income dispersion and counter cyclical markups recent advances in measuring cyclical changes in the income distribution raise new questions how might these distributional changes affect the business cycle itself we show how counter cyclical income dispersion can generate counter cyclical markups in the goods market without any preference shocks or price setting frictions in recessions idiosyncratic labor productivity shocks raise income dispersion lower the price elasticity of demand and increase imperfectly competitive firms optimal markups the calibrated model explains not only many cyclical features of markups but also cyclical and long run patterns of standard business cycle aggregates

north south standards harmonization and international trade recent years have seen a surge in economic integration agreements eias and the development of non tariff measures ntms as a consequence a growing number of eias include provisions on ntms however little attention has been given in the literature to the effects of ntm liberalization in the context of eias in this paper we focus on provisions for technical regulations and analyze whether the north south harmonization of technical barriers affects international trade using a gravity equation it tests whether as a result of the deep integration associated with standards provisions included in the eia the southern partners trade expands with the north but at the expense of their trade with non bloc southern partners empirical results provide strong support for this conjecture moreover harmonization on the basis of regional standards negatively impacts the exports of developing countries to the north

the impact of fiscal policy on profits i introduction a large number of policy making decisions rely on the key issue of the impact of fiscal policy on the economy therefore it is not surprising that the effect of fiscal policy on macroeconomic aggregates has been extensively studied in the empirical literature 1 several authors starting with blanchard and perotti 2002 have attempted to estimate the effect of government spending shocks on output and other variables in the context of structural var models see perotti 2008 for a survey this interest has been renewed since the 2008 2009 recession given the unprecedented size of fiscal packages worldwide barro and redlick 2009 hall 2009 an important part of this literature focuses on the theoretical and empirical investigation of the fiscal policy transmission channels theories of fiscal policy transmission differ in their implications regarding the response of different macroeconomic variables to government spending shocks for example the neoclassical model predicts a negative impact of government spending on real wages and consumption while this prediction is challenged by new keynesian models to that end an important branch of empirical literature on fiscal multipliers has investigated the transmission channels of fiscal policy by looking mainly at the response of private consumption and real wages 2 this paper deals with an important but relatively under investigated channel of fiscal policy transmission which is the effect of fiscal policy on profits as pointed out by hall 2009 the impact of fiscal shocks on the markup of price over marginal cost is important for understanding the functioning of the fiscal multiplier in the purely neoclassical general equilibrium model a rise in government spending produces a negative wealth effect the labor supply curve shifts outward and real wages and consumption fall this implies that the output multiplier will be well below unity a keynesian type fiscal multiplier implying a large positive output effect and positive responses of private consumption and real wages to increased government spending relies on a negative response of the markup of price over marginal cost to an increase in economic activity the intuition is that a decrease in the price marginal cost markup in response to higher government spending allows a rise in wages or at least a smaller reduction in wages compared with the case when the markup is constant a rise in wages would then imply that households will substitute away from leisure and into consumption therefore if the markup is countercyclical conditional on government spending shocks sizeable output multipliers of fiscal spending are consistent with existing empirical evidence that fiscal shocks are not related to strong decreases in real wages or consumption blanchard and perotti 2002 fatas and mihov 2001 gall david lopez salid and valles 2007 perotti 2005 2008 in general a new keynesian model with sticky prices implies a countercyclical markup ratio as input prices rise in a boom while output prices stay constant however for understanding the fiscal policy transmission the key factor is markup and not price stickiness itself as a countercyclical markup could also be implied by models with flexible prices when the desired markup changes in response to a shock 3 a model which assigns a central role to markups for fiscal policy transmission has been presented by ravn schmitt grohe and uribe 2007 assuming that demand has a price inelastic component that is a function of deep habits a government spending shock that leads to a positive output response increases the share of the price elastic component of demand causing a rise in the overall demand elasticity and a corresponding decline in the optimal markup 4 thus for a sufficient decline in the markup the resulting rise in wages induces households to substitute away from leisure and into consumption thereby more than offsetting the negative wealth effect of government spending predicted by the neoclassical model

tariff preferences wto negotiations and the ldcs the case of the everything but arms initiative by assessing the impact of the recently adopted everything but arms eba initiative of the eu on the least developed countries ldcs and by showing how further multilateral trade liberalisations erode the eba preferences and impact the ldcs this paper attempts to uncover the ldcs difficult positions in the wto trade negotiations due to its limited product coverage and previous preferences granted by the eu welfare impacts of the eba on the ldcs are shown to be small and the bulk of these gains are associated with the sensitive products that are subject to gradual liberalisations moreover these small gains are likely to disappear if the eu conducts trade policy reforms in fulfilling its wto obligations resulting in an actually worse off situation for the ldcs extending the analysis to a multilateral trade liberalisation scenario reinforces the above results that the ldcs may well lose due to preference erosion and higher world market prices it concludes that other development assistance measures from developed countries should be made available to the ldcs to ease their dependency on trade preferences and to foster their supply capacities the ldcs themselves should attempt to integrate the duty and quota free market access status contained in the eba into a binding wto agreement to secure a stable trading environment but more importantly in order to solve the difficulties at the root these countries should actively engage in reforming their own trade policies

the quantitative analytics of the basic neomonetarist model this paper constructs a dynamic macroeconomic model with less than perfect price flexibility which has a classical side consistent with real business cycle theory augmented by investment adjustment costs increasing returns to scale and a new flexible formalization of imperfect competition something akin to the classical dichotomy is justified by a mode of approximation appropriate for a model in which one state variable adjusts quickly while another state variable adjusts slowly even with investment adjustment costs monetary expansions are found to raise the real interest rate the determinants of real rigidity and the macroeconomic rate of price adjustment are investigated copyright 1995 by ohio state university press

pricing in a customer market in standard pricing models movements in demand are partially offset by price responses in a customer market however price markups may decrease with high demand thus price may magnify rather than stabilize demand movements i consider a monopolist selling a good of which first time consumers are uncertain repeat customers know that the product works the monopolist trades the objectives of exploiting past customers and attracting new ones in a period with many new potential customers the monopolist gives more weight to attracting and lowers its markup last i examine some evidence on whether expansions are periods with disproportionately many new customers

trading relations is the roadmap from lome to cotonou correct one of the reasons behind the re negotiation of the lome convention resulting in the cotonou agreement was the alleged inability of the trade provisions of lome to increase the african caribbean and pacific acp countries market share of the european union eu market the cotonou agreement may lead to the more advanced acps being granted future market access to the eu under a generalized system of preferences gsp in conformity with world trade organization wto rules to this end this paper makes a comparative analysis of the effects of the eu s lome convention and gsp on exports of developing countries using a gravity type of model the results indicate positive and statistically significant export effects of the both the lome convention and the gsp the export effects are greater in case of the lome convention throughout the study period running from 1973 to 1992 in addition the paper illustrates the eu country distribution of the export effects and shows that belgium and the netherlands ar

real rigidities and the non neutrality of money rigidities in real prices are not sufficient to create rigidities in nominal prices and real effects of nominal shocks and by themselves small frictions in nominal adjustment such as costs of changing prices create only small non neutralities but this paper shows that substantial nominal rigidity can arise from a combination of real rigidities and small nominal frictions the paper shows the connection between real and nominal rigidity given the presence of nominal frictions both in general and for two specific sources of real rigidity one arising from goods market imperfections and the other from labour market imperfections

free trade agreements in the americas are the trade effects larger than anticipated this paper argues that the competitive liberalisation of national governments of the past several decades reflects national governments expectations of larger trade impacts from regional economic integration agreements eias than typical ex ante economic models have suggested moreover we show that previous typically cross section ex post empirical evaluations of the effects of eias on trade have seriously over or underestimated the effects partly due to ignoring the endogenous self selection bias of country pairs into eias accounting for this bias we find that economic integration agreements in the americas have had much larger impacts on trade over the period 1960 2000 than previously found and the ex post estimates are less fragile than those in earlier cross section analyses the results shed further light on understanding the causes and consequences of the growth of regionalism in the world

expanding international trade beyond the rta border the case of asean s economic diplomacy abstract we examine the roles of regional trade agreements rtas not only in regionalization processes but also in globalization of trade results from various specifications of the gravity equation model confirm that a country can noticeably increase directional trade through diplomatic relations as well as through membership

retail competition in electricity markets abstract the introduction of competition into retail electricity supply gave rise to great expectations however to date its performance has proven less than stellar owing primarily to the theoretical concepts underpinning this reform which draw heavily on the austrian school neither consumers decision processes nor this sector s technical paradigm were adequately accounted for leading to an uncorrect estimation of the expected impact of opening to competition short and medium term prospects for the evolution of retail markets must be reconsidered from the perspective of greater stability not a generalization of competition but rather a persistent segmentation between active and inactive clients not a large and rapid diffusion of radical innovations in commercialisation with the potential for undermining the incumbents positions

the british model in britain failing slowly in 1990 britain reorganised its electricity industry to run on competitive lines the british reforms are widely regarded as successful and the model used provides the basis for reforms of electricity industries worldwide the main reason for this perception of success is major reductions in the real price of electricity with no reduction in service quality this paper examines whether the reputation of the british reforms is justified it concludes that the reputation is not justified and that serious fundamental problems are beginning to emerge the central question is have the british reforms resulted in the creation of efficient wholesale and retail markets on this criterion the reforms have failed the wholesale market is dominated by obscure long term contracts privileged access to the market and self dealing within integrated generator retailers leaving the spot markets with minimal liquidity and unreliable prices the failure to develop an efficient wholesale market places the onus on consumers to impose competitive forces on electricity companies by switching regularly small consumers will not do this and they are paying too much for their power for the future there is a serious risk that the electricity industry will become a weakly regulated oligopoly with a veneer of competition

are exports of china japan and korea diverted in the major regional trading blocs in recent years china japan and korea the three major economies in east asia have been gearing up their efforts to sign free trade agreements with many different regions and countries one of the main reasons for this is that they fear that with a regionalism movement rising in every corner of the world their exports are discriminated against and diverted in the trading blocs of other nations the main purpose of this paper is to investigate whether this is a real fear we utilise the gravity equation augmented with dummy variables for regional trading blocs in three different specifications one is the static standard gravity model to examine the effect of regional blocs on the level of exports from these three countries in 2003 the second is the fixed effects and random effects panel models for the period 1993 2003 and the third is the dynamic partial adjustment model to examine the effect of blocs on the changes in exports between 1993 and 2003 the results show that trade diversion is observed only for china s exports in eu efta and eaec but no diversion effect is observed for japan s and korea s exports in any of the major trading blocs on the other hand trade creation is observed for exports from china in asean for exports from japan in asean cacm caricom eaec eu and nafta and for exports from korea in asean cacm eaec and mercosur thus japan s and korea s fear of discrimination and trade diversion is ungrounded while china s fear is grounded only to a limited extent

purchase bidding strategy for a retailer with flexible demands in day ahead electricity market the paper aims to determine the day ahead market bidding strategies for retailers with flexible demands to maximize the short term profit it proposes a short term planning framework to forecast the load under dynamic tariffs and construct biding curves stochastic programming is applied to manage the uncertainties of spot price regulating price consumption behaviors and responsiveness to dynamic tariffs a case study based on data from sweden is carried out it demonstrates that a real time selling price can affect the aggregate load of a residential consumer group and lead to load shift toward low price periods the optimal bidding curves for specific trading periods are illustrated through comparing the bidding strategies under different risk factors the case study shows that a risk averse retailer tends to adopt the strategies with larger imbalances the benefit lies in the reduction of low profit risk however the aversion to risk can only be kept in a certain level a larger imbalance may lead to a quick reduction of profit in all scenarios

international risk sharing with endogenously segmented asset markets abstract asset price data imply a large degree of international risk sharing while aggregate consumption data do not we show that a model with trade in goods and endogenously segmented asset markets can account for this puzzling discrepancy active households who pay a fixed cost to transfer money into or out of assets share risk within and across countries and their marginal utility growth prices assets so asset prices imply high risk sharing inactive households consume their current income and do not share risk so aggregate consumption which averages across all households reflects lower risk sharing the model also provides a resolution to the backus smith kollmann puzzle

cyclical dynamics in idiosyncratic labor market risk is individual labor income more risky in recessions this is a difficult question to answer because existing panel data sets are so short to address this problem we develop a generalized method of moments estimator that conditions on the macroeconomic history that each member of the panel has experienced variation in the cross sectional variance between households with differing macroeconomic histories allows us to incorporate business cycle information dating back to 1930 even though our data do not begin until 1968 we implement this estimator using household level labor earnings data from the panel study of income dynamics we estimate that idiosyncratic risk is i highly persistent with an annual autocorrelation coefficient of 0 95 and ii strongly countercyclical with a conditional standard deviation that increases by 75 percent from 0 12 to 0 21 as the macroeconomy moves from peak to trough

aggregate consequences of limited contract enforceability we study a general equilibrium model in which entrepreneurs finance investment with optimal financial contracts because of enforceability problems contracts are constrained efficient we show that limited enforceability amplifies the impact of technological innovations on aggregate output this implies that economies with lower enforceability of contracts are characterized by greater macroeconomic volatility a key assumption for the amplification result is that defaulting entrepreneurs are not excluded from the market

an econometric view on the estimation of gravity models and the calculation of trade potentials this paper presents an ar 1 model in the spirit of hausman and taylor zero differences between actual and in sample predicted trade flows large systematic differences between observed and in sample predicted trade flows only indicate model misspecification and econometric problems out of sample predictions make sense if countries of interest are in an early stage of the transformation process the gravity model remains an interesting tool for the calculation of counterfactuals e g the impact of catching up in gdp per capita in the ceec or of the reduction of trade costs via infrastructure investments or tariffs on bilateral trade etc for this line of research the difference between short term and long term influences could provide interesting insights

who benefits from aid for trade comparing the effects on recipient versus donor exports recent studies offer an ambiguous picture on the effectiveness of foreign aid in strengthening the export capacity of recipient countries moreover the literature on aid for trade aft has often neglected that exporters in the donor countries may be among the main beneficiaries we hypothesize that aft is as much in the self interest of donor countries as it may have promoted the exports of recipient countries we simultaneously estimate and compare the effects of aft on trade in both directions we find that aft increases recipient exports to donors as well as recipient imports from donors the first effect tends to dominate the latter which contradicts the skeptical view that donors grant aft primarily to promote their own export interests

assessing the enlargement and deepening of the european union this paper estimates a theoreticallymotivated gravity model to examine the effect of the european union eu on trade and whet her the order of entry has affected the trade performance of member countries additionally we analyse the impact of the diffe rent phases of eu integration on trade the results show that both original countries and successive enlargements boost intra b loc trade moreover the results suggest that the deepening in the integration process has led to more trade creation among members finally only the latter ph ase of the european integration process the single currency has increased trade with non members

are trade preferences more effective than aid in supporting exports evidence from the everything but arms preference scheme this study examines the effect of the everything but arms eba trade preferences regime on exports from african caribbean and pacific countries acp to the european union eu with this aim an augmented gravity model is estimated for exports from the 79 acp countries to the eu 15 for the time period 1995 to 2005 using panel data techniques the model estimates are used to quantify the effect of the eba preferences on the acp ldcs export performance and to compare it with the impact of official development assistance in addition to their separate effects the combined impact of eba and aid flows is examined the main results do not confirm a positive effect of the eba regime on exports otherwise the combined effect of eba and aid on exports is positive supporting an eu development strategy that includes both sorts of assistance aid and trade preferences

the creation and capture of rents wages and innovation in a panel of u k companies this paper examines the impact of technological innovation on wages using a panel of british firms a head count measure of major innovations between 1945 and 1983 is combined with share price and accounting information innovating firms are found to have higher average wages but rival innovation tends to depress own wages this appears consistent with a model where wages are partly determined by a sharing in the rents generated by innovation in other words innovation may be a good instrument for proxies for rents such as profitability quasi rents or tobin s average q instrumental variable estimates of the elasticity between wages and quasi rents are about 0 29

requiem for the representative consumer aggregate implications of microeconomic consumption behavior macroeconomists pursuing microfoundations for aggregate consumption have generally adopted one of two approaches either to model microeconomic consumption behavior carefully and then to aggregate or to thoroughly understand the behavior of a representative consumer in general equilibrium then to introduce microeconomic risk and heterogeneity the broad conclusion from the bottom up approach has been that precautionary saving and microeconomic heterogeneity can profoundly change behavior stephen p zeldes 1989 angus s deaton 1991 christopher d carroll 1992 the broad conclusion from the top down approach has been that precautionary saving is of little importance in determining the aggregate capital stock s rao aiyagari 1994 per krusell and anthony a smith 1998 leading some economists to conclude that heterogeneity is unimportant for macroeconomic purposes this paper shows that while general equilibrium effects do imply that the aggregate magnitude of precautionary saving is modest nevertheless when a model with uninsurable idiosyncratic risk is modified so that it can match the key micro facts it produces behavior very different in important respects from that produced by the representative agent economy this leads to the conclusion that for many purposes the representative consumer model should be abandoned in favor of a model which matches key microeconomic facts this abstract was borrowed from another version of this item

price maker bidding in day ahead electricity market for a retailer with flexible demands this study develops a short term planning model to determine the bidding curves on a day ahead market for a price maker retailer with flexible power demand it concerns the interactions between the spot price and the flexible demand both conditional value at risk and volume deviation risk are taken into account a numerical study using the data from the nordic electricity market is performed to investigate the influence of risk factors on the retailer s profit risk levels average spot price and total consumption three types of price elasticity are compared to show that the retailer can benefit from the flexibility in demand side in some cases the flexibility also leads to lower spot prices so that the customers in real time price based demand response can face a lower electricity price for per unit power consumption

disentangling market access effects of preferential trading arrangements with an application for asean members under an asean eu fta the paper develops two synthetic measures at the hs 10 level to depict effective market access for a country receiving preferential access and applies these to the market access asean members would receive following the implementation of an fta with the eu first the measures show that current effective market access for asean eba members is cut in half by the preferences granted by the eu to countries that compete with these countries in the eu markets second the measures show that about one quarter of the preferential margin under the proposed fta for eba members would be lost as a result of preferential access granted to asean gsp members third disaggregated estimates of the restrictiveness of rules of origin confirm that rules are more restrictive for products with higher preferential margins and that asean countries usually face tougher rules of origin in the eu because of the composition of their exports

assessing the impact of unilateral trade policies eba and agoa on african beneficiaries exports using matching econometrics the existing literature studying the impact of non reciprocal preferential trade agreements nrptas assumes implicitly nrptas are non randomly assigned without showing the evidence of that using a matching methodology this paper investigates whether the african growth and opportunity act agoa and the everything but arms eba unilateral trade concessions have had an impact and in what magnitude on the exports of african beneficiary countries in the light of the evidence of the non random nature endogeneity of nrptas methodologically previous studies using the matching procedure focused on bi or multilateral trade agreements our work focuses on nrptas that depend only on donors conditions accordingly we show that for nrptas gravity covariates cannot be used for the matching procedure we propose to use political variables as determinants for obtaining non reciprocal trade preferences in order to address the endogenous nature of nrpta assignment our main results confirm that a country becomes eligible for a nrpta only when it meets certain conditions defined by their donors such as political stability and economic regulation for agoa and freedom of expression and human development for eba results also show that both agoa and eba policies have had a positive impact on african beneficiary countries exports to nrpta s providers even if the magnitude impact of eba is significantly lower than that of agoa

exporting to new destinations and the effects of tariffs the case of meat commodities this study uses a random parameter probit estimation to examine the effects of tariff liberalization on the probability of establishing new trading relationships in meat commodities our simulation results indicate that the effects of tariff reductions decrease with distance but increase with the level of development the probabilities of trade increase at an increasing rate with the size of tariff reductions thus justifying calls for ambitious liberalization schemes canada and mexico are the nafta countries that are most likely to export in response to eu tariff reductions on bovine and poultry meats while brazil and argentina emerge as the mercosur countries most likely to penetrate the eu bovine meat market after eu tariff reductions uruguay s probability to export poultry meat is most responsive to eu tariff reductions

sticky price models of the business cycle can the contract multiplier solve the persistence problem we construct a quantitative equilibrium model with firms setting prices in a staggered fashion and use it to ask whether monetary shocks can generate business cycle fluctuations these fluctuations include persistent movements in output along with the other defining features of business cycles like volatile investment and smooth consumption we assume that prices are exogenously sticky for a short time persistent output fluctuations require endogenous price stickiness in the sense that firms choose not to change prices much when they can do so we find that for a wide range of parameter values the amount of endogenous stickiness is small thus we find that in a standard quantitative model staggered price setting alone does not generate business cycle fluctuations

revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model this paper uses a gravity model to assess ex post regional trade agreements the model includes 130 countries and is estimated with panel data over the period 1962 1996 the introduction of the correct number of dummy variables allows for identification of vinerian trade creation and trade diversion effects while the estimation method takes into account the unobservable characteristics of each pairs of trade partner countries the endogeneity of some of the explanatory variables as well as a potential selection bias in contrast to previous estimates results show that regional agreements have generated a significant increase in trade between members often at the expense of the rest of the world

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

is trade in electrical and electronic products sensitive to ipr protection evidence from china s exports abstractthis article attempts to provide the first empirical evidence on the effect of intellectual property rights iprs on china s export of electrical and electronic products it adopts a gravity model for unbalanced panel data of china s 146 important trading partners over the period of 2002 2012 to eliminate the effects of fdi in determining the linkage between ipr and exports the panel excludes the destination countries and territories that invest in china the results reveal that the level of ipr protection in destination countries has a positive impact on china s flow of exports further analysis on data disaggregated by ipr score demonstrates that a higher level of ipr protection in destination countries and territories is positively linked with china s exports of these items in each of the ipr protection clusters and indicates a strong market power effect by the interplay between r d expenditure and ipr in the destinations finally both market power and market expansion effects are found to

impacts of free trade agreements on agricultural trade creation and trade diversion this paper evaluates agricultural trade creation and diversion effects of the most important free trade agreements ftas trade creation and diversion effects are estimated using a poisson pseudo maximum likelihood ppml estimator with various fixed effects to deal with heteroskedasticity and zero trade observations the analysis finds that ppml estimation is preferred to ols and the estimated impacts of ftas are different if zero trade observations are considered the asean china preferential trade agreement eu 15 eu 25 and southern african development community agreements have generated large increases in agricultural trade among their members

aid and the supply side public investment export performance and dutch disease in low income countries contemporary policy debates on the macroeconomics of aid often concentrate on short run dutch disease effects ignoring the possible supply side impact of aid financed public expenditure in the simple model of aid and public expenditure presented here public infrastructure generates an inter temporal productivity spillover which may exhibit a sector specific bias the model also provides for a learning by doing externality through which total factor productivity in the tradable sector is an increasing function of past export volumes an extended computable version of this model is used to simulate the effect of a step increase in net aid flows the simulations show that beyond the short run when conventional demand side dutch disease effects are present the relationship between enhanced aid flows and real exchange rates output growth and welfare is less straightforward than simple models of aid suggest public infrastructure investment that generates a productivity bias in favor of non tradable production delivers the largest aggregate return to aid but at the cost of deterioration in the income distribution income gains accrue predominantly to skilled and unskilled urban households leaving the rural poor relatively worse off under plausible parameterizations of the model the rural poor may also be worse off in absolute terms

monopolistic competition business cycles and the composition of aggregate demand abstract we develop a dynamic general equilibrium model with monopolistically competitive firms and endogenous markups and show the possibility of equilibria with persistent fluctuations driven by self fulfilling revisions of expectations for some parameter values such fluctuations are characterized by time series properties similar to those observed in u s postwar business cycles in contrast with the existing literature our results do not rely on the presence of increasing returns or nominal rigidities a key ingredient of the model is the link between markups and the composition of aggregate demand some econometric evidence on the latter is also reported journal of economic literature classification number d43 d58 e32

china s one belt one road initiative the impact of trade facilitation versus physical infrastructure on exports the one belt one road obor project is perhaps china s most significant international relations initiative in recent times it is based on openness harmony inclusivity mutual benefit and market operations and aims to connect the economically vibrant east asia and the developed europe by land and by sea and in the process it brings growth and development to tens of countries along the modern silk routes in this paper we compare the impact of the main initiatives of obor namely enhancements in physical infrastructure and improvements in border administration on the trade of countries that have signed on to this project especially countries along the six economic corridors we find overwhelming evidence that shows improvements in border administration has the greatest impact on exports of corridor countries although physical infrastructure is important for trade the chinese government should place equal attention to improvements in trade facilitation to ensure trade routes operate seamlessly across the various corridors

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

dealer price discrimination in new car purchases evidence from the consumer expenditure survey this paper documents the variation in dealer discounts for new cars using transactions price data from the consumer expenditure survey consumer specific characteristics fail to explain dealer discounts whereas model market specific and purchase transaction variables e g first time purchase trade in and financing through dealer do explain them the results contradict earlier findings of race and gender discrimination based on a controlled experiment this contradiction is reconciled by examining the higher moments of the empirical discount distribution while mean and median markups do not vary by race and gender minority purchases are characterized by higher dispersion this may rationalize the disparate treatment of minorities by dealers documented in the controlled experiment

an assessment of the europe agreements effects on bilateral trade gdp and welfare abstract the so called europe agreements had been enacted in the 1990s to initiate the integration of goods markets between the 15 eu incumbent economies as of 1995 and 10 potential entrants located in central and eastern europe this paper evaluates the trade gdp and welfare effects of these agreements by means of structural analysis of a bilateral trade flow model the results support three conclusions first the agreements exerted significant positive effects on goods trade between the eu15 incumbents and the ceec and at the same time they induced trade redirection from other countries second eu15 gdp responded by an increase of much less than 1 while that in the 10 ceec increased by several percent in response to the agreements third the effects on welfare were moderate in the eu15 but amounted to more double digit percentage changes in the involved ceec

the perversity of preferences gsp and developing country trade policies 1976 2000 industrial countries maintain special tariff preferences namely the generalized system of preferences gsp for imports from developing countries critics have highlighted the underachieving nature of such preferences but developing countries continue to place the gsp at the heart of their agenda in multilateral negotiations what effect do such preferences have on a recipient s own trade policies the authors develop and test a simple theoretical model of a small country s trade policy choice using a dataset of 154 developing countries from 1976 through 2000 they find that countries removed from the gsp adopt more liberal trade policies than those remaining eligible the results corrected for endogeneity and robust to numerous alternative measures of trade policy suggest that developing countries may be best served by full integration into the reciprocity based world trade regime rather than continued gsp style special preferences

risk assessment of oil price from static and dynamic modelling approaches the price gap between west texas intermediate wti and brent crude oil markets has been completely changed in the past several years the price of wti was always a little larger than that of brent for a long time however the price of wti has been surpassed by that of brent since 2011 the new market circumstances and volatility of oil price require a comprehensive re estimation of risk therefore this study aims to explore an integrated approach to assess the price risk in the two crude oil markets through the value at risk var model the var is estimated by the extreme value theory evt and garch model on the basis of generalized error distribution ged the results show that evt is a powerful approach to capture the risk in the oil markets on the contrary the traditional variance covariance vc and monte carlo mc approaches tend to overestimate risk when the confidence level is 95 but underestimate risk at the confidence level of 99 the var of wti returns is larger than that of brent returns at identical confidence levels moreover the ged garch model can estimate the downside dynamic var accurately for wti and brent oil returns

on money as a medium of exchange we analyze economies in which individuals specialize in consumption and production and meet randomly over time in a way that implies that trade must be bilateral and quid pro quo nash equilibria in trading strategies are characterized certain goods emerge endogenously as media of exchange or commodity money depending both on their intrinsic properties and on extrinsic beliefs there are also equilibria with genuine fiat currency circulating as the general medium of exchange we find that equilibria are not generally pareto optimal and that introducing fiat currency into a commodity money economy may unambiguously improve welfare velocity acceptability and liquidity are discussed

aid for trade effectiveness complementarities with economic integration developing countries are increasingly using regional integration as a main policy lever when pursuing a trade led growth strategy and today deep preferential trade agreements go beyond trade policy negotiations and cover trade facilitation issues since aid for trade aft has been recognised as a powerful instrument for increasing developing countries trade capacity by targeting internal trade costs this article tests whether complementarities exist between this type of aid and economic integration using a gravity model on panel data for the period 1995 2005 results indicate that aft when combined with economic integration has been effective in increasing trade flows both south south and north south trade flows have benefited and the combination of the two instruments has been particularly effective in expanding the south s exports to the north finally when breaking down aft into categories assistance to trade related institutions seems to generate the strongest complementarities with economic integration

lng is linking regional natural gas markets evidence from the gravity model abstract evidence exists that global natural gas markets have become more integrated over time one possible explanation for this increased level of integration is that increased liquefied natural gas trade has increased the opportunity for price arbitrage by decreasing transport costs if this explanation is true then the natural gas market should become relatively more integrated because countries separated by large distances would be more willing to trade with each other we employ a gravity model to test whether trade in liquefied natural gas has helped to de regionalize the total natural gas market using trade in the compressed natural gas market as a comparison benchmark the results indicate that liquefied natural gas is indeed a global commodity whereas the compressed natural gas markets are more regional importantly we find that trade in liquefied natural gas has de regionalized the total natural gas market

retailers risk management and vertical arrangements in electricity markets the failure of the asset light retailer s organizational model is indicative of the incapacity of this organizational structure to manage efficiently the combination of sourcing and market risks in the current market environment because of the structural dimensions of electricity s market risks a retailer s level of risk exposure is unknown ex ante and will only be revealed ex post when consumption is known in contrast to the textbook model of electricity reforms the paper demonstrates through numerical simulations that in the current market context pure portfolios of contracts are incomplete risk management instruments compared to physical hedging the latter is critical to overcome the asset light retailer s curse

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

aid and trade this paper surveys the recent theoretical and empirical literature that explores the relations between aid and trade and asks about the complementarity or substitution effects at work we distinguish between the effects of aid on trade flows and on trade policies of the donor as well as the recipient countries special focus is given on trade facilitation or aid for trade

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

search in the product market and the real business cycle empirical evidence suggests that most firms operate in imperfectly competitivemarkets we develop a search matching model between wholesalers and retailers firms face search costs and form long term relationships price bargain results in both wholesaler and retailer markups depending on firms relative bargaining power we simulate the model to explore the role of product market search frictions in business cycles we show that the way search costs are modelled is crucial to provide a realistic picture of firms business environment and improve the cyclical properties of an otherwise standard real business cycle model

an embarrassment of riches confronting omitted variable bias and multiscale capitalization in hedonic price models abstract many researchers have addressed concerns of omitted variable bias in hedonic price models through the use of spatial fixed effects we argue that this approach does not consider the biases introduced by effects that overlap the zone of capitalization for nonmarket goods we show this bias can dominate the usual omitted variable bias using data on developer provided open space we control for multiscale capitalization and omitted variables simultaneously by extending the hausman taylor estimator where the panel component of the estimator is defined over repeated transactions within neighborhoods rather than the traditional definition following a unique cross sectional unit through time

robust predictions for bilateral contracting with externalities the paper studies bilateral contracting between one principal and n agents when each agent s utility depends on the principal s unobservable contracts with other agents we show that allowing deviations to menu contracts from which the principal chooses bounds equilibrium outcomes in a wide class of bilateral contracting games without imposing ad hoc restrictions on the agents beliefs this bound yields for example competitive convergence as n in environments in which an appropriately defined notion of competitive equilibrium exists we also examine the additional restrictions arising in two common bilateral contracting games the offer game in which the principal makes simultaneous offers to the agents and the bidding game in which the agents make simultaneous offers to the principal

the cyclical behavior of marginal cost and price the author examines the cyclical behavior of price marginal cost margins for u s manufac turing after 1956 short run marginal cost is markedly procyclical this is primarily due to procyclical overtime payments incurred beca use employment is not perfectly flexible in most industries output price fails to respond to the cyclical movement in marginal cost so price marginal cost margins are markedly countercyclical the res ults contradict business cycle theories that explain low production i n a recession by a high real cost of producing they support theories that explain low production in a recession by the inability of firms to sell their output copyright 1987 by american economic association

trade creation and diversion effects of regional trade agreements a product level analysis this paper examines the impacts of regional trade agreements rtas on trade flows at product level with a particular focus on trade creation and diversion based on estimation of the gravity equation dealing with the zero trade flows and endogeneity bias problems we analyse the impacts of various types of rtas involving 67 countries for 20 products during the 1980 2006 period we find that rtas among developing countries tend to cause trade diversion compared with rtas among developed countries taking the higher external tariff rates of developing countries compared with developed countries into consideration our results suggest trade diversion is likely to be caused by remaining high tariffs on imports from non members in addition we find the trade creation effect for many products in the cases of customs unions and plurilateral rtas these results imply that trade creation would be caused by various factors besides the reduction in tariff rates based on these results we draw a policy implication that external tariff rate reduction is an important factor in avoiding trade diversion in the formation of rtas in particular for rtas among developing countries while a large number of members and the common external tariff appear to be important for generating the trade creation effect

entrepreneurial activity risk and the business cycle abstract this paper analyzes a model in which the risk associated with entrepreneurial activity implies that the amount of such activity is procyclical and results in amplification and intertemporal propagation of productivity shocks in the model risk averse agents choose between a riskless project and a risky project with higher expected output the entrepreneurial activity agents who become entrepreneurs need to bear part of the project specific risk for incentive reasons more agents become entrepreneurs when productivity is high because agents are more willing to bear risk and need to bear less risk for incentive reasons furthermore cross sectional heterogeneity can be countercyclical

a survey of new keynesian theories of aggregate supply and their relation to industrial organization i survey the recent literature on the phillips curve along the way i will try to relate this literature to topics of interest to industrial organization i will also point out the gaps in our understanding and places where more careful micro economic analysis would be helpful to macroeconomists in the conclusion i summarize what an industrial organization economist might take away from this literature

trade creation and trade diversion in the eec the lafta and the cmea 1960 1994 in a simplified version of the gravity model appropriate dummy variables have been introduced to analyse the effects of both trade creation and trade diversion by three economic organizations the european economic community eec the latin american free trade association lafta and the council of mutual economic assistance cmea for the period 1960 94 five year intervals are the main subject of measurement the results show that both trade creation dummies and trade diversion dummies have statistically significant coefficients which show the appropriateness of this new approach the trade creation effect and trade diversion effect of each institution are proved to be generally weakening during the 1990s it is also observed that each organization has a distinctive international trade character for japanese trade a similar approach is used to analyse nonaligned trade by japan with particular interest in the effects of these three institutions on trade with japan the result is that there is no s

earnings inequality and the business cycle abstract economists have long viewed recessions as contributing to increasing inequality however this conclusion is largely based on data from a period in which inequality was increasing over time this paper examines the connection between long run trends and cyclical variation in earnings inequality we develop a model in which cyclical and trend inequality are related and find that in our model recessions tend to amplify long run trends i e they involve more rapidly increasing inequality when long run inequality is increasing and more rapidly decreasing inequality when long run inequality is decreasing in support of this prediction we present evidence that during the first half of the 20th century when earnings inequality was generally declining earnings disparities indeed appeared to fall more rapidly in downturns at least among workers at the top of the earnings distribution

a comparative analysis of merchant and broker intermediation abstract this paper provides a comparative analysis of merchant and broker intermediation contracts the intermediation process begins with commitment to a contractual form after which intermediaries take actions demand is realized and trade occurs with buyers merchant intermediaries commit to a purchase quantity at the time contracts are formed and are compensated with residual surplus the merchant intermediary form is shown to be best suited to conditions in which demand has low variance but is highly responsive to intermediary effort on the other hand brokers do not take title to intermediated goods and are compensated with revenue sharing commissions the broker intermediary form is best suited to conditions in which demand has large variance and is independent of intermediary effort

growth by destination the role of trade in africa s recent growth episode summary over the period 1990 2009 africa has experienced a distinct and favorable reversal in its growth fortunes in stark contrast to its performance in the preceding decades leading to a variety of hypotheses seeking to explain the phenomenon this paper presents both cross country and panel data evidence on the causal factors driving the recent turnaround in africa s growth and takes the unique approach of disaggregating the separate growth impacts of africa s bilateral trade with china europe and america the empirical analysis presented in this paper suggests that the primary and most robust causal factors driving africa s recent growth turnaround are private sector and foreign direct investment although empirical evidence of the role of bilateral trade openness in africa s recent growth emerges within a fixed effect estimation setting these results are not as robust when endogeneity and other issues are fully accounted for among the three major bilateral partners africa s bilateral trade with china has been a relatively important factor spurring growth on the continent and especially so in resource rich oil producing and non landlocked countries the econometric results are not as supportive of growth inducing effects of foreign aid these findings emerge after applying a variety of panel data specifications to the data including the recent fixed effects filtered fef estimator introduced by pesaran and zhou 2014 and the dynamic panel generalized method of moments gmm estimator which allows for endogeneity between trade and growth

does mercosur s trade performance raise concerns about the effects of regional trade arrangements this study employs a new methodological approach that measures production efficiency in changing trade patterns it shows that the most rapidly growing products in mercosur s intratrade generally are goods in which members do not have a comparative advantage and have not been able to export competitively to outside markets this is consistent with substantial trade diversion within the arrangement mercosur s discriminatory tariffs against nonmembers which are four to six times higher than those in arrangements such as the european union european free trade area or north american free trade agreement are likely the cause recent further increases in mercosur s tariffs against nonmembers are likely to exacerbate the magnitude of trade diversion

waves of international banking integration a tale of regional differences abstract we propose an original measure of international banking integration based on gravity equations and a spline function on a panel of 14 countries and their 186 partners between 1999 and 2012 contrary to the conventional wisdom we uncover that 1 the international banking integration outside the euro area has been tenaciously increasing since 1999 and has even strengthened after the crisis 2 in contrast the international banking integration of the euro area has been cyclical since 1999 with a peak in 2006 and a complete reversal since then 3 this decline is not a correction of previous overshooting but a marked disintegration 4 outside the euro area the level of income does not affect the shape of banking integration

forecasting next day electricity prices by time series models in the framework of competitive electricity markets power producers and consumers need accurate price forecasting tools price forecasts embody crucial information for producers and consumers when planning bidding strategies in order to maximize their benefits and utilities respectively this paper provides two highly accurate yet efficient price forecasting tools based on time series analysis dynamic regression and transfer function models these techniques are explained and checked against each other results and discussions from real world case studies based on the electricity markets of mainland spain and california are presented

does aid for trade enhance export performance investigating on the infrastructure channel today there are few empirical studies assessing the effectiveness of aid for trade on trade pe rformance furthermore existing works do not test channels by which this impact is transiting we address this question using an empirical analysis constructed in two steps following a model of export performance we first test if institutions and infrastructure our two potential channels of transmission are indeed determinants of export performance secondly we test the impact of aid for trade sectoral flows on the determinants that were highlighted in the first part we show that the infrastructure channel appears to be highly significant in the first step whereas the institutional one turns out to have limited impact on developing countries exports furthermore in our second step aid for infrastructure seems once instrumented to have a strong and positive impact on the infrastructure level our results indicate that a 10 increase in aid to infrastructure commitments per capita leads to an average increase of the exports over gdp ratio for a developing country of 2 34 it is also equivalent to a 2 71 reduction of the tariff and non tariff barriers this highlights the very high economic impact of aid for trade throughout the channel of infrastructures

hedging strategies in energy markets the case of electricity retailers as market intermediaries electricity retailers buy electricity from the wholesale market or self generate for re sale on the retail market electricity retailers are uncertain about how much electricity their residential customers will use at any time of the day until they actually turn switches on while demand uncertainty is a common feature of all commodity markets retailers generally rely on storage to manage demand uncertainty on electricity markets retailers are exposed to joint quantity and price risk on an hourly basis given the physical singularity of electricity as a commodity in the literature on electricity markets few articles deal on intra day hedging portfolios to manage joint price and quantity risk whereas electricity markets are hourly markets the contributions of the article are twofold first we define through a var and cvar model optimal portfolios for specific hours 3 am 6 am 12 pm based on electricity market data from 2001 to 2011 for the french market we prove that the optimal hedging strategy differs depending on the cluster hour secondly we demonstrate the significantly superior efficiency of intra day hedging portfolios over daily therefore weekly and yearly portfolios over a decade 2001 2011 our results clearly show that the losses of an optimal daily portfolio are at least nine times higher than the losses of optimal intra day portfolios

determinants of successful regional trade agreements abstract this paper investigates the determinants of the effectiveness of regional trade agreements rtas in enhancing bilateral trade characteristics of both the country pair and other rta members are found to significantly influence the trade creation effect of rtas however north north north south and south south rtas are found to have similar effects on trade

natural disasters and the effect of trade on income a new panel iv approach natural disasters affect bilateral trade we use this fact to generalize the instrumental variables strategy of frankel and romer 1999 to a panel setup this allows revisiting an old question does openness cause per capita gdp we work with a modified gravity framework in which we interact foreign natural disasters with geography predicting the exogenous component of bilateral trade flows and aggregating over trade partners we obtain a time varying instrument for multilateral openness of a country controlling for constant determinants of income history geography by means of fixed effects we find a robust positive effect of trade on income averaging 0 74 the estimated elasticity is substantially smaller than the one obtained in the cross section poor or non oecd countries feature a larger elasticity

aid dutch disease and manufacturing growth abstract we examine the effects of aid on the growth of manufacturing using a methodology that exploits the variation within countries and across manufacturing sectors and corrects for possible reverse causality we find that aid inflows have systematic adverse effects on a country s competitiveness as reflected in the lower relative growth rate of exportable industries we provide some evidence suggesting that the channel for these effects is the real exchange rate appreciation caused by aid inflows we conjecture that this may explain in part why it is hard to find robust evidence that foreign aid helps countries grow

life cycle economies and aggregate fluctuations do the implications for business cycle issues change when we switch from studying infinitely lived representative agent models to more sophisticated demographic structures with finitely lived agents this article addresses that question by using a large overlapping generations model that is calibrated to u s demographic properties microeconomic evidence and national income and product accounts the finding is that the answers obtained are basically the same for the two kinds of models the article also explores the relative volatility of hours across age groups an issue that cannot be addressed by using the infinitely lived representative agent abstraction

electricity price short term forecasting using artificial neural networks this paper presents the system marginal price smp short term forecasting implementation using the artificial neural networks ann computing technique the described approach uses the three layered ann paradigm with backpropagation the retrospective smp real world data acquired from the deregulated victorian power system was used for training and testing the ann the results presented in this paper confirm considerable value of the ann based approach in forecasting the smp

money search and business cycles monetary models that specify explicit frictions to generate money demand have been developed over the last 20 years and have been used to address many questions in this article i investigate the short run properties of a particular model considering a number of versions based on some modeling choices all versions feature flexible prices i find that in many aspects both real and nominal the model resembles other more reduced form models some variations of the model come closer to matching some key nominal facts than a reduced form model the model also generates counter cyclical markups in line with the data

aid trade and migration how do bilateral flows interact this paper takes as its point of departure the european commission s position set out in 2005 which laid clear emphasis on aid and trade as tools for controlling immigration we attempt to subject this position to empirical investigation we exploit data on bilateral aid trade and migration flows between developed and developing countries for the period 2000 10 adopting an instrumental variable approach to address the endogeneity issue due to potential simultaneity bias our results establish that increasing aid and trade with developing countries is likely to fail to contain immigration at least in the short run the pattern of results is consistent with the hypothesis that promoting development in migrant sending countries or cooperating with such countries to control migration outflows is not sufficient to lessen immigration increasing visa restrictions and controls at borders is generally controversial still the results imply that policymakers cannot attain their short term immigration goals with the so called smart solutions of aid and trade

information rigidities and asymmetric business cycles abstract we study the link between asymmetries of markups and firm exit rates and asymmetries in information acquisition along the u s business cycle we argue that a model of optimal firm exit under rational inattention produces lagged counter cyclical and positively skewed markups together with counter cyclical exit rates consistent with the empirical evidence our model also predicts counter cyclical information rigidities consistent with survey evidence

international standards and international trade empirical evidence from iso 9000 diffusion abstract empirical scholarship on the standards trade relationship has been held up due to methodological challenges measurement varied effects and endogeneity considering the trade effects of one particular standard iso 9000 we surmount methodological challenges by measuring standardization via national penetration of iso 9000 allowing standardization to manifest via multiple quality signaling information compliance cost and common language channels and using instrumental variable multilateral resistance and panel data techniques to overcome endogeneity we find evidence of common language and quality signaling augmenting country pair trade yet iso rich nations benefit the most from standardization while iso poor nations find iso 9000 to represent a trade barrier due to compliance cost effects

gravity models a reformulation and an application to discriminatory trade arrangements gravity models are used to estimate trade flows from 162 countries into 11 major importing countries for 1976 counting the ec as one the main theories underlying gravity models are reviewed and a new gravity model is derived from a linear expenditure system a major innovation of this model is that both tariffs and dummy variables for discriminatory arrangements are incorporated price variables are also explicitly included in the model the tariff and the dummy variables are found to be statistically significant and this indicates that previous gravity model studies which used dummies to estimate the trade benefits of preferential tariffs may not have accurately estimated the effects of the preferences the price variables generally are also found to be statistically significant which casts doubt on the homogeneous goods assumption underlying the purchasing power parity hypothesis some significant differences in the estimates were found when separate equations were regressed for the eec and the us

do women pay more for new vehicles evidence from transaction price data recently there has been a debate concerning whether price discrimination by new vehicle dealers results in systematically higher prices for minority and female buyers ian ayres and peter siegelman 1995 and pinelopi koujianoi goldberg 1996 use different methodologies and different data sets and come to different conclusions ayres and siegelman use testergenerated paired audits and find that black and female test buyers were quoted higher prices than white males goldberg uses consumer expenditure survey ces data and finds no systematic evidence of price discrimination in transaction price discounts by race or sex but greater variation in discounts for blacks our paper contributes to the debate on price discrimination in new car purchases using a new j d power and associates database that reports gross profit directly from dealer financial software systems although our data set does not distinguish the race of the buyer we do get direct evidence on dealer profit for male and female buyers in a sample reflecting over 4 000 new vehicle transactions our paper addresses the previously obtained contradictory results and differs from the previous studies in several ways the database we use permits us to measure directly dealers self reported gross profit per vehicle the best measure of differential treatment the database reflects contemporaneously collected dealer data it comes from the same financial software programs that are used to automatically report data to the franchiser manufacturer financial institutions and motor vehicle bureaus as well as being used to calculate sales tax liabilities further the data set allows us to test for price discrimination in the profit contributions of ancillary tie ins such as service contracts credit life insurance and dealer residuals from financing the vehicle purchase in the ayres and siegelman study black auditors received initial offers or negotiated prices that were much higher than those for the paired white male auditors at the same dealerships 400 more for black females and 1 060 more for black males white female auditors received offers or negotiated prices that were 55 to 129 more than those for white males but the effect was not statistically significant ayres 1995 combined the paired audit data with additional unpaired data gathered in the same study and finds that final offers to white women were 216 higher than to white men and with a p value 0 06 approaching conventional significance levels under the audit technique no tester ever consummated a transaction so ayres and siegelman have no measure of vehicle profit from any sale goldberg 1996 argues that the offers obtained by the auditors do not reflect transaction prices in part because the protocol for the ayres and siegelman study called for auditors to adopt one of two bargaining strategies seller behavior should be different across classes of consumers if the classes have different demands e g different variances of reservations prices or different bargaining strategies goldberg maintains that since different classes of buyers may use different bargaining strategies the offers obtained by the auditors reveal information about seller behavior but not about transaction prices goldberg 1996 uses ces data from 1983 to 1987 to test for price discrimination by new vehicle dealers controlling for a number of variables she was unable to find reliable evidence that blacks or white females received smaller discounts on the manufacturer s suggested retail price msrp than white males the estimation results suggested that white females received discounts that were 130 smaller than those received by white males but the effect was statistically insignificant the gold department of economics virginia commonwealth university box 844000 richmond va 23284 we thank glenn mercer of mckinsey and company for providing us with access to the j d power and associates database