policy rivalry among industrial states what can we learn from models of strategic trade policy the economic theory of international trade has changed dramatically over the last decade by admitting into its mainstream a body of literature that focuses on the implications of monopolistic and oligopolistic elements in international markets by applying the tools of the new industrial organization in an international context two new classes of models have emerged models of intra industry trade and models of strategic trade policy the policy implications of models of strategic trade policy were quite disturbing for the economics profession since these models demonstrated that the classical harmony between national and cosmopolitan welfare maximization does not exist if one assumes opportunities for strategic manipulation of oligopolistic international industries this article reviews two prominent models of strategic trade policy the brander spencer model and the krugman model and relates them to more familiar earlier concepts such as stackelberg s asymmetrical duopoly solution and the venerable infant industry argument for government intervention the primary purpose of this article however is to provide a synopsis of the large literature addressing the question of whether models of strategic trade policy can give guidance for government policy

the effect of unions on the structure of wages a longitudinal analysis this paper studies the effects of unions on the structure of wages using an estimation technique that explicitly accounts for misclassification errors in reported union status and potential correlations between union status and unobserved productivity the econometric model is estimated separately for five skill groups using a large panel data set formed from the u s current population survey the results suggest that unions raise wages more for workers with lower levels of observed skills in addition the patterns of selection bias differ by skill group among workers with lower levels of observed skill unionized workers are positively selected whereas union workers are negatively selected from among those with higher levels of observed skill despite a large and sophisticated literature there is still substantial disagreement over the extent to which differences in the structure of wages between union and nonunion workers represent an effect of trade unions rather than a consequence of the nonrandom selection of unionized workers over the past decade several alternative approaches have been developed to control for unobserved heterogeneity between union and nonunion workers 2 one method that has been successfully applied in other areas of applied microeconometrics is the use of longitudinal data to measure the wage gains or losses of workers who change union status unfortunately longitudinal estimators are highly sensitive to measurement error even a small fraction of misclassified union status changes can lead to significant biases if the true rate of mobility between union and nonunion jobs is low this sensitivity led lewis 1986 to essentially dismiss the longitudinal evidence in his landmark survey of union wage effects in this paper i present some new evidence on the union wage effect based on a longitudinal estimator that explicitly accounts for misclassification errors in reported union status the estimator uses external information on union status misclassification rates along with the reduced form coefficients from a multi variate regression of wages on the observed sequence of union status indicators to isolate the causal effect of unions from any selection biases introduced by a correlation between union status and the permanent component of unobserved wage heterogeneity recognizing that unions may raise wages more or less for

tariff and quota equivalence in the presence of asymmetric information abstract this paper investigates the equivalence of optimal import tariffs and quotas in a cournot duopoly model when firms have more information about demand than the domestic government i consider a screening model in which the government offers the domestic firm different contracts from which to choose i show that the availability and cost of obtaining correct information from the firm depends upon the choice of trade policy instrument asymmetric information thus destroys the equivalence of tariffs and quotas which prevails under complete information and has a profound impact on how government firms and consumers rank different trade policy instruments

quantitative restrictions in the presence of cost based informational asymmetries this study introduces a cost based informational asymmetry into a two period model where a domestic incumbent firm s behavior in the first period affects the entry decision of a foreign firm in the second period the effects of import quota policy within this environment are examined and compared to the standard full information effects when quota quantities are set exogenously the standard effects of quota policy may be significantly altered depending on whether or not policy induces the domestic firm to signal cost structure for example higher quotas may discourage foreign entry because of the induced signaling effects of quota policy recognition that incomplete information is the rule rather than the exception when decisionmakers interact in an international setting has stimulated an emerging literature on the effects of trade policy in the presence of informational failures particularly germane to the present study are those papers that introduce an informational asymmetry into an international model of imperfect competition the majority of this literature examines the sensitivity of optimal strategic trade policy to information failures within a brander spencer 1985 model where the domestic and foreign firms compete for export sales to a third market and either the domestic or foreign government employs export subsidies collie and hviid 1993 qiu 1994 maggi 1995 brainard and martimort 1997 wright 1998 collie and hviid 1994 on the other hand allow for domestic consumption and consider optimal import policy in the presence of a foreign monopolist analysis that focuses on the positive effects of trade policy in the presence of informational failures is more limited one such example is a study by hartigan 1994 which considers the effects of antidumping duties to date however there has been no analysis of how and whether the introduction of an informational failure alters the effects of quantitative restrictions to trade the aim of the present study is to extend the existing literature by examining the effects of a quantitative restriction to trade in the presence of a cost based informational asymmetry within a standard two period entry model 2 during the initial time period a domestic firm supplies the home market and

the effects of minimum wages on wage dispersion and employment evidence from the u k wages councils using data on wages council coverage from the united kingdom new earnings survey the authors examine the impact of mandated minimum wages on wage dispersion and employment in the united kingdom in the 1980s they find evidence that a dramatic decline in the toughness of the regulation imposed by the wages councils through the 1980s a decline that is in the level of the minimum wage relative to the average wage significantly contributed to widening wage dispersion over those years there is however no evidence of an increase in employment resulting from the weakening bite of the wages council minimum pay rates instead consistent with the conclusions of several recent u s studies the findings suggest that the minimum wage had either no effect or a positive effect on employment

tariff policy for a monopolist in a signaling game abstract we examine the incentives for a government to levy an optimal tariff on a foreign monopolist with unknown costs with complete information the home government uses a discriminatory tariffs policy to extract rents if the government is incompletely informed about costs we show that under reasonable conditions the unique equilibrium involves pooling where the firm exports the same quantity regardless of its efficiency we find that in general home welfare is higher under alternative policies such as uniform tariffs or free trade suggesting that trade policies that are motivated by rent extraction are unlikely to be robust to the introduction of incomplete information

incentive compatible trade policies a two country trade model with production uncertainty is considered if complete contingent markets do not exist it is desirable for governments to adopt some trade policies to share the production risk a full information policy involves incomes transfers across countries which can be achieved by equal import tariffs and export subsidies with incomplete information we consider incentive compatible trade policies which are designed to be truth revealing while partially sharing the production risk in this case the tariff in one country may differ from the export subsidy abroad

anti dumping measures as a tool of protectionism a mechanism design approach in this paper we explore the design of optimal incentive compatible anti dumping ad measures when the weight given to the domestic firm s profit in the government s objective function is relatively small it is shown that no ad duty should be imposed if the foreign firm reports its own costs but a constant ad duty should be imposed if the domestic firm reports the foreign firm s cost when this weight is large in either case of reporting the ad duty is a prohibitive tariff the optimal ad measures are modified in the presence of a gatt wto constraint jel classification f12 f13 les mesures anti dumping en tant qu outil de protectionnisme une approche en termes de construction de mecanismes ce memoire examine la construction de mesures optimaales anti dumping ad quandla valence des profits de la firme domestique est faible dans la fonction objective du gouvernement on peut montrer qu aucune mesure ad ne devrait etre imposee si l entreprise etrangere revele ses propres couts mais qu un droit ad constant devrait etre impose si c est la firme domestique qui revele les couts de l entreprise etrangere quand la valence des profits de la firme domestique est grande quelle que soit la source de l information la mesure ad qui s impose est un droit de douane prohibitif les mesures optimales doivent evidemment etre modifiees pour prendre en compte la contrainte engendree par l existence des regles du gatt omc

british unions in decline determinants of the 1980s fall in union recognition this examination of establishment level data from the workplace industrial relations surveys of 1980 1984 and 1990 shows that the proportion of british establishments that is workplaces in both the private and public sector that recognized unions for collective bargaining over pay and working conditions fell by almost 20 between 1980 and 1990 largely accountable for this decline was a much lower rate of union recognition in establishments founded in the 1980s than in previous years particularly in the private sector citing these findings as well as recent structural changes in employment in the british labor market such as the shift from manufacturing to services from manual to non manual employment and from full time to part time work and a government that continues to enact anti union legislation the authors foresee no reversal of unions decline in the 1990s

uncertainty arbitrage and intra industry trade when rms in the same industry located in dierent regions or countries expe rience shocks to production costs in their respective industries that are imperfectly correlated arbitrage opportunities automatically lead to trade trade can either stabilize or destabilize the price faced by producers in a given country producers surplus is aected due to the variance covariance eect while consumers surplus is more directly aected through the variance of the product price the paper ex amines how consumers surplus producers surplus and social welfare are aected when the regions switch from autarky to free trade in the presence of industry and region speci c cost shocks contrary to anderson et al 1989 and moner colonques 1998 under cournot competition when the industries are symmetric in the two regions producers surplus can increase in both regions in the switch from autarky to trade in general depending on the variance of the cost shocks in the two regions the correlation coe cient between the shocks and the number of rms producers and consumers surplus in a given country can be either higher or lower under trade compared to autarky however social welfare is higher in both regions under a surprisingly robust set of conditions contrary to traditional trade theory the gain in social welfare in several situations is due to the gains in producers surplus osetting the loss in consumers surplus

location costs product quality and implicit franchise contracts abstract in the literature on international trade only little attention has been given to informational asymmetries between firms and consumers with respect to product quality the few economic models that analyze the question of how asymmetric information about product quality might affect trade flows treat product quality as exogeneous in contrast our model takes product quality as an endogeneous variable i e firms can choose the quality they wish to produce in this case location costs can signal product quality under certain conditions and thereby affect international trade flows more specifically intra industry trade in vertically differentiated experience goods can be determined by information asymmetries about product quality

fdi policies under shared factor markets abstract we examine the consequences of foreign direct investment fdi policies in a general equilibrium setting with several oligopolistic industries by shifting labor demand across countries fdi raises the wage in the host country and lowers the wage in the source country thereby raising profits of source country firms at the expense of host country firms the extent of cross ownership of firms the relative number of firms and the relative supply of skilled labor alter the impact of fdi policy on national welfare the tension between profits and wages determines whether the optimal policy is designed to encourage fdi

minimal returns and the breakdown of the price volume relation abstract we look at stock market prices and transaction volume on the day of minimal the minimum for that year daily returns from 1885 to 1990 we find that large in absolute terms minimal returns show little correlation with transaction volume

the signaling effect of emission taxes under international duopoly we analyze equilibrium emission taxes under international cournot duopoly in the presence of asymmetric information between firms when each firm does not know the production cost of its rival located in the other country the government of each country can use its emission tax as a signal of the competitiveness of its domestic firm we show that owing to this signaling effect the equilibrium emission tax and expected welfare of each country can be higher than those under symmetric information between firms or even higher than those obtained if the governments were to non strategically set the tax rate equal to the expected marginal damage from pollution i e the pigouvian tax level our results suggest that the presence of asymmetric information between firms can mitigate a race to the bottom in strategic environmental policymaking

government intervention in production and incentives theory a review of recent contributions national science foundation the commissariat general du plan and the center for energy policy research at m i t

the threshold effect in expected volatility a model based on asymmetric information this article develops theoretical insight into the threshold effect in expected volatility which means that large shocks are less persistent in volatility than small shocks the model uses the kyle admati pfleiderer setup with liquidity traders informed traders and a market maker information is modeled as a garch process it is shown that the garch process for information is transformed into a tarch process for threshold garch for the market price changes working with information flows allows one to derive implications for trading volume and market liquidity which provide the basis for a more complete test of the model article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

endogenous trading volume and momentum in stock return volatility this article examines the ability of volume data to shed light on the source of persistence in stock return volatility a mixture model in which a latent common factor restricts the joint density of volume and returns is used to relax the assumption of exogenous volume used in previous studies we use a point in time signal extraction procedure to identify this latent process and a calibrated simulation to conduct analysis of the viability of the model to explain important properties of the data using daily returns and volume on individual stocks our procedure cannot accommodate serial dependence in squared returns

from value at risk to stress testing the extreme value approach this article presents an application of extreme value theory to compute the value at risk of a market position in statistics extremes of a random process refer to the lowest observation the minimum and to the highest observation the maximum over a given time period extreme value theory gives some interesting results about the distribution of extreme returns in particular the limiting distribution of extreme returns observed over a long time period is largely independent of the distribution of returns itself in financial markets extreme price movements correspond to market corrections during ordinary periods and also to stock market crashes bond market collapses or foreign exchange crises during extraordinary periods an approach based on extreme values to compute the var thus covers market conditions ranging from the usual environment considered by the existing var methods to the financial crises which are the focus of stress testing univariate extreme value theory is used to compute the var of a fully aggregated position while multivariate extreme value theory is used to compute the var of a position decomposed on risk factors 2000 elsevier science b v all rights reserved

an incentive compatible approach to the transfer pricing problem abstract this paper offers an alternative approach to regulating certain types of transfer pricing if the multinational enterprise s transfer price decision is not regulated it will manipulate the transfer price in order to maximize net global profit traditional approaches argue for ad hoc penalty schedules to mitigate manipulative transfer pricing in contrast this paper offers an incentive compatible approach which explicitly incorporates the informational asymmetries that encourage misreports the model has the desirous feature that the optimal regulatory policy has self enforcing properties that is the firm will find it profit maximizing to report true costs

strategic trade policy design with asymmetric information and public contracts this paper examines strategic trade policy under asymmetric information with publicly observable contracts we analyse both the cases of unilateral and bilateral intervention we find that the requirement of incentive compatibility undermines the strategic precommitment effect when public funds are costly even with no restrictions on the form of the policies second when firms sell substitute goods the introduction of a rival interventionist government may reduce the cost of informational rents to each government third it turns out that under bilateral intervention there exists a continuum of symmetric equilibria with levels of output and corresponding levels of welfare in the exporting countries which can be ranked the requirement of ex post participation constraints for the firm limits the set of subsidies which can be offered to the firm in particular under bilateral intervention the equilibrium levels of output which are implemented under adverse selection are below their values under ex ante uncertainty i e below the equilibrium levels of output which are achieved when firms sign their contracts before the realization of their costs ever since the inception of research on strategic trade policy with the seminal paper by brander and spencer 1985 economists have been warning that the informational requirements of rent shifting policies are enormous and unlikely to be met in practice because the policy recommendations are highly sensitive to the particularities of the market in response a number of recent papers have begun to address the specific ways that informational failures affect policy and to modify policy recommendations to take such failures into account this paper analyses the implications of asymmetric information for strategic trade policy under both unilateral and bilateral intervention our complete information benchmark is a simple trade policy designed to shift rents similar to brander spencer two firms are competing in a third country and receive export subsidies from their respective governments however we place no restrictions on the form of these export policies previous literature has shown that under complete information a large number of outcomes may be sustained as equilibria of delegation games such as this moreover the introduction of uncertainty about the state of nature on the part of both

information and disclosure in strategic trade policy we relax the standard assumption in the strategic trade policy literature that governments possess complete information about the economy assuming instead that governments must obtain information from firms we examine firms incentive to disclose information to the governments in the brander spencer setting with quantity competition we find firms disclosing both demand and cost information thereby justifying the literature s omniscient government assumption with price competition however firms have no incentives to disclose demand or cost information so governments remain uninformed further with quantity competition and unknown demand governments are caught in an informational prisoner s dilemma

investment analysis and the adjustment of stock prices to common information in this article we are concerned with the effect of the number of investment analysts following a firm on the speed of adjustment of the firm s stock price to new information that has common effects across firms it is found that returns on portfolios of firms that are followed by many analysts tend to lead those of firms that are followed by fewer analysts even when the firms are of approximately the same size many analyst firms also tend to respond more rapidly to market returns than do few analyst firms adjusting for firm size this relation however is nonlinear and the marginal effect of the number of analysts on the speed of price adjustment increases with the number of analysts article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

can speculative trading explain the volume volatility relation we derive a speculative trading model with endogenous informed trading that yields a conditionally heteroscedastic time series for trading volume and the squared price changes we use half hourly price change and volume data for ibm during 1988 to test the model and estimate the structural parameters using the simulated method of moments estimation procedure although the model seems to do a reasonable job fitting the unconditional moments of the volume and the squared price change processes it fares less well in fitting the relation between current trading volume and lags of trading volume and squared volume s and its lag s relation to squared price changes

asymmetric predictability of conditional variances we show that there is an asymmetry in the predictability of the volatilities of large versus small firms using both univariate and multivariate arma garch m parameterizations we find that volatility surprises to large market value firms are important to the future dynamics of their own returns as well as the returns of smaller firms conversely however shocks to smaller firms have no impact on the behavior of either the mean or the variance of the returns of larger capitalization companies article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

stock prices and volume the authors undertake a comprehensive investigation of price and volume co movement using daily new york stock exchange data from 1928 to 1987 they adjust the data to take into account well known calendar effects and long run trends to describe the process they use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and volume four empirical regularities are found 1 positive correlation between conditional volatility and volume 2 large price movements are followed by high volume 3 conditioning on lagged volume substantially attenuates the leverage effect and 4 after conditioning on lagged volume there is a positive risk return relation article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

adaptive expectations and stock market crashes a theory is developed that explains how stocks can crash without fundamental news and why crashes are more common than frenzies a crash occurs via the interaction of rational and naive investors naive traders believe that prices follow a random walk with serially correlated volatility their expectations of future volatility are formed adaptively when the market crashes naive traders sell stock in response to the apparent increase in volatility since rational traders are risk averse as well a lower price is needed to clear the market the crash is a self fulfilling prophecy frenzies cannot occur in this model

optimal strategic trade policy under asymmetric information abstract when cost is private information in the brander spencer model the home government is confronted by a decision of choosing between two policy options a menu of policies and a uniform policy the former induces separation and so reveals the cost information to the foreign competitors the latter helps the weak firm by concealing the cost information the main result from this study is that policy menu is preferred to uniform policy under cournot competition while the opposite occurs under bertrand competition

the effect of public information and competition on trading volume and price volatility in a one period model of market making with many exogenously informed traders we first show that the variance of prices and expected trading volume depend on the public information released at the start of trading this is accomplished by representing beliefs with elliptically countoured distributions for which the form of optimal decision rules does not depend on the specific distribution used second if the model is altered so that the decision to become informed is made endogenous then the decision rules of the market maker and infomed traders depend on the public information third in a multiperiod model with many informed traders and long lived private information recursion formulas similar to those of kyle 1985 hold for all elliptically contoured distributions trading volume is autocorrelated and unless per period liquidity trading is bounded away from zero as new trading periods are added informed traders profits vanish article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a note on optimal strategic trade policy under asymmetric information in journal of international economics 36 1994 333 larry qiu developed a model of an optimal export promotion policy under asymmetric information in the bertrand competition he shows that the expected welfare is larger under the uniform policy than under the separation inducing policy actually in this note we show that no such separating equilibrium exists although his main conclusion in the bertrand competition analysis is unaffected his reasoning in the paper is misleading

forecasting the realized volatility of the oil futures market a regime switching approach considering nonlinear and highly persistent dynamics of realized volatility we introduce markov regime switching models to the heterogeneous autoregressive model of the realized volatility har rv models to forecast the realized volatility of the crude oil futures market in sample results demonstrate that the high volatility regime is short lived out of sample results suggest that har rv models with regime switching increase the forecasting ability significantly than those without regime switching moreover these findings are robust for different actual volatility benchmarks forecasting windows and model settings

cost uncertainty and trade liberalization in international oligopoly abstract trade liberalization has been shown to be unfavourable for firms of at least one country for the homogeneous goods case in an environment of certainty we show that in the presence of private cost information and for ex ante identical firms oligopolistic firms will prefer to operate under free trade rather than under autarky in homogeneous goods industries provided there exists a certain degree of firms heterogeneity and a sufficiently large amount of uncertainty for the particular case of symmetry both in demand and industry sizes the firms of at least one country prefer to operate under autarky rather than under free trade

injury based protection with auditing under imperfect information 1 introduction this article focuses on the use of signals to limit distortionary protection when a domestic firm has private information about injury from foreign competition we assume that a domestic authority is mandated to use trade policy to maintain domestic production while minimizing costs to domestic consumers the presence of asymmetric information about domestic production costs means that the firm will have an incentive to overstate the harm it is suffering from imports we analyze how the authority can use an incentive device to punish a firm if a costly audit determines that the firm has overstated its injury an incentive compatible mechanism is derived consisting of a probability of audit a tariff and a penalty that will insure that the firm does not retain informational rents associated with the private information this basic problem of an authority assessing domestic injury arises in a number of critical trade policy contexts the two most prominent examples in the world trade organization wto system are safeguard mechanisms and unfair trade remedies i e antidumping and countervailing duty investigations in both types of administered protection cases a domestic trade authority must determine whether injury beyond some critical level has occurred before wto consistent protection can be imposed the information used to evaluate injury is provided by the affected domestic industry which has an obvious incentive to overstate the harm caused by foreign competition given that these types of contingent protection procedures are the single most important form of protection under the wto system potential misuse of private information is of great importance there are two strands of relevant literature the first considers strategic behavior in the specific context of administered protection the second concerns information asymmetries in more general trade policy outcomes the former strand has focused on strategic behavior between firms to exploit administered protection procedures prusa 1992 shows how antidumping cases in home and foreign firms can manipulate contingent protection to enforce collusion staiger and wolak 1991 study how antidumping acts as a cartel enforcing device in a noncooperative infinitely repeated game framework in a two period noncooperative game framework with uncertainty prusa 1994 shows that the home firm might feign first period injury in order to get the protection in the second period this may induce foreign firms to raise their export prices and to lower their own domestic market price as shown by fischer 1992 firms will try to act strategically to increase the endogenous probability of protection leidy and hoekman 1991 and leidy 1994 extend this concept more broadly to contingent protection and call it spurious injury the second strand of the literature focuses more broadly on incomplete information in trade policy collie and hviid 1994 investigate rent extraction from a foreign monopolist with incomplete information about domestic demand qiu 1994 and brainard and martimort 1997 investigate strategic trade policy with incomplete information about the domestic cournot firm s costs herander and kamp 1999 consider how incomplete information about the domestic cost structure can affect the outcomes of quantitative restrictions while collie and hviid 1994 herander and kamp 1999 and qiu 1994 use a signaling game framework brainard and martimort 1997 develop their approach within an incentive contracts context this article s approach is based on both incentives and signals we follow partially the approach of kohler and moore 1998 who analyze the same information asymmetries but use transfers to the domestic firm to elicit truth telling the present analysis takes perhaps a more realistic tack by considering how an authority can audit information provided by the firm to eliminate misrepresentation of injury

union wage practices and wage dispersion within establishments this study analyzes establishment level data primarily to examine the effect of unionism on the wage structure within establishments the major finding is that within establishment dispersion of wages is significantly narrower in unionized than in nonunionized establishments a pattern the author attributes in large part to unions wage practices such as single rate or automatic progression modes of wage payment as opposed to merit reviews and individual wage determination the data also show that dispersion in average wages is narrower among organized plants but by more modest amounts than the within establishment differential overall the evidence suggests a major role for explicit union wage policies in explaining the dispersion of wages within firms and in the economy as a whole

economic news and equity market linkages between the u s and u k abstract the source of equity market linkages between the u s and u k is investigated by focusing on intraday price movements of stock index futures contracts we document heightened u k return volatility at 11 30 a m and 1 30 p m gmt which corresponds to regular macroeconomic releases in the u k and u s respectively the response of u k equities in the half hour surrounding the u s announcements is significant and similar to price movements for u s equities to the same announcements these results support the hypothesis that the documented international equity market linkages are attributable to reactions of foreign traders to public information originating from the u s

meteor showers or heat waves heteroskedastic intra daily volatility in the foreign exchange market this paper seeks to explain the causes of volatility clustering in exchange rates careful examination of intra daily exchange rates provides a test of two hypotheses heat waves and meteor showers the heat wave hypothesis is that the volatility has only country specific autocorrelation alternatively the meteor shower is a phenomenon of intra daily volatility spillovers from one market to the next using the garch model to specify the heteroskedasticity across intra daily market segments we find that the empirical evidence is generally against the null hypothesis of the heat wave using a volatility type of vector autoregression we examine the impact of news in one market on the time path of per hour volatility in other markets

threshold arch models and asymmetries in volatility this paper attempts to enlarge the class of threshold heteroscedastic models tarch introduced by zakoian 1991a we show that it is possible to relax the positivity constraints on the parameters of the conditional variance unconstrained models provide a greater generality of the paths allowing for nonlinearities in the volatility cyclical behaviour is permitted as well as different relative impacts of positive and negative shocks on volatility depending on their size we give empirical evidence using french stock returns

the decline of labour market institutions and the rise in wage inequality in britain abstract at the same time as the role of labour market institutions declined very dramatically in britain there was a very sharp rise in wage inequality that since 1980 has increased at a faster pace than in most advanced countries britain in the 1980s and early 1990s therefore provides a very good testing ground for evaluating the importance of labour market institutions in explaining the evolution of the wage structure i look at this in terms of two institutions that have traditionally propped up wage levels at the bottom end of the wage distribution unions and minimum wages i find that their weakening has played an important part in the rise in wage inequality in britain

tariff policy and entry with cost based informational asymmetries i introduction how does the presence of incomplete information alter the usual effects of trade policy recognition that incomplete information characterizes most decision making processes that take place within an international setting has stimulated an emerging body of literature which addresses this question particularly germane to the present study are those papers which introduce an informational asymmetry into an international model of imperfect competition the majority of this literature examines the sensitivity of optimal strategic trade policies to information failures within a brander spencer 1985 model where the domestic and foreign firm compete for export sales to a third market and either the domestic or foreign government employs export subsidies examples include works by brainard and martimort 1997 collie and hviid 1993 maggi 1995 and qiu 1994 another study collie and hviid 1994 allows for domestic consumption and considers optimal import tariff policy in the presence of a foreign monopolist in general optimal trade policy in the presence of informational failures is found to differ from that under complete information the emphasis of the present study is not on the conduct of optimal trade policy but rather on how the introduction of an informational asymmetry alters the realized impact of trade policy on quantities and welfare 1 specifically we examine the effects of import tariff policy within a standard two period model of entry where the costs of the domestic firm are proprietary information the incumbent domestic firm recognizes the threat of a potential foreign rival entering exporting to the domestic market where the latter is uninformed of the cost structure of the domestic firm as is well known from the industrial organization literature the incumbent domestic firm may have an incentive to change its time period one behavior so as to signal information on costs to the foreign firm in an effort to deter entry see milgrom and roberts 1982 in specifying the degree of knowledge possessed by domestic policymakers we adopt the premise that informational deficiencies on the part of policymakers are likely to be quite acute in trade policy formation indeed as brander 1995 notes it is reasonable to suppose that governments are less informed on market conditions and firm characteristics than firms themselves in contrast to previous studies however we also assume that policymakers either cannot acquire information or if they are able to cannot respond by altering policy here the formation of trade policy does not reflect or incorporate full information and thus cannot provide signals to the other uninformed party the foreign firm moreover because policymakers cannot alter policy the foreign firm perceives the tariff rate as credibly fixed the inability to incorporate information into trade policy is especially relevant for situations where policymakers are subject to previously negotiated trade agreements here even should uninformed policymakers subsequently acquire information on domestic cost structure they will be unable to respond our emphasis on the realized effects of tariff policy reflects this information structure to conduct optimal policy government must hold complete information on markets and firm characteristics at the time policy is set as in collie and hviid 1993 1994 or be able to acquire it through signaling or a screening mechanism as in qiu 1994 and brainard and martimort 1997 2 when policymakers lack the ability to acquire or respond to such information optimal policy is not a consideration what is of interest to policymakers in this situation is the response of domestic output and imports to a given tariff rate at the outset of the game then there is a tariff rate set previously by domestic policymakers who were uninformed of domestic costs since the foreign firm cannot infer domestic cost structure by merely observing the tariff rate set by uninformed policymakers any signaling that takes place is on the part of the domestic firm

the changing distribution of male wages in the uk this paper uses microeconomic data from the u k family expenditure surveys fes and the general household surveys ghs to describe and explain changes in the distribution of male wages since the late 1970s wage inequality has risen very fast in the u k and this rise is characterized both by increasing education and age differentials we show that a large part of the changes in the u k can be summarized quite simply as increases in eduction differentials and a decline of growth of entry level wages which persist subsequently this fact we interpret as cohort effects we also show that like in the u s an important aspect of rising wage inequality is increased within group wage dispersion finally we use the ghs to evaluate the role of alternative education measures

heteroskedasticity in stock return data volume versus garch effects this paper provides empirical support for the notion that autoregressive conditional heterqskedasticity arch in daily stock return data reflects time dependence in the process generating information flow to the market daily trading volume used as a proxy for information arrival time is shown to have significant explanatory power regarding the variance of daily returns which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns furthermore arch effects tend to disappear when volume is included in the variance equation the autoregressive conditiqnal heteroskedasticity arch process of engle 1982 has been shown to provide a good fit for many financial return time series 1 arch imposes an autoregressive structure on conditional variance allqwing volatility shocks to persist over time this persistence captures the propensity of returns of like magnitude to clu ter in time and can explain the well documented nonnormality and nonstability of empirical asset return distributions see especially fama 1965 an appealing explanation for the presence of arch is based upon the hypothesis that daily returns are generated by a maiture of distributions in which the rate of daily information arrival is the stochastic mixing variable as suggested by diebold 1986 gallant hsieh and tauchen 1988 and stock 1987 1988 arch might capture the time series properties e g serial correlation of this mixing variable hqwever this linkage has not been broadly documented with the datia the objective of this study is to examine the validity of this explanation for daily stock returns the empirical strategy exploits the implication of the mixture model that the variance of daily price increments is heteroskedastic specifically positively related to the rate of daily information arrival using daily trading volume as a proxy for the mixing variable we show that for a sample of 20 common stocks arch effects vanish when volume is included as an explanatory variable in the conditional variance equation