences of international trade i study the interaction between imperfect labor contracts and international trade in a setting in which workers have private information about their own abilities when an individual s contribution to firm output can be measured accurately in some activities but not in others the most able workers select occupations in which their pay most closely reflects their own performance in a world economy with two otherwise similar countries that have different distributions of talent the country with the more heterogeneous labor force exports the good that is produced by the most talented individuals in this country trade exacerbates the polarization of the labor force and often worsens the distribution of income

sorting it out international trade with heterogeneous workers each worker brings a bundle of skills to the workplace for example quantitative and communication skills since employers must take this bundle as a package deal they choose workers with just the right mix of skills we show that international differences in the distribution of worker skill bundles for example japan s abundance of workers with a modest mix of both quantitative and teamwork skills have important implications for international trade industrial structure and domestic income distribution formally we model two dimensional worker heterogeneity and show that the second moments of the distribution of skills are critical as in the roy model

from sectoral linkages to class conflict trade and coalition formation in britain prior to and after world war i although the sectoral framework on global commerce and coalition formation provides a better explanation of trade and political alignments in pre 1914 britain than the stolper samuelson framework it shares the main shortcoming of the latter when applied to the interwar period neither approach explains the restructuring of politics along class lines after 1918 according to the sectoral framework the continued imperfect mobility of capital and labor and deeper divisions within the business community should have led to greater not less cross class cooperation over trade and trade related issues this article extends an earlier critique of the stolper samuelson framework to address this puzzle it argues that weak worker trade union organization modifies the incentive of business owners to align with labor on trade even when imperfect capital mobility and divisions in the business community heighten the incentive of capitalists to form lobbying coalitions with labor in addition to addressing the marke

sectorial wages and the real exchange rate abstract this paper considers a multi sector economy subject to exogenous demand shocks that alter the equilibrium structure of relative prices and relative wages contracts set nominal wages in advance of the realization of stochastic shocks formulae for optimal sectorial wages indexation rules are provided these optimal rules alter the absolute and the relative structure of sectorial nominal wages the rules depend on the heterogeneity of the skill distribution the effects of shocks on the real exchange rate and on real wages are determined and the limited role of second best nominal exchange rate policy is analyzed

a bertrand model of wage competition with capital mobility abstract this paper analyzes wage competition between national trade unions with perfect international capital mobility a simple neoclassical representation of the capital market equilibrium leads to a bertrand result for the outcome of international wage competition

demand for beef and chicken products separability and structural change several studies have indicated that the recent shift from beef to poultry in consumption is not entirely caused by changes in rela tive prices or income braschler chavas dahlgran hudson and vertin moschini and meilke frank thurman most studies of structural change have focused on red meat consumption only thurman has looked closely at the poultry market and no one has considered poultry products yet the mix of chicken products marketed changed dramat ically during the last twenty years and should have influenced aggregate meat demand the share of broiler slaughter marketed as whole birds declined from 74 in 1965 to 28 in 1985 while cut up parts and processed chick en products increased from 26 to 72 whole birds are inferior goods and cut up parts and processed chicken are normal goods haidacher et al the shift in chicken prod uct mix away from whole birds should have increased the preference for total chicken in this article two related questions are ad dressed first do consumers allocate expendi tures among meats by animal origin or by product type second does disaggregation of meat into products in a meat demand model give insight into the causes of structural

factor mobility and customs unions theory the standard theory of customs unions originated with the pathbreaking work of viner 11 viner draws a distinction between the trade creating and the trade diverting effects of customs unions trade creation involves a shift of consumption of the importable good from a high cost domestic producer to a lower cost foreign producer trade diversion however involves a switch from the lowest cost external producers to a higher cost producer viner argues that trade creation improves the home country s welfare and trade diversion dampens it viner s analysis was refined by gehrels 4 lipsey 8 and batra 1 the theory was reexamined in light of unemployment by yu 12 and in the presence of variable returns to scale by choi and yu 3 viner s main results were modified accordingly underlying the standard theory of customs unions is the assumption that factors are perfectly mobile between industries in a given country this assumption simplifies the analysis but cannot be supported by empirical observations it is notable that the two sector trade model has been recently extended to accommodate varying degrees of factor mobility mussa 10 considered the case in which capital is sector specific but labor displays any degree of mobility grossman 5 posited capital immobility but allowed perfect labor mobility casas 2 studied the implications of labor immobility which gives rise to an endogenous wage differential hill and mendez 6 developed a general model which allows any degree of mobility in both factors yu and parai 14 adopted casas approach to examine the gains from trade issues this factor mobility literature has generated many interesting results in the neoclassical trade theory the implications of factor immobility for the customs union theory however remain by and large unexplored the purpose of this paper is to make a modest contribution by considering the customs unions theory in the presence of any degree of mobility of both factors as a secondary contribution we elucidate how the presence of factor immobility makes the extent of factor price differentials

from factor endowments to class struggle pre world war i germany and rogowski s theory of trade and political cleavages ronald rogowski s recent and important work commerce and coalitions sets forth a farranging and parsimonious theory of trade and political cleavages this article closely investigates its validity in the case of pre world war i germany where trade has long been seen as a critical factor determining coalition formation and rogowski s argument appears at first glance to be especially compelling close investigation however reveals that the key variable in rogowski s theory relative factor endowments fails to account for the political alignment of capital and labor in germany following 1890 this article puts forward an alternative theory in which business labor coalition formation is determined not only by the alliance possibilities associated with trade but also by their intersection with the strength of worker organization and capital labor mobility this argument both addresses the anomalies that prewar germany poses for rogowski s account of trade and cleavages and provides a potential explanatio

the demand for cigarettes in japan a two stage budgeting procedure was used to estimate demand elasticities for cigarettes in japan cigarettes were disaggregated into japanese u s and rest of world testing for habit effects was performed at both stages results indicated that habit effects occur for total expenditures on cigarettes but not between types

the inverse almost ideal demand system abstract a new demand system related to the almost ideal demand system aids of deaton and muellbauer is developed and illustrated this inverse aids iaids retains all of the desirable theoretical properties of the aids model with the exception of consistent aggregation an empirical issue is whether a linear approximation will work as well for the iaids as it has for the aids model since quantities are not as highly correlated as prices an application to u s meat demand demonstrates that the linear approximation of the iaids is excellent which enhanced the ease and range of application

factor immobility and gains from trade the implications of imperfect factor mobility have been studied by for example batra 1 ch 10 mussa 10 grossman 7 hill and mendez 8 and casas 4 among others this factorimmobility literature has generated many interesting results in the neo classical trade theory the issue of gains from trade has been studied by batra 1 ch 4 eaton and panagariya 6 choi and yu 5 and batra and naqvi 2 the implications of imperfect factor mobility for gains from trade remain by and large unexplored the main purpose of this paper is to explore the implications of factor immobility for several gains from trade and optimal policy issues a special feature of the present paper involves an endogenously determined wage differential arising from factor immobility however the wage distortion is not a genuine distortion as the social welfare depends upon workers locational preferences in addition to consumer demands the paper is developed as follows section ii describes the model and its assumptions section iii presents the analysis regarding the optimality of free trade free trade vs no trade and the optimal policies section iv shows the welfare effects of protection measures section v offers the concluding remarks

the structure of food demand interrelatedness and duality this paper presents a new empirical demand system which mitigates the effects of multicollinearity while facilitating the measurement of interrelatedness duality theory is used to derive the inverse demand functions using data on fourteen food items a complete set of demand equations is estimated in both quantity and price dependent forms the model is used to test for the theoretical restrictions of homogeneity additivity and negativity as well as the habit formation hypothesis a comparison is made between these results and those of brandow and george and king

the poultry market demand stability and industry structure the stability of the demand for poultry meat and specification issues in its estimation are explored the analysis concludes that the demand for poultry meat shifted out in the early 1970s at the same time the demand relationship between poultry and pork changed from substitution to independence a second conclusion is that poultry price is predetermined for demand in annual u s data while quantity is not a predetermined price suggests several market structures exogeneity tests are performed to distinguish among them the results are consistent with a competitive constant returns to scale industry facing elastic factor supplies

factor mobility and the general equilibrium model of production abstract the two sector production model is generalized to accommodate any degree of mobility in the two factors the model provides a convenient framework for exploring the manner in which factor mobilities interact with factor intensities in resolving a number of basic issues in neoclassical trade theory particular emphasis is placed on determining the importance of absolute mobility when the two factors are equally mobile and of the size of the mobility differential when factor intensities are equal across sectors

regional land markets and trade induced inequities leger l a 1994 regional land markets and trade induced inequities reg studies 28 109 118 regional policies can be used to redress trade induced inequities in a small open economy a ricardo viner general equilibrium trade model is used in which interregional migration of labour is costly increasing relocation costs arise from the operation of markets for essential services in particular residential land these create distributional inequities and suggest the possibility of manipulation population density in regional land use to effect both redistribution and a move to greater productive efficiency leger l a 1994 les marches fonciers regionaux et les inegalites provoquees par les echanges reg studies 28 109 118 dans une petite economie ouverte depourvue de terrains a b tir les politiques regionales servent a corriger les inegalites provoquees par les echanges on se sert d un modele d echanges du type ricardo viner reposant sur la notion de l equilibre general et qui suppose que le cout

imperfect factor mobility and the distribution of income abstract when labor is imperfectly mobile between industries workers may have a special interest in commercial policies that increase the price of the output of the industry in which they are employed this proposition is investigated in a two good model in which the degree of labor mobility is measured by the elasticity of a convex input transformation curve the existence of such a transformation curve is justified by a model in which individual workers have differing relative and absolute efficiencies in different industries the results are extended to the case of many industries

testing restrictions on a model of japanese meat demand tests for quasi separability net substitutability and perfect substitutability are developed and implemented on an almost ideal demand system model of the japanese meat sector the data set satisfies both symmetry and homogeneity there is evidence of net complimentarity between chicken and dairy beef and chicken and pork the tests indicate that japanese wagyu beef is considered a separate commodity to both imported beef and dairy beef the results also indicate that fish can be treated as separable in the japanese meat demand system

dynamics of trade liberalization policy abstract this paper analyzes the dynamics of trade liberalization policies in the presence of adjustment costs the discussion focuses on modeling the nature of those costs and the interaction between wages and resource reallocation during the adjustment also it highlights the role that human capital plays in the adjustment process

an inverse demand system for u s composite foods reply elasticity matrix the approach he uses for verification however is conceptually and empirically inadequate first hicks has systematically treated the inverse demand and defined q complements and q substitutes of the antonelli matrix in contrast to the pcomplements and p substitutes of the well known slutsky matrix in ordinary demand as shown in deaton and muellbauer p 57 the antonelli matrix and slutsky matrix are closely linked they are generalized inverses of each other conceptually if one intends to verify the dual nature of a demand system one should focus on the generalized inverse relationships between the antonelli and slutsky matrices rather than using young s intuitive approach by comparing the estimated price flexibilities with the derived demand elasticities moreover young s demand elasticity matrix is derived from a constructed uncompensated price flexibility matrix that departs from the functional form specified in huang s inverse demand system i know of no theoretical basis to verify the inverse demand system by using young s derived demand elasticity matrix that is obviously outside the framework of the initial model specification for the inverse demand system second in general the empirical demand elasticity and price flexibility matrices obtained from certain well known estimation procedures are not the reciprocal of one another in a statistical sense because the two sets of regression lines differ from one another in an ordinary demand system the sum of residuals is minimized along the quantity axis whereas the sum of residuals is minimized along the price axis in an inverse demand system the problem was discussed in houck who summarized some earlier studies and concluded a the reciprocal of the direct price flexibility is not in general the same as the direct price elasticity and b the reciprocal of the price flexibility is absolutely less than the true elasticity if there are discernible cross effects with other commodities thus young s demand elasticity matrix which is computed as the reciprocal of a derived uncompens ted price flexibility matrix has limited practical use because the elasticity matrix may not represent the true demand structure as reflected from the sample observations perhaps a statement from waugh pp 29 30 best addresses this point i prefer to use the p ice flexibilities themselves rather than their reciprocals if for any reason the elasticity of demand is wanted i would prefer to use the other regression equations using quantities as the dependent variables

the magic bullet the rtaa institutional reform and trade liberalization the reciprocal trade agreements act rtaa of 1934 has long been heralded as a simple institutional reform with revolutionary consequences namely by changing the trade policymaking process in the united states the rtaa is held responsible for the dramatic liberalization in u s policy beginning in the 1930s and 1940s this article takes issue with this conventional wisdom i argue that the standard accounts which emphasize the importance of delegation for overcoming logrolling in congress or for facilitating reciprocity in international trade negotiations fail to provide an adequate explanation for just how the institutional innovation was achieved and sustained in the face of protectionist opposition i suggest instead that trade liberalization was driven by exogenous changes in party constituencies and societal preferences that had crucial effects on congressional votes to extend the rtaa authority and liberalize trade after 1945 the preservation of the rtaa program was symptomatic rather than causal as a consequence it may well be abandoned in the future the evolution of u s trade policy has been and will continue to be powerfully shaped by changes in the preferences of societal groups and in the positions taken by parties on the trade issue

class versus industry cleavages inter industry factor mobility and the politics of trade domestic political conflict has been a constant companion to international trade but the nature of that conflict has varied greatly in western democracies over the last two centuries political battles over trade policy appear to have sometimes divided societies along broad class lines and at other times split them into narrow industry based coalitions i argue that this diversity stems from historical and cross national variation in inter industry factor mobility class coalitions are more likely where factor mobility is high whereas narrow industry based coalitions are more likely where mobility is low evidence from six western economies for the last two centuries indicates that levels of factor mobility have varied historically and cross nationally in accord with industrialization and regulation this variation corresponds broadly with observable differences in the formation of trade policy coalitions