every little helps esg news and stock market reaction stories about corporate social responsibility have become very frequent over the past decade and managers can no longer ignore their impact on firm value in this paper we investigate the extent and the determinants of the stock market s reaction following ordinary news related to environmental social and governance issues the so called esg factors to that purpose we use an original database provided by covalence ethicalquote our empirical analysis is based on about 33 000 esg news positive or negative targeting one hundred listed companies over the period 2002 2010 on average firms facing negative events experience a drop in their market value of 0 1 whereas companies gain nothing on average from positive announcements we find also that market participants are responsive to the media but they do not react to firms press releases or to ngos disclosures moreover our results indicate that sector s reputation mitigates the loss the goodwill hypothesis and that cultural proximity and lexical contents of esg disclosures play a significant role in the magnitude of the impact

armington models and terms of trade effects some econometric evidence for north america elasticities of substitution among u s imports from mexico canada the rest of the world and competing domestic production are estimated for twenty two mining and manufacturing sectors based on quarterly data for 1980 88 these elasticities will provide a benchmark for computable general equilibrium models of north american trade liberalization the authors also find that estimated armington elasticities are low and therefore researchers may want to reconsider the device of using high values of armington elasticities in multicountry computable general equilibrium models to avoid large terms of trade losses associated with preferential trade liberalization

dairy tariff quota liberalization contrasting bilateral and most favored nation reform options we develop a highly disaggregated tariff line source differentiated partial equilibrium model of u s specialty cheese imports to investigate alternative reform options for tariffrate quotas a mixed complementarity framework is used to represent bilateral and multilateral tariff quota administration methods within the u s dairy industry the impact of liberalizing u s specialty cheese imports via bilateral and multilateral tariffrate quota expansions out of quota tariff cuts and simultaneous liberalization scenarios is evaluated we find that the path of liberalization is quite different depending on the reform approach undertaken the results have important policy implications in the agricultural negotiations

preferential trading agreements and capital flows abstract a three country trade model is used to determine the impact of a preferential trading agreement between two countries on world prices and the international allocation of capital assuming the agreeing countries have characteristics typically associated with developing countries we derive a simple condition that predicts whether a country experiences an inflow or outflow of capital with the agreement while at least one country experiences a capital inflow the other may experience an outflow welfare implications are addressed

vertical integration market foreclosure and consumer welfare in the cable television industry i examine the effects of vertical integration between programming and distribution in the cable television industry i assess the effects of ownership structure on program offerings prices and subscriptions and i compare consumer welfare across integrated and unintegrated markets the results of this analysis suggest two general conclusions first integrated operators tend to exclude rival program services suggesting that certain program services cannot gain access to the distribution networks of vertically integrated cable system operators second vertical integration does not harm and may actually benefit consumers because of the associated efficiency gains

import price elasticities reconsidering the evidence recent economic geography and trade empirical studies based on monopolistic competition suggest high levels of trade price elasticities between 3 and 1 1 however price elasticity estimations in trade equations using unit values as price proxies usually lead to lower values of around unity we show that those inconclusive results may be due to some misspecification in these equations as well as measurement errors in prices when suit able instrumental variables are used within a panel of industrialized countries we obtain high price elasticities the majority ranging from i to 13 the highest estimates correspond to industries producing homogeneous goods jel classification c2 c3 and f 1

learning and the time interdependence of costa rican exports abstract exports may enhance learning through production induced learning by doing learning to export by doing and flows of information from customers we provide evidence on the learning effects of export destination for costa rica for 1955 through 1980 we examine granger causality results and export trends to determine relationships between exports to the central american common market cacm the rest of the south and the north increasing exports to the cacm appear to promote learning in machinery leather and intermediate manufactures we also find that the cacm redirects some exports away from northern markets probably with damaging consequences

trade policy options for chile this article uses a multisector multicountry computable general equilibrium model to examine chile s strategy of additive regionalism negotiating bilateral free trade agreements with all of its significant trading partners taking chile s regional arrangements bilaterally only its agreements with northern partners provide sufficient market access to overcome trade diversion costs due to preferential market access however additive regionalism is likely to provide chile with gains that are many multiples of the static welfare gains from unilateral free trade at least one partner country loses from each of the regional agreements considered and excluded countries as a group always lose gains to the world from global free trade are estimated to be vastly larger than gains from any of the regional arrangements

the demand for ldc exports of manufactures estimates from hong kong exports of manufactures from developing countries are generally believed to be sensitive to changes in the level of income in the developed countries their major market this belief is grounded on both casual observation especially from the experience of recent recessions and on extensive econometric evidence of low price elasticities and high income elasticities of demand for ldc exports in developed countries this paper argues that both casual observation and previous econometric evidence are misleading the aim of the paper is to show the order of magnitude of the bias contained in previous econometric estimates of price and income elasticities of demand for ldc exports of manufactures due to neglect of supply side influences previous econometric work has neglected the supply side of ldc exports for the simple reason that it is difficult to model it is difficult to model properly the supply of aggregate ldc exports since the determinants of export supply differ from country to country even for a single country modelling export supply is complicated since in addition to foreign demand and domestic supply exports are determined in part by domestic demand for exportables furthermore in most ldcs the incentive to export is strongly influenced by complex and continually changing industrial and trade policy measures there is one major exception hong kong one of the developing world s largest and most successful exporters of manufactured goods the manufacturing sector in hong kong is almost completely specialised exporting 95 of output consequently domestic demand plays no part in determining the volume of exports furthermore factor markets and the manufacturing sector are almost completely free from government intervention the main exception being the textile export restraints imposed at the insistence of importing countries the voluntary restraint agreements vras to which hong kong is subject no doubt affect the composition of exports but not necessarily the volume of aggregate exports if resources in the restrained sectors can easily be redeployed elsewhere in the economy judging from past export growth rates the vras do not appear to have had a significant effect on aggregate export growth in hong kong the results reported below also suggest that hong kong has effectively circumvented the trade barriers it faces the hong kong manufacturing sector in many ways resembles a firm in the

corruption trade costs and gains from tariff liberalization evidence from southern africa this paper exploits quasi experimental variation in tariffs in southern africa to estimate trade elasticities traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities in contexts of pervasive corruption even small bribes can significantly reduce tariffs making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms import behavior the tariff liberalization scheme is however still associated with improved incentives to accurately report quantities of imported goods and with a significant reduction in bribe transfers from importers to public officials

the path of price changes in vertical integration the paper examines the path of final good price changes when a monopoly supplier of an intermediate good vertically integrates into a competitive constant returns final good industry i show that the price rises while the monopolist is taking over the downstream industry and then falls after downstream monopolization is complete the relationship of these results to the existing literature on full forward integration is established

the effects of customs unions on the pattern and terms of trade in a ricardian model with a continuum of goods abstract this paper adapts the dornbusch fischer samuelson continuum of goods ricardian model to three countries the pattern of trade and the terms of trade are determined endogenously in this general equilibrium model we derive comparative statics effects of endowment and tariff changes on trade patterns and terms of trade and apply the results to customs union theory trade creation and trade diversion impacts of unions are shown to be determined by the position of countries traded goods on the continuum in addition the desirability of economic integration is found to depend on the level of country development

what s the point of reciprocal trade negotiations exports imports and gains from trade this paper explains why trade policy makers may prefer reciprocal trade negotiations rtn to unilateral tariff reductions utr for economic reasons it answers puzzles like why wto reciprocity and strengthens the unnecessarily weak case made for the wto by those who downplay or dismiss benefits from foreign tariff reductions ftr rtn is superior to utr because it provides economic benefits that utr cannot namely ftr benefits which are clearer than potentially important utr benefits whereas each policy offers efficiency gains any terms of trade effect of utr generally detracts from these gains while any terms of trade effect of ftr is typically beneficial especially for a small price taking country with this benefit augmenting ftr s efficiency gains moreover benefits from reductions in foreign barriers may come from several sources they are not solely the result of terms of trade improvement or economies of scale the two benefits already noted in the literature though often dismissed for example with foreign ntb elimination possible home benefits are shown even with rising costs and terms of trade deterioration rtn is also superior to utr because by eliminating protection in either ntb or tariff form rtn provides an escape from not only a terms of trade prisoners dilemma but many other previously unrecognised prisoners dilemmas including one in international rent transfers and several others with no economies of scale or terms of trade motivation of course if superior rtn is not an option utr may well be desirable if reciprocity is an option but only in a narrower cu or fta form such reciprocity may still be superior to utr or it may be inferior theory cannot unambiguously rank these

an alternative welfare decomposition for customs unions the authors present a means of evaluating the effects of customs union formation by a decomposition of the overall welfare effect into two components the consequences of induced changes in domestic prices and the effects on income of adjustments in tariff rates and endogenous changes in the pattern and volume of trade a virtue of the proposed decomposition is that it is path independent providing unambiguous results for analyses of both marginal and discrete changes in tariff rates this property means that the decomposition may be numerically implemented to provide better insight into the welfare effects of economic integration

reform of the european union s common agricultural policy how to reach gatt compatibility abstract this paper studies the reform of the european union s common agricultural policy cap it examines three questions 1 1 do current reforms meet the targets specified in the uruguay round agreement 2 2 what additional reforms are needed to make cap gatt compatible and 3 3 does cap reform alleviate the eu s budgetary problem to investigate these issues we use a six region 13 sector computable general equilibrium model with explicitly modeled policies we find that cap reform worsens the eu s budgetary situation and does not meet the gatt targets we quantify support price reductions and quota increases needed to reach the targets

the free trade epidemic of the 1860s and other outbreaks of economic discrimination why was there an abrupt increase in economic openness in europe in the 1860s this increase may have been the result of a contagion process in which the cobden chevalier treaty between britain and france threatened to displace third party exports to fra nce with british exports as a result most european states signed similar treaties with france which had further ripple effects this article outlines a formal model of this process based on the assumption that an agreement between two states incre ases the desirability of similar treaties to third parties propositions regarding the rate and pattern of spread of treaties are derived from this model this article then discusses the insights these propositions may offer into the rise and fall of the most favored nation network of treaties between 1860 and 1929 at a theoretical level the model aims to link the microlevel processes underlying state preferences to system level phenomena at a substantive level this analysis offers insight into the current explosion of regionalism

trade wars trade negotiations and applied game theory what is the value of trade negotiations quantitative measures of the value of trade liberalisation generally ignore the strategic aspects of protection policy the traditional approach is to compare welfare levels under the existing structure of protection with welfare levels under some alternative structure of protection such as unilateral or multilateral free trade we add two additional questions first in a non cooperative context are either of these points of comparison consistent with countries adopting best response policies given the policies of other countries second in the context of a cooperative negotiation are either of these points of comparison consistent with the outcome that meets certain plausible criteria for a bargaining process if the answer to either of these questions is no then the traditional approach provides at best an incomplete answer to the original question and could provide a misleading answer a simple example illustrates our basic point consider the game in table i this is a non cooperative game between the united states and ec in which each agent has just two pure strategies to do nothing and keep k the existing structure of protection in place or to abolish a trade barriers on imports from the other agent only the payoffs shown are the annual welfare impact relative to the status quo as measured by the equivalent variation ev in income in billions of i973 u s dollars the values shown are taken from the simulation results of brown and whalley i980 table i 4 p 864 what is the best response of the united states in this context if the ec decides to keep its protection structure the united states does better by also keeping its protection structure intact in other words given that the ec plays k it is a best response for the united states to also play k thus the traditional approach would imply that the united states gains from protection in this case however what is the best response of the united states if the ec decides to abolish its protection structure in this instance the united states does best by also abolishing its protection structure the point here is simply that the welfare cost of protection to the united states depends on what the ec does without saying something about what the ec will do one cannot answer our question vis a vis the united states as it happens in this particular game we

a quantitative assessment of the economic impact on canada of sectoral free trade with the united states this paper attempts to measure the impact on canada of a canada united states sectoral free trade arrangement involving five manufacturing sectors the analysis is based on a quantitative general equilibrium model with particular focus on the technology industrial structure and conduct within the manufacturing industries in canada the results of the paper indicate that there are surprisingly large benefits to a sectoral free trade agreement while the real income gains are much smaller than with a bilateral free trade arrangement involving all industrial sectors they are on the order of 37 per cent of value added in the sectors considered une evaluation quantitative de l impact economique sur le canada d un libre echange sectoriel avec les etats unis ce memoire tente de mesurer l impact sur le canada d un accord de libre echange sectoriel canada etats unis impliquant cinq secteurs manufacturiers l analyse est fondee sur un modele d equilibre general quantitatif et met l accent sur la technologie ainsi que sur la structure et les comportements industriels intra sectoriels dans les industries manufacturieres au canada les resultats de cette analyse montrent que des benefices etonnamment importants peuvent emaner d un accord de libre echange sectoriel m8me si les accroissements de revenu sont bien plus faibles que ceux qui seraient engendres par un accord de libre echange bilateral impliquant tous les secteurs industriels ils atteignent un ordre de grandeur de 37 de la valeur ajoutee dans les secteurs impliques

demand and supply factors in the determination of nie exports a simultaneous error correction model for hong kong a comment v a muscatelli t g srinivasan and d vines 1992 purported to refute j riedel s 1988 finding that hong kong is a small price taking country in world markets this comment shows however that muscatelli srinivasan and vines s results are due entirely to an unjustifiable restriction they imposed on the estimated export demand equation and not the result of using a superior estimation technique as they asserted copyright 1994 by royal economic society

income distribution impacts of climate change mitigation policy in the susquehanna river basin economy we examine the cost side income distribution impacts of a carbon tax in the susquehanna river basin srb region of the united states utilizing a computable general equilibrium model we find the aggregate impacts of a 25 ton carbon tax on the srb economy are likely to be negative but modest an approximately one third of 1 reduction in gross regional product grp in the short run and double that amount in the long run however unlike many previous studies we find that the carbon tax is mildly progressive as measured by income bracket changes per capita equivalent variation and gini coefficient changes based on expenditure patterns the dominant factors affecting the distributional impacts are the pattern of output income and consumption impacts that affect lower income groups relatively less than higher income ones an increase in transfer payments favoring lower income groups and decreased corporate profits absorbed primarily by higher income groups

vertical integration scale distortions partial integration and the direction of price change two new features are introduced in a standard model of forward vertical integration by an intermediate good monopolist into a contestable downstream industry first u shaped average costs replace constant returns in the downstream industry second the effect of subjecting the monopolist to the pressure of upstream entry is explored it is found that monopoly pricing of the intermediate good can distort the scale as well as the input proportions of the downstream firms either distortion leads to integration but here integration may be partial rather than full prices rise with partial integration when there is no upstream entry but prices fall when upstream entry is free

prospects of trade liberalization between the developed and the developing countries abstract this paper analyzes the theoretical and policy aspects of various possible approaches multilateral preferential and others toward new initiatives for liberalizing trade relations between the developed and the developing countries the increasing differentiation between the newly industrializing countries nics and the less developed countries ldcs suggests that a multidimensional framework allowing flexibility in dealing with different subsets within the developing countries would be more relevant the paper analyzes the probable outcomes and constraints of the various trade liberalizing options with regard to their effects on trade flows welfare and terms of trade

differentiating the consumer benefits from labeling of gm food products although recurrent evidence is found that consumers have different willingness to pay for gm and non gm products there is disagreement in the scientific community about the size of consumer benefits from gm labeling in this article we use a theoretical model based on a standard constant elasticity of substitution ces to explain the importance of the quality effect it is shown that failing to consider the quality effect may yield an overestimation of benefits from gm labeling voluntary or mandatory

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

managing the evolution of multilateralism author s downs george w rocke david barsoom peter n abstract in the past five years a relatively extensive literature has emerged that explores the demand for multilateral cooperation that is those factors that motivate states to develop or resist developing formal institutions that operate to increase interstate economic military or environmental cooperation 1 these factors include the transaction costs associated with ad hoc and multiple bilateral arrangements increased interstate trade the diffusion of liberal trade theory information about the costs of environmental degradation and trends in elite ideology to date however our understanding of the supply side of multilateralism the standards that are set for admission the order and speed with which candidate states are admitted and the impact of expansion on cooperation and future evolution has been relatively undeveloped 2 partly as a result theorists have had little to say about how multilateral institutions are likely to evolve or what the policy consequences of their expansion will be 3 supply side issues are important because multilateral organizations usually do not spring forth full blown they grow instead of forming an inclusive agreement that is one that covers nearly all of the states that its designers eventually hope to include many multilateral organizations start out with substantially smaller memberships and generally expand over time we argue that among the many possible explanations for the choice of this design strategy there is a rational choice argument

excess entry vertical integration and welfare this article provides a systematic analysis of the welfare effects of vertical integration by a monopolist input supplier into a monopolistically competitive downstream industry we give sufficient conditions on consumer preferences that lead to pareto improving vertical integration and demonstrate a close relationship between assumptions on preference for variety excess entry in monopolistically competitive markets and the welfare effects of vertical integration excess entry in downstream markets tends to give rise to pareto improving vertical integration we extend the analysis to vertical oligopoly and access price regulation

from a customs union to a common market the need for factor tax harmonization abstract wooton 1988 demonstrates that a movement of a small customs union towardsa common market may result in a welfare loss if the common external tariff rates are not zero the present paper building on wooton s model demonstrates that even if the common external tariff rates are zero the movement towards a common market may still result in a welfare loss if the tax rates on factor s rates of return are not equal among partners within two special models the analysis also demonstrates that when the tax rates on factors rates of return are equal among member countries then the movement towards a common market is optimal regardless of whether or not the common external tariff rates are zero

3 3 theory of customs unions abstract four recent models those of berglas corden meade and riezman which have extended the theory of customs union to 3 3 dimensions are reviewed the reasons for both apparent and real differences among the welfare propositions from these models are explained some new extensions are derived the main conclusions are that the family of 3 3 models introduce several effects which cannot be present in 3 2 models and that the distinctions among the models are due mostly to diverse assumptions concerning the trilateral pattern of trade which are not readily apparent

best practices in regional trading agreements an application to asia regionalism in asia particularly in the form of free trade areas ftas is a recent trend that is becoming increasingly important this has been disturbing to many given the significance of trade and investment in asian economic growth and development and the region s key role in global commerce in light of this trend the goal of this paper is to develop a blueprint or a set of 10 best practices that can be used as a guide to ftas in order to ensure that they approximate first best outcomes to the greatest extent possible next the paper applies this framework to the existing ftas between asian countries and their regional and extra regional partners the results suggest that the more advanced regional accords generally receive high grades with the notable exception of rules of origin which tend to be even more problematic in the context of accords in which an oecd country is a party

joining an existing regional trade agreement from the perspective of a small open economy chile s accession to nafta and mercosur during the mid 1970s chile began a bold program of unilateral trade liberalization following decades of protectionism effectively putting an end to four decades of import substitution policies like other countries in latin america chile had relied on quantitative restrictions qrs and in some cases high tariffs to protect the production of importables agricultural exports were subject to qrs moreover agriculture suffered a high indirect taxation from industrial protection hurtado valdrs and muchnik the current trade regime is simple to describe a uniform tariff of 11 applies to all importables except wheat sugar and edible oils which have a price band scheme which provides additional protection beyond the uniform tariff there are no qrs on imports and no export taxes licensing or quotas a uniform vat applies to all imports and domestic production and under the uruguay round agreement ura of april 1994 chile bound tariffs at 25 for all products except wheat and sugar at 31 5 thus chile s program of tariffs like several countries in latin america had already occurred at the time of the ura in april of 1994 chile therefore came out of the gatt negotiations with virtually no mandated changes to its trade policies today chile s agricultural trade policy is facing new challenges one is to maintain an open trade regime in the face of continuous pressure for protection of importables because of a stress on profitability since about 1990 a second challenge is to improve trade related institutions such as rules for dealing with contingency protection measures safeguards antidumping etc that remain out of step with liberalized trade a third challenge is related to preferential trade agreements ptas which have taken on astonishing prominence more recently in the trade policy debate of the posturuguay round in latin america regional agreements are in and trade agreements proliferate mercosur in the southern cone nafta in north america the free trade agreement at the summit for the americas in miami and older treaties such as the andean trade preference act add to these the trade

the impact of environmental management on firm performance environmental management has the potential to play a pivotal role in the financial performance of the firm many individuals suggest that profitability is hurt by the higher production costs of environmental management initiatives while others cite anecdotal evidence of increased profitability a theoretical model is proposed that links strong environmental management to improved perceived future financial performance as measured by stock market performance the linkage to firm performance is tested empirically using financial event methodology and archival data of firm level environmental and financial performance significant positive returns were measured for strong environmental management as indicated by environmental performance awards and significant negative returns were measured for weak environmental management as indicated by environmental crises the implicit financial market valuation of these events also was estimated cross sectional analysis of the environmental award events revealed differences for first time awards and between industries first time award announcements were associated with greater increases in market valuation although smaller increases were observed for firms in environmentally dirty industries possibly indicative of market skepticism this linkage between environmental management and financial performance can be used by both researchers and practitioners as one measure of the benefits experienced by industry leaders and as one criterion against which to measure investment alternatives

changes in the covalence ethical quote financial performance and financial reporting quality we examine the equity valuation effect of press releases of upgrades or downgrades reflected in the covalence ethical quote ceq an index ranking the ethical performance of multinational firms the index is updated quarterly and is comprehensive enough to include 45 criteria reflecting working conditions impact of product impact of production and company institutional impact thus it captures many dimensions of firms ethical performance that are not accounted for in previous research our research encompasses a joint test of the value relevance of the index itself and the impact of ethical reputation on a firm s value we find first a significant causal relationship between stock market reactions and changes in the ceq specifically disclosures of positive negative changes in firm ethical performance cause increases decreases in firm value second cross sectional analysis indicates a positive association between changes in firm ethical performance and both its financial performance and its financial reporting quality collectively these results suggest that the ceq conveys information that is useful to investors further corporate measures taken to increase ethical performance are associated with positive benefits to shareholders finally investors have concluded that good news about their firms efforts to be ethical is worth the cost

exchanging market access at the outsiders expense the case of customs unions under a customs union countries can exchange preferential market access by coordinating external tariffs to shift profits from excluded countries i show that the exporting rents resulting from this coordination can offset trade diversion losses produced by the union even if its members are relatively small in world markets such gains come however at the expense of excluded countries i show that small countries can use customs unions also to foster multilateral cooperation by increasing the incentives of excluded countries to support global free trade le cas des unions douanieres dans le cas d une union douaniere les pays peuvent marchander l acces preferentiel a un marche en coordonnant leurs tarifs externes de maniere a extraire des profits des pays exclus on montre que les rentes a l exportation qui resultent de cette coordination peuvent compenser les pertes attribuables a la diversion du commerce qui decoule de l union douaniere meme si ses membres sont relativement de petite taille dans les marches mondiaux de tels gains se font cependant aux depens des pays exclus on montre que les petits pays peuvent utiliser les unions douanieres pour stimuler la cooperation multilaterale en accroissant les incitations des pays exclus a poursuivre des strategies de libre echange global

explaining armington what determines substitutability between home and foreign goods for decades trade economists have modeled imperfect substitution between home and foreign goods in consumption often called the armington assumption with little analysis of what explains the wide variation in these substitution elasticities across sectors using a varying coefficients model the authors estimate armington elasticities between u s domestic and foreign goods across over one hundred industrial sectors from 1980 to 1988 and examine the role of product industry political and home bias factors as determinants they find strong support that the presence of foreign owned affiliates affects armington elasticities in important ways and some support that entry barriers and union presence have an effect

endogenous trade bloc formation in an asymmetric world this paper investigates how variations in endowments and the structure of preferences impact on the coalition formation decisions of asymmetric countries there exist relatively few general results on the relationship between country characteristics and trade bloc formation here new light is shed on this issue by systematically simulating bloc formation and by explicitly analysing the blocking behaviour of coalitions a general equilibrium model of world trade is implemented with equilibrium coalition formation being modelled using the equilibrium concept of the core it is found that global free trade is observed when all countries are similar customs unions tend to form between countries with adjacent consumer preferences or with adjacent endowments of their export commodity finally in contrast to the existing literature but consistent with observed behaviour it is found that free trade areas often pareto dominate customs unions provided consumer preferences differ sufficiently

trade agreements vs unilateral tariff reductions evidence from modeling with a continuum of goods the relative merits of preferential trading agreements and unilateral tariff reduction are investigated yielding the conclusion that preferential agreements are superior for plausible specifications of tastes and endowments the attractiveness of agreements however depends crucially on general equilibrium effects on intraunion and external terms of trade game theoretic differences between the alternative policy strategies are emphasized agreements are cooperative equilibria while unilateral action defines a noncooperative stackelberg equilibrium the analytical framework is a three country variant of the dornbusch fischer samuelson classical trade model numerical simulations also illustrate that agreements may enhance government revenue and learning by doing copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

geographically discriminatory trade arrangements a bstract an eight region numerical general equilibrium model of global trade is used to investigate the impacts of various geographically discriminatory trade policy arrangements gdas on regional trade and welfare results suggest that the important factors determining gains and losses in any gda are such issues as whether initial levels of protection are asymmetric the relative sizes of participating regions and the pattern of trade between participating and non participating countries results also appear to confirm the implication of wonnacott and wonnacott 1981 that the gain from reducing a partner s tariff is typically a more important consideration in evaluating potential benefits from a customs union than the traditional concerns of trade creation and trade diversion

vertical integration variable proportions and successive oligopolies this paper investigates the problem of how the effect of vertical integration upon the final product price is related to the production and or market structures some ambiguous results of the previous models are shown to involve the compound effect of vertical an d horizontal merger this model considers purely vertical integration and shows that the lerner index of monopoly remains unaffected before and after merger vertical integration is shown accordingly to yield an unambiguous decrease in the final product price an increase in consumer welfare implications for antitrust laws are also discussed copyright 1988 by blackwell publishing ltd

is unilateral tariff reduction preferable to a customs union the curious case of the missing foreign tariffs during the past decade and a half an important part of the literature on customs unions has dealt with the question of whether a country might obtain the gains it would achieve from a customs union cu in an alternative way by a unilateral tariff reduction utr utr may involve a partial reduction in tariffs or a reduction all the way to zero a widely accepted conclusion see eitan berglas p 329 c a cooper and b f massell 1965b pp 745 47 roma dauphin ch 2 harry johnson p 280 melvyn krauss pp 417 19 and peter robson is that utr does indeed hold out the prospect for all the gains from a cuwithout the disadvantagesif two important simplifying assumptions are made namely that we ignore economies of scale and the effects of a customs union on the terms of trade 2 in the words of berglas it is important to note that if a preferential trade agreement does not affect the terms of trade then it does not allow for any mutually beneficial policy opportunities which are not open to each of the member countries separately through utr p 329 if this conclusion is correct it is very important in that it undercuts the earlier literature on customs unions the question asked by jacob viner in his pioneering work whether a cu represents a net gain or a net loss in economic efficiencybecomes unimportant except insofar as a customs union is based on terms of trade effects3 or economies of scale 4 since a cu can be summarily rejected in favor of utr the utr case would mean that for economists the puzzle is not to identify the efficiency gains or losses from a cu but rather to explain why countries form customs unions in the first place berglas p 329 cooper and massell 1965b p 247 and johnson p 270 indeed in his survey of cu theory krauss identifies the problem raised by cooper and massellof why countries form customs unionsas the theoretical issue of the past decade the 1960 s just as in the prior one the major issue as explicitly defined by jacob viner 1950 was whether a customs union represented a movement towards freer trade or greater protection p 413 the typical reply to the cooper massell question is countries tend to form a cu for noneconomic reasons berglas pp 329 30 5

preferential trading agreements an investigation abstract a three country general equilibrium model of international trade in an arbitrary number of goods is constructed and the welfare effects of the formation of a preferential trading club e g customs union free trade area are analyzed

an ex ante model for estimating the impact on trade flows of a country s accession to a customs union this paper presents a structural ex ante model to study the trade creation and trade diversion effects associated with a country s accession to a customs union the model extends previous studies by introducing explicitly product differentiation and exports in the determination of trade creation and trade diversion unlike the traditional vinerian analysis where the role of exports is neglected the model handles the effects of the elimination of the common external tariff facing home exports the model is then applied to portugal s accession to the european community and estimates of trade substitution elasticities are presented for 26 sectors finally these elasticities are used along with other parameter estimates to classify sectors according to whether they would give rise to trade creation or trade diversion

partners to a preferential trade agreement implications of varying size abstract most often the theory of preferential trade agreements assumes a small home country and a large partner in this paper the welfare implications of a small trading partner are examined a distinction is found between two ranges of size a country may be just small or be ultra small conventional propositions about the likelihood of a gain or a loss from entering into a preferential agreement would still hold when the partner is small whereas some of them would have to be reversed when the partner is an ultra small economy

regional trading arrangements natural or supernatural members of the customs union the potential unfavorable effects arise from the introduction of distortions in the relative price between the goods of members and nonmembers in terms of classic customs union theory the trade off is between trade creation and trade diversion the entire exercise assumes that the firstbest solution of worldwide free trade is not attainable for political reasons thus the choice between a status quo of nondiscriminatory most favored nation mfn tariffs and a move to preferential trading arrangements pta s is an exercise in the theory of the second best this paper summarizes recent research by the authors we make an evaluation of the

how often are propositions on the effects of regional trade agreements theoretical curiosa this paper uses computational techniques to assess whether or not various propositions that have been advanced as plausible in the literature on regional trade agreements may actually hold the idea is to make probabilistic statements as to whether propositions of interest might hold rather than to restrict assumptions so they unambiguously hold our aim is to blend theory and numerical simulation and go beyond the ambiguous analytically derived propositions that dominate the theoretical literature so as to assess the likelihood of propositions holding for particular model specifications

whither armington trade models the armington trade model distinguishes commodities by country of origin and import demand is determined in a separable two step procedure this framework has been applied to numerous international agricultural markets with the objective of modeling import demand in addition computable general equilibrium cge models commonly employ the armington formulation in the trade linkage equations the purpose of this paper is to test the armington assumptions of homotheticity and separability with data from the international cotton and wheat markets both parametric and nonparametric tests were performed and the empirical results reject the armington assumptions this has important implications for international trade modeling and cge modeling

towards a common market factor mobility in a customs union this paper examines whether the member countries of a customs union would gain from moving towards the next stage of economi c integration the common market when the set of common external tar iffs is not chosen optimally increased factor mobility may reduce th e welfare of the customs union however common market formation is t he best policy when a customs union of any size sets its tariffs to t he appropriate levels

a north american free trade agreement analytical issues and a computational assessment abstractthe following sections are included introductionissues in analyzing the economic impact of the naftathe computational modelcomputational resultsconclusionsstudy questionsreferencessuggested further reading this abstract was borrowed from another version of this item

the leverage theory of tying revisited evidence from newspaper advertising data from the canadian newspaper advertising industry is used to assess the private profitability of tying in a market where the standard efficiency motives e g price discrimination cost saving and quality control are unlikely to apply the empirical assessment is based on a model of leveraging in which suppliers of the tied good are paid a commission rather than a fee for service this model demonstrates that tying is profitable under a wide range of circumstances furthermore it is found that with newspapers tying and monopoly power go hand in hand