the silent success of customs unions an earlier version of this paper is part of arevik gnutzmann mkrtchyan s thesis essays on the economics of trade agreements 2014 http hdl handle net 1814 34561

trade policy of a free trade agreement in the presence of foreign lobbying abstract this paper studies the effect of foreign lobbies on trade policy of a country which is a member of a free trade agreement fta it uses a monopolistically competitive political economy model in which the government determines external tariffs endogenously the effect of foreign lobbying under the fta is examined empirically using canadian industry level trade data that allow differentiating of lobby groups by the country of origin the analysis suggests that the presence of foreign lobbying has a significant effect on the domestic trade policy the heterogeneity of foreign lobbies is also important the presence of an organized lobbying group in an fta partner country tends to raise trade barriers while an organized lobbying group of exporters from outside of the fta is associated with less protection

self enforcing trade agreements and lobbying abstract in an environment where international trade agreements must be enforced via promises of future cooperation the presence of an import competing lobby has important implications for optimal punishments when lobbies work to disrupt trade agreements a nash reversion punishment scheme must balance two conflicting objectives longer punishments help to enforce cooperation by increasing the government s costs of defecting but because the lobby prefers the punishment outcome this also incentivizes lobbying effort and with it political pressure to break the agreement thus the model generates an optimal length for nash reversion punishments and it depends directly on the political influence of the lobbies trade agreement tariffs are shown to be increasing in the political influence of the lobbies as well as their patience levels

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

have fossil fuels been substituted by renewables an empirical assessment for 10 european countries abstract the electricity mix worldwide has become diversified mainly by exploiting endogenous and green resources this trend has been spurred on so as to reduce both carbon dioxide emissions and external energy dependency one would expect the larger penetration of renewable energies to provoke a substitution effect of fossil fuels by renewable sources in the electricity generation mix however this effect is far from evident in the literature this paper thus contributes to clarifying whether the effect exists and if so the characteristics of the effect by source three approaches generation capacity and demand were analysed jointly to accomplish the main aim of this study an autoregressive distributed lag model was estimated using the driscoll and kraay estimator with fixed effects to analyse ten european countries in a time span from 1990 until 2014 the paper provides evidence for the substitution effect in solar pv and hydropower but not in wind power sources indeed the generation approach highlights the necessity for flexible and controllable electricity production from natural gas and hydropower to back up renewable sources moreover the results prove that peaks of electricity have been an obstacle to the accommodation of intermittent renewable sources

policymakers horizon and the sustainability of international cooperation abstract this paper examines the impact of policymakers horizon on the sustainability of international cooperation we describe a prisoners dilemma game between two infinitely lived countries run by policymakers we show that re election incentives can act as a discipline device making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely lived policymakers we also show that when voting suffers from a recency bias policymakers may have incentives to collude to get re elected and term limits may help international cooperation

the relationship between economic growth and electricity consumption from renewable and non renewable sources a study of turkey abstract the main objective of this study is to analyze the short and long run estimates as well as the causality relationships between economic growth gr electricity consumption from renewable sources relc and electricity consumption from non renewable sources nrelc for turkey in a multivariate model wherein capital k and labor l are included as additional variables using the autoregressive distributed lag ardl approach to cointegration the johansen cointegration test and the gregory hansen cointegration test with structural break we show that gr relc nrelc k and l are cointegrated although nrelc has a long run positive effect on gr the long run estimate of relc is negative but insignificant at 5 level of significance the granger causality test based on the vector error correction model reveals the evidence of neutrality hypothesis between relc and gr and between nrelc and gr in turkey in the short run in addition the granger causality runs from relc nrelc k and l to gr as well as from gr relc k and l to nrelc in the long run which supports the existence of growth hypothesis between relc and gr and feedback hypothesis between nrelc and gr in the long run it is advised that policy makers in the turkish government should continue to reduce the share of electricity consumption from renewable sources and encourage the usage of electricity from non renewable sources to have sustainable long run growth rates it is also essential to promote the investment projects to increase the efficiency of electricity generation from non renewable sources

long term impact of minimum wages on workers careers evidence from two decades of longitudinal linked employer employee data i acknowledge the support of the spanish ministry of the economy severo ochoa programme for centres of excellence in r d sev20150563 the aei spain and feder ue grant eco2016 76734 p

self enforcing trade agreements evidence from time varying trade policy the bagwell and staiger 1990 theory of cooperative trade agreements predicts new tariffs i increase with imports ii increase with the inverse of the sum of the import demand and export supply elasticities and iii decrease with the variance of imports the authors find us import policy during 1997 2006 to be consistent with this theory a one standard deviation increase in import growth the inverse of the sum of the import demand and export supply elasticity and the standard deviation of import growth changes the probability that the us imposes an antidumping tariff by 35 percent by 88 percent and by 76 percent respectively

the clash of liberalizations preferential versus multilateral trade liberalization in the european union there has been an explosion in the number of preferential trade agreements in the past decade preferential trade agreements are characterized by liberalization with respect to only a few partners and thus they can potentially clash with and retard multilateral trade liberalization despite this important concern with preferential trade agreements there is almost no systematic evidence on whether they actually affect multilateral trade liberalization the authors model the effect of preferential trade agreements on multilateral trade liberalization and show that preferential trade agreements slow down multilateral trade liberalization unless they have a common external tariff and allow for internal transfers next they use detailed data on product level tariffs negotiated by the european union in the past two multilateral trade rounds to structurally estimate their model the authors confirm the main prediction the european union s preferential trade agreements have clashed with its multilateral trade liberalization and find that the effect is quantitatively significant moreover they also confirm several auxiliary predictions of the model and provide new evidence on the political economy determinants of multilateral liberalization in the european union

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

bilateralism multilateralism and the quest for global free trade abstract we develop an equilibrium theory of trade agreements in which both the degree and the nature bilateral or multilateral of trade liberalization are endogenously determined to determine whether and how bilateralism matters we also analyze a scenario where countries pursue trade liberalization on only a multilateral basis we find that when countries have asymmetric endowments or when governments value producer interests more than tariff revenue and consumer surplus there exist circumstances where global free trade is a stable equilibrium only if countries are free to pursue bilateral trade agreements by contrast under symmetry both bilateralism and multilateralism yield global free trade

minimum wage effects on labor market outcomes under search matching and endogenous contact rates building upon a continuous time model of search with nash bargaining in a stationary environment we analyze the effect of changes in minimum wages on labor market outcomes and welfare although minimum wage increases may or may not lead to increases in unemployment in our model they can be welfare improving to labor market participants on both the supply and demand sides of the labor market we discuss identification of the model using current population survey data on accepted wages and unemployment durations and show that by incorporating a limited amount of information from the demand side of the market it is possible to obtain credible and precise estimates of all primitive parameters we show that the optimal minimum wage in 1996 depends critically on whether or not contact rates can be considered to be exogenous and we note that the limited variation in minimum wages makes testing this assumption problematic

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

false friends empirical evidence on trade policy substitution in regional trade agreements in this paper we examine the interplay of regional economic integration and the use of bilateral antidumping ad measures our empirical analysis brings three central findings to light i we find that regional trade agreements rtas generally reduce the likelihood of ad activity among integration partners ii in addition an improvement in the tariff treatment between trading partners regardless of whether expressed as the directly faced tariff or as a tariff margin generally leads to a lower likelihood of bilateral ad and iii regarding the interaction of both events however a reciprocally higher tariff margin between integration partners leads to a higher likelihood of bilateral ad than an equal tariff margin among non integration trading partners the latter effect seems to be primarily driven by those rtas with a participation of south countries

does antidumping use contribute to trade liberalization in developing countries some supporters of antidumping have argued that this procedure serves as a kind of safety valve for protectionist pressure in this paper we investigate whether there is empirical evidence that the use of antidumping actions has contributed to ongoing tariff reductions over the period 1988 to 2004 in a sample of 23 developing countries some of which have become aggressive users of antidumping in recent years the evidence is not supportive of the safety valve argument for these countries instead evidence suggests that past use of antidumping may have led to less rather than more trade liberalization

macroeconomic factors and antidumping filings evidence from four countries abstract this paper examines the relationship between antidumping filings and macroeconomic factors real exchange rate fluctuations affect the two criteria for dumping in opposite ways making the overall effect on filings ambiguous in theory examining the filing patterns of the four major users of ad law during the 1980 98 period we find that real exchange rates and domestic real gdp growth both have statistically significant impacts on filings bilateral filing data indicate that a one standard deviation real appreciation of the domestic currency increases filings by 33 we also find one standard deviation fall in domestic real gdp increases filings by 23

trade deflection and trade depression this is the first paper to empirically examine whether a country s use of an import restricting trade policy distorts a foreign country s exports to third markets we first develop a theoretical model of worldwide trade in which the imposition of antidumping and safeguard taris or trade remedies by one country causes significant distortions in world trade flows we then empirically test this model by investigating the eect of the united states use of such import restrictions on japanese exports of roughly 4800 products into 37 countries between 1992 and 2001 our estimation yields evidence that us restrictions both deflect and depress japanese export flows to third countries imposition of a us antidumping measure against japan deflects trade as the average antidumping duty on japanese exports leads to a 5 7 increase in japanese exports of the same product to the average third country market the imposition of a us antidumping measure against a third country depresses trade as the average us duty imposed on a third country leads to a 5 19 decrease in japanese exports of that same product to the average third country s market we also document the substantial variation in trade deflection and trade depression across dierent importing countries and exported products

the mfn clause welfare and multilateral cooperation between countries of unequal size abstract this paper analyzes mfn in a competing exporters model of trade between three countries with unequal endowments and shows that mfn yields higher aggregate welfare than tariff discrimination even as it makes low income countries worse off furthermore in a repeated game of tariff cooperation multilateral free trade is easier to sustain under mfn punishments relative to discriminatory ones this conclusion holds even when tariff discrimination takes the form of bilateral trade agreements overall the analysis shows that from the viewpoint of low income countries mfn and multilateral tariff cooperation are complementary in nature

a theory of managed trade this paper proposes a theory that predicts low levels of protection during periods of normal trade volume coupled with episodes of special protection when trade volumes surge this dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings high trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels therefore as the volume of trade expands the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check copyright 1990 by american economic association

import protection business cycles and exchange rates evidence from the great recession this research estimates the impact of macroeconomic fluctuations on import protection policies over 1988 q1 2010 q4 for five industrialized economies the united states european union australia canada and south korea there is evidence of a strong countercyclical trade policy response in the pre great recession period of 1988 q1 2008 q3 during which increases in domestic unemployment rates real appreciations in bilateral exchange rates and declines in the gdp growth rates of bilateral trading partners led to substantial increases in new temporary trade barriers it then applies this pre great recession empirical model to realized macroeconomic data from 2008 q4 2010 q4 and find it predicts a surge of new import protection during the great recession e g for the us and eu the model predicts new trade barriers would cover an additional 15 percentage points of nonoil imports well above the baseline level of 2 3 percent of import coverage immediately preceding the crisis finally the research examines why the realized trade policy response differed from model predictions while exchange rate movements played an important role in limiting new import protection during the great recession there is also evidence of one particularly important change in trade policy responsiveness i e in this period governments refrained from imposing new temporary trade barriers against foreign trading partners experiencing their own weak or negative economic growth

politically realistic objective functions and trade policy profs and tariffs abstract this paper demonstrates a mathematical correspondence between the deus ex machina tariff formation approach and political economy approach the correspondence implies that the tariff chosen by lobbying influenced policy makers will be equivalent to a tariff chosen by a deus ex machina government that gives too much weight to profits this result allows many political economy issues to be addressed in the simple framework of a deus ex machina government which faces a politically realistic objective function prof

evaluating the minimum wage exemption of the long term unemployed in germany the authors evaluate the exemption of long term unemployed job seekers from germany s national minimum wage using linked survey and administrative micro data they rely on a regression discontinui

renewable and non renewable energy consumption and economic activities further evidence from oecd countries this article examines the dynamic relationship between renewable and non renewable energy consumption and industrial output and gdp growth in oecd countries using data over the period of 1980 2011 the panel cointegration technique allowing structural breaks is used for empirical investigation the results show that there is a long term equilibrium relationship among non renewable and renewable energy sources industrial output and economic growth the panel causality analyses show bidirectional causality between industrial output and both renewable and non renewable energy consumption in the short and long run however there is evidence of bidirectional short run relationship between gdp growth and non renewable energy consumption while unidirectional causality between gdp growth and renewable energy consumption these results indicate that oecd economies still remain energy dependent for their industrial output as well as overall economic growth however expansion of renewable energy sources is a viable solution for addressing energy security and climate change issues and gradually substituting renewable to non renewable energy sources could enhance a sustainable energy economy

lobbying and international cooperation in tariff setting abstract this paper develops a theory of tariff protection that incorporates cooperative behavior and lobbying governments use import tariffs or subsidies to maximize a weighted sum of lobbying contributions and general welfare governments do not use export taxes or subsidies and thus balance the interests of export and import competing lobbies in setting tariff levels in a symmetric model cooperation between governments is sustained by threats of punishment in future periods unless governments place too much weight on the future the result is a cooperative tariff otherwise the result is a reciprocal import subsidy

optimal minimum wage legislation a comment when firms in one sector do not know the ability of individual workers and there is a positive relation between ability and alternative earnings then firms will tend to pay the same wage to all workers and the average ability of those employed will be positively related to the wage in such an environment weiss i980 has demonstrated that the profit maximising wage may exceed the wage which clears the labour market causing equilibrium unemployment in a recent paper in this journal drazen i986 extends the weiss model by varying two assumptions first weiss assumes that a worker would attempt to maximise his wage drazen assumes that a worker is interested in his expected income the wage times the probability of being employed second drazen considers a world in which labour quality at each firm is not a function of the wage offered by that firm but instead depends on the average wage in the market drazen argues that with his assumptions the average market wage preferred by firms may exceed the wage which clears the labour market but that each firm has an incentive to lower the wage to the market clearing level in order to prevent free riding a minimum wage should be imposed the purpose of this note is to suggest that the first of the two assumptions mentioned above results in a market clearing wage in the weiss model thus free riding will not be a problem and there is no basis for imposing a minimum wage the difference between my results and those in drazen s paper can be easily explained consider the first of the two assumptions considered above workers are interested in their expected income and ignore the second assumption hence average labour quality at a firm is a function of the firm s wage there is no free rider problem in this case firms have two choice variables the wage w and fraction hired h of those who apply when workers are interested in their expected income wh it can be demonstrated see the next section that a firm will be at a corner solution for h h will be set as high as possible h i so all who apply are hired no firm wants to set the wage above the market clearing level thus the second assumption that the average market wage affects labour quality does not affect the equilibrium although each firm would like to free ride when firms try to lower the wage excess demand for labour results the desired wage will clear the labour market and there is no role for a

factors affecting the efficiency of wind power in the european union countries abstract the study uses the two stage bias corrected dea approach of simar and wilson 2007 to assess the efficiency of the eu countries in terms of their wind power investment in 2015 the set of input variables includes installed wind power capacity and average wind power density while output variables include wind generated electricity and three additional aspects environmental economic and energy security next the study examines the effect of renewable energy policy regarding wind energy the energy mix and the offshore wind power utilisation on the wind power efficiency of the analysed countries the results obtained reveal that the united kingdom sweden denmark and ireland are the most efficient countries in terms of wind power investment the inclusion of additional aspects demonstrates the greatest improvement of efficiency in belgium cyprus the netherlands estonia and germany the results seem to indicate that economic instruments used within renewable energy policy have a positive effect on wind power efficiency while policy support and regulatory instruments might negatively impact moreover the results show that the energy mix explains the variation of the efficiency of the eu countries when their economic and environmental aspects are considered the analysis of the geographic location indicates that countries with a high share of offshore wind capacity are the most efficient

optimal minimum wage policy in competitive labor markets this paper provides a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market and obtains two key results first we show that a binding minimum wage while leading to unemployment is nevertheless desirable if the government values redistribution toward low wage workers and if unemployment induced by the minimum wage hits the lowest surplus workers first importantly this result remains true in the presence of optimal nonlinear taxes and transfers in that context a binding minimum wage enhances the effectiveness of transfers to low skilled workers as it prevents low skilled wages from falling through incidence effects second when labor supply re sponses are along the extensive margin only the co existence of a minimum wage with a positive tax rate on low skilled work is always second best pareto ineffcient a pareto improving policy consists of reducing the pre tax minimum wage while keeping constant the post tax minimum wage by increasing transfers to low skilled workers and financing this reform by increasing taxes on higher paid workers overall our results imply that the minimum wage and subsidies for low skilled workers are complementary policies pa

are wages too low empirical implications of efficiency wage models firms may pay efficiency wages to enhance productivity the conventional presumption is that efficiency wages are inefficiently high because they lead to unemployment that is also inefficiently high government policies that lower wages raise output using a simple and general efficiency wage model this paper finds a necessary and sufficient condition for the opposite conclusion if the condition holds wages are inefficiently low leading to productivity that is also inefficiently low it is the high wage policies that raise output even if they also lower employment published empirical results support the condition no evidence is found for the conventional presumption

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

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

minimum wage effects on employment substitution and the teenage labor supply evidence from personnel data using personnel data from a large us retail firm i examine the firm s response to the 1996 federal minimum wage increase compulsory increases in average wages had negative but statistically insignificant effects on overall employment however increases in the relative wages of teenagers led to significant increases in the relative employment of teenagers especially younger and more affluent teenagers further analysis suggests a pattern consistent with noncompetitive models where the legislation affected mainly the wages of teenagers and so was only moderately binding it led both to higher teenage labor market participation and to higher absolute employment of teenagers

recurrent trade agreements and the value of external enforcement abstract this paper presents a theory of dynamic trade agreements in which external institutions such as the wto play a central role in supporting credible enforcement in our model countries engage in ongoing negotiations and as a consequence cooperative agreements become unsustainable in the absence of external enforcement institutions by using mechanisms such as delays in dispute resolution and direct penalties enforcement institutions can restore incentives for cooperation despite the lack of coercive power the occurrence of costly trade disputes and the feasibility of mechanisms such as escape clauses depend on the degree to which enforcement institutions can verify and condition on events that may lead to trade disputes

preferential trade agreements and antidumping protection abstract are preferential trade agreements ptas stumbling blocks or building blocks towards multilateral trade liberalization we address this question by investigating the effects of the negotiation and implementation of ptas on the use of antidumping ad i e the most common form of contingent trade protection by member countries against non members as there has been a concurrent surge in regionalism and ad activity since the 1990s theoretically derived empirical predictions are supported by the empirical analysis based on the 15 most intense users of ad the results demonstrate that both the negotiation and the implementation of ptas lead to fewer ad measures against non member countries except for members of customs union agreements in force facing large import surges from non members thus our results highlight a building block effect of ptas on multilateral trade cooperation when it comes to ad protection

optimal minimum wage legislation in this paper we present a model in which minimum wage legislation may be pareto optimal this arises because a higher wage would be preferred to the market clearing wage by demanders for and suppliers of labour even though unemployment is induced and minimum wage legislation is needed to support the preferred equilibrium consider a labour market where the quality of labour depends positively on the wage offered if labour quality is highly sensitive to wage increases effective unit labour cost will fall as the wage rises this would lead the representative firm to prefer paying an above market clearing wage and to ration job slots such an effect has been studied when quality depends on an individual firm s wage offer see for example weiss i980 or stiglitz i974 suppose however that labour quality depended not on any individual firm s wage offer but on the average market wage if firms were atomistic each invidual firm would have an incentive to undercut the optimal above marketclearing wage trying to get the quality benefits of high average wages while paying lower wages itself the high wage solution would not be viable legislation fixing minimum wages might be required to support the preferred equilibrium quality might depend on average market wages when workers must decide whether or not to enter a labour market before they can sample and obtain specific job offers migration into labour markets for example rural to urban migration in less developed countries provides one example as the decision to migrate and therefore the quality of the labour pool will depend on some average of expected wage offers the decision over which profession to enter at the beginning of the educational process provides another example of course imperfect information plays a key role here it is assumed that both firms and workers have imperfect information about the suitability of individual workers for jobs both before and to a lesser extent after employment has begun this lack of information will rule out both profitable selfselection mechanisms and wages strictly proportional to output so that firms will care about the quality of the labour pool the non optimality of market clearing prices which will be demonstrated makes this paper similar to a number of papers on the implications of adverse selection in labour and product markets one may mention two excellent papers on screening in labour markets by guasch and weiss i980 i98i this paper builds on some of the results in those papers stiglitz and weiss i98i show how credit rationing may arise from a similar type of argument wilson

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

can bilateral trade agreements help induce free trade there has been growing debate about whether bilateral trade agreements are damaging multilateral efforts to eliminate barriers to international trade this paper develops a model in which trading blocs always charge optimal tariffs and make trade agreements based on strategic considerations we ask a very simple question does the fact that trading blocs can form bilateral trade agreements make free trade less likely to occur the answer is that it depends on the size distribution of the trading blocs if there is one large trading bloc along with some smaller ones then bilateral trade agreements allow the smaller trading blocs to coalesce and block the monopoly power of large trading blocs in this case bilateral trade agreements facilitate the attainment of free trade not allowing customs unions leads to more not less protection if trading blocs are of roughly equivalent size then bilateral trade agreements allow groups of trading blocs to more effectively monopolize world trade in which case they may make free trade less likely these results suggest that a policy that inhibits the formation of trading blocs may be harmful we also compute the welfare effects of trade agreements to get some idea of how empirically important these issues are

external trade diversion exclusion incentives and the nature of preferential trade agreements in a game of endogenous trade agreements between three countries we show that while the pursuit of customs unions cus prevents global free trade from emerging as a coalition proof nash equilibrium the pursuit of free trade agreements ftas does not this result reflects the relatively flexible nature of ftas whereas each fta member can independently undertake further trade liberalization with respect to the non member cu members must do so as a group due to their common external tariff by diverting members exports away from the non member both types of trade agreements induce the non member to voluntarily lower its import tariffs

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

electricity consumption from renewable and non renewable sources and economic growth evidence from latin american countries abstract this study explores the effect of renewable and non renewable electricity consumption on economic growth in 18 latin american countries to achieve the goal of this study a panel gross domestic product gdp model was constructed taking the period 1980 2010 into account from the pedroni cointegration test results it was found that renewable electricity consumption non renewable electricity consumption labor gross fixed capital formation and total trade are cointegrated moreover the panel dynamic ordinary least squares dols test results revealed that all above the mentioned variables have a long run positive effect on gdp growth in the investigated countries the vector error correction vec granger causality model results revealed the existence of feedback causality between the variables the results of the study indicated that renewable electricity consumption is more significant than non renewable electricity consumption in promoting economic growth in the investigated countries in the long run and the short run based on the results of this study it is recommended that the investigated countries should increase their investment on renewable energy projects to increase the role of electricity consumption from renewable sources in addition it is essential that these countries should reduce their non renewable electricity consumption by increasing their energy efficiency and implementing energy saving projects by applying these recommendations these countries would be able to mitigate global warming and reduce their dependency on fossil fuel to increase their energy security

toward a consumer economy in china implications of changing wage policies for u s cotton exports the effect of a chinese minimum wage increase on china s textile market as well as on the world cotton market is evaluated based on a nonlinear quadratic almost ideal demand system nqaids model of china s textile demand the results suggest that the income elasticity for textiles is around 0 6 in china and that apparel is less price responsive than home textiles and other textile products simulation results suggest that a minimum wage increase would raise chinese domestic textile consumption and lower chinese textile exports most of the decline in textile exports by china is offset by expansion in other countries domestic textile production and results in a slight increase in world cotton mill utilization and higher clothing prices

the ec and protection the political economy this paper surveys the arguments that the creation of the ec has increased world protectionism relative to what it would otherwise have been models of tariff bargaining between trade blocks suggest some increase because the optimum tariff is higher for larger blocks but this is not inevitable models of ec decision taking suggest an increase because of the restaurant bill problem and the tendency of committees towards universalism the evidence is not enough however to be certain that a protectionist effect exists

the impact of phasing out fossil fuel subsidies on the low carbon transition abstract there is growing consensus on the fact that fossil fuel subsidies provided by governments in high income countries represent a misalignment on emissions reduction with the global climate agenda in addition a discussion emerged on the negative socio economic and environmental externalities associated with fossil fuel subsidies nevertheless pathways for phasing out fossil fuel subsidies in high income countries and their implications on the low carbon transition have not yet been assessed with the aim to narrow this knowledge gap we extend the eirin stock flow consistent behavioral model to study the implications on sustainable development of the gradual phasing out of fossil fuels subsidies whose revenues could be used by the government to subsidize energy investments in green capital e g solar panels either via fiscal policies or green bonds we assess the effects on green growth employment credit and bonds market as well as the distributive effects across heterogeneous households and sectors a smooth phasing out of fossil fuels subsidies contributes to improve macroeconomic performance to decrease inequality and helps the government to find fiscal space to support stable renewable energy policies renewable energy subsidies contribute to foster the low carbon transition but could imply distributive effects depending on the way in which they are implemented

an international literature survey on energy economic growth nexus evidence from country specific studies in this paper an extensive review of the rapidly growing in the literature on the nexus between economic growth and four types of energy consumption total energy consumption electricity consumption nuclear consumption and renewable consumption the various hypotheses associated with the causal interaction between these variables along with a survey of the empirical literature are also discussed the survey focuses on country coverage periods modeling techniques and empirical conclusions a general observation from these studies that results are found to be sensitive to methodology and type of energy considered the empirical results for the specific countries surveyed show that i for energy consumption growth nexus 29 supported the growth hypothesis 27 the feedback hypothesis 23 the conservation hypothesis and 21 the neutrality hypothesis ii for the electricity consumption growth nexus 40 supported the growth hypothesis 33 the feedback hypothesis and 27 conservation hypothesis iii for the nuclear consumption growth nexus 60 supported the neutrality hypothesis and 40 the growth hypothesis and iv for the renewable consumption growth nexus 40 supported the neutrality hypothesis 40 the conservation hypothesis and 20 the growth hypothesis these mixed results may be attributed to the different used data selected variables and econometric approaches undertaken

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

electricity generation mix and economic growth what role is being played by nuclear sources and carbon dioxide emissions in france abstract the gradual trend towards the electrification of economies has raised new challenges focusing on france this paper uses monthly data from january 2010 to november 2014 to study the challenge of the simultaneous integration of various sources of generation and their relationship with economic growth for the analysis of the dynamics of interaction between electricity sources the auto regressive distributed lag ardl bounds test approach was shown to be appropriate as it allows short and long run effects to be distinguished the results showed that nuclear energy has been a huge driver of economic growth in france and at the same time leads to an environment with lower co 2 emissions renewables were shown to exert a negative effect on economic growth which could be due to lack of investment in other sources of production due to the resilient position held by nuclear sources the substitution effect among sources is noticeable the robustness of the results was checked using annual data from 1970 until 2012 and the results were comparable to those from the monthly data

multi lateral trade negotiations and the most favored nation clause abstract this paper considers the interaction between private information and the most favored nation clause in trade negotiations it demonstrates that by aggregating uncertainty over a number of trading partners the most favored nation clause may offer a welfare improvement over a set of bilateral trade negotiations this improvement is shown to be most pronounced when a large number of countries are involved in negotiations

insecure resources bilateral trade and endogenous predation a game theoretic analysis of conflict and trade this article analyzes how interstate conflict over resources affects the incentives to trade and how greater trade openness affects the endogenous decisions of arming by enemy countries we identify conditions under which there is trade between two adversary countries and show that each adversary s arming affects domestic welfare in three different ways the first is an export revenue effect which increases welfare because arming causes export revenue to go up i e there is an arming induced terms of trade improvement the second is a resource predation effect which increases welfare because arming increases the appropriation of a rival country s resource input to produce a consumption good the third is an output distortion effect which reduces welfare because arming lowers the domestic production of civilian goods based on these effects we show circumstances in which greater trade openness reduces the intensity of arming we also discuss the implications of resource security asymmetry for conflict and trade

trading rules and the environment does equal treatment lead to a cleaner world abstract in this paper we consider a three stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform most favored nation mfn tariffs on countries choice over environmental standards for varying degrees of pollution spillovers because of the presence of punishment effects and stronger own and cross tariff effects we find that discrimination yields higher standards than mfn and free trade independently of the extent of pollution spillovers when pollution is local and incentives to free ride on other countries abatement efforts are weak we show however that welfare is larger under mfn than under discrimination in a dynamic setting we consider the impact of symmetric and asymmetric treatments on the sustainability of an international environmental agreement iea and obtain that multilateral cooperation is easier to sustain under discrimination than under mfn or free trade

tariff bindings and the dynamic formation of preferential trade agreements abstract we show that multilateral tariff binding liberalization substantially impacts the nature and extent of preferential trade agreement pta formation first it shapes the nature of forces constraining expansion of free trade agreements ftas the constraining force is a free riding incentive of fta non members under relatively high bindings but an exclusion incentive of fta members under relatively low bindings second multilateral tariff binding liberalization shapes the role played by ptas in the attainment of global free trade initially tariff binding liberalization leads to custom union cu formation in equilibrium but in a way that undermines the pursuit of global free trade however further tariff binding liberalization leads to fta formation in equilibrium and in a way that facilitates the attainment of global free trade our theoretical analysis also has implications regarding recent empirical discussions over the relative merits of ftas versus cus

public policy influence on renewable energy investments a panel data study across oecd countries this paper examines the impact of public policy measures on renewable energy re investments in electricity generating capacity made by institutional investors using a novel combination of datasets and a longitudinal research design we investigate the influence of different policy measures in a sample of oecd countries to suggest an effective policy mix which could tackle failures in the market for clean energy the results call for technology specific policies which take into account actual market conditions and technology maturity to improve the conditions for institutional investments advisable policy instruments include economic and fiscal incentives such as feed in tariffs fit especially for less mature technologies additionally market based instruments such as greenhouse gas ghg emission trading systems for mature technologies should be included these policy measures directly impact the risk and return structure of re projects supplementing these with regulatory measures such as codes and standards e g rps and long term strategic planning could further strengthen the context for re investments

efficiency wages employment versus welfare this paper analyzes the effects of government policies in an efficiency wage model in such a model wages exceed market clearing rates firms may pay high wages for many reasons levine gives thirteen motivations for efficiency wages 12 in the model used here high wages prevent shirking by workers the model is similar to those of shapiro and stiglitz sparks fairris and alston and others 15 17 7 efficiency wage models are often viewed as providing the microeconomic foundations of involuntary unemployment and keynesian economics 1 2 unemployment is also emphasized in many discussions of government policies 3 4 11 a major example is that of johnson and layard 9 they find that a per capita employment subsidy financed by an ad valorem wage rate tax would reduce unemployment they conclude that this policy would benefit a country because of the employment effect 2 yet this paper shows that the employment effect is misleading here a policy that causes employment to rise fall also must cause income net of effort to fall rise so total welfare falls rises the policy implications discussed by johnson and layard and others are therefore reversed

minimum wage laws what does an employment increase imply about output and welfare abstract card and krueger find empirically that minimum wage laws may increase employment the current paper seeks the analytical implications of employment increasing minimum wages for output and welfare the standard supply and demand model cannot be used for this purpose one needs a model in which employment increasing minimum wages are at least possible such as this paper s efficiency wage model here an employment increase is neither necessary nor sufficient for expected welfare gains for either employed or unemployed workers an employment increasing minimum wage raises output but unambiguously lowers labor force participation and hurts those who remain unemployed

determinants of renewable energy growth a global sample analysis abstract we investigate factors influencing country level renewable energy growth by applying fevd and pcse estimation methods in a unique sample analysis with a longer time series 1990 2010 and a broader sample size of countries including brazil russia india china and south africa than previous studies our results reveal new insights the results suggest that certain government backed energy policies impede renewable energy investments thus implying significant failures in policy design these policies may be failing mainly because of uncertainty and the likelihood of discontinuity weak voluntary approaches are introduced in order to satisfy public demand for more sustainable investments and programmes we find that these may have negative influences on the growth of renewables as well the insight gained is consistent over the estimation methods employed

inter jurisdictional competition for firms regions inhabited with an immobile population of disabled and able individuals compete to attract mobile firms that provide jobs the redistributive goal of regional governments is to support the disabled who cannot work able individuals may work be involuntary unemployed because of frictions in the labor market or choose to be voluntary unemployed labor force participation decisions depend on regional redistributive policies both the size of workforce and tax on firms affect profits and therefore firms location decisions allowing regions to engage in tax competition may be efficient if regions cannot tax firms they compete by implementing inefficient redistributive policies

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

do credible domestic institutions promote credible international agreements we examine the relationship between international policy coordination and domestic policy reputation when both are self sustaining we show that domestic policy commitment does not necessarily facilitate international cooperation rather efficient policies may be most easily sustained when governments are unable to pre commit to policy domestically moreover the lack of domestic commitment is more likely to facilitate international cooperation the larger the international spillovers of domestic policies are

a strategic and welfare theoretic analysis of free trade areas abstract we construct a three country model to determine how the formation of free trade areas ftas affects optimal tariffs and welfare we find that at constant rest of the world row tariffs the adoption of internal free trade induces union members to reduce their external tariffs below the kemp wan j int econom 6 1976 95 97 level and causes row s terms of trade to improve and its welfare to rise when row also behaves optimally its policy response to the formation of the fta is to raise tariffs generally fta members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large we also demonstrate how ftas may undermine the attainment of global free trade

a theory of trade concessions abstract we present a model of tariff disputes and concessions consisting of an infinitely repeated game under bilateral incomplete information given potential agreements to be reached through unilateral or reciprocal concessions we find that an agreement involving reciprocal concessions is reached immediately if the discount factor is large and or the volume of trade is small otherwise prior beliefs about country type matter when both countries hold pessimistic priors immediate reciprocal concessions still occur very different prior beliefs lead to an immediate unilateral concession of the pessimistic country whereas optimistic priors coupled with low discount factors may generate delayed agreements 1997 elsevier science b v all rights reserved

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

the negotiation of sustainable tariffs abstract the governments of two countries explicitly negotiate over a new pair of tariffs as soon as they reach agreement the countries put into effect the agreed upon pair of tariffs which must be self enforcing we investigate how the difference in the two governments patience affects the negotiation results provided that the common optimum tariff is the status quo tariff rate for each country we find that the country with the more patient government gains most from the negotiation if the time lag between a defection and punishment in the implementation phase is short the opposite is true if the response lag in the implementation phase is long

preferential trade agreements and multilateral tariff cooperation are preferential trade agreements ptas building or stumbling blocks for multilateral trade liberalization i address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly the central result is that when countries are symmetric a free trade agreement fta undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union cu does so via its effect on the cooperation incentives of members however when countries are asymmetric with respect to either market size or cost there exist circumstances where ptas facilitate multilateral tariff cooperation

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment