is free trade in the interest of exporting countries when there is ecological dumping abstract given conditions of oligopolistic competition the coordinated ban of direct export promoting policies e g in the eu or by gatt increases the income of exporting countries however in the presence of environmental distortions free trade can lead to ecological dumping in exporting countries the question arises if free trade is still in the interest of exporting countries we show that welfare maximizing governments of exporting countries prefer free trade even if countries subsidize their local industries indirectly via ecological dumping the existence of further national policy instruments does not make free trade agreements obsolete

the political economy of trade institutions of protection d omestic support for a liberal commercial policy in the u s rests on a commonly accepted set of rules and norms these rules and norms best characterized as a defense of free and fair trade arise from two different traditions the first originated as a political reaction to high trade barriers preceding the great depression central decision makers took as a lesson from the depression period that short term political forces should not determine the level of state intervention into the market the second to protect against unfair trade emanates from a long history of state support for industries that claim foreign producers are pursuing unfair predatory practices established in statute before the depression these rules did not fundamentally change in the postwar period together these decision rules are used to interpret american trade protectionism

approaches and methods for the econometric analysis of market power a survey and empirical comparison this study discusses two widely used approaches in the new empirical industrial organization neio literature and examines the strengths and weaknesses of the production theoretic approach pta and the general identification method gim for the econometric analysis of market power in agricultural and food markets we provide a framework that may help researchers to evaluate and improve structural models of market power starting with the specification of the approaches in question we compare published empirical studies of market power with respect to the choice of the applied approach functional forms estimation methods and derived estimates of the degree of market power thereafter we use our framework to evaluate several structural models based on pta and gim to measure oligopsony power in the ukrainian dairy industry the pta based results suggest that the estimated parameters of oligopsony power are significantly different from zero while gim based results do not indicate any evidence of oligopsony market power in the ukrainian dairy industry moreover estimations results vary substantially due to the employed estimation procedure

simulation and optimization approaches to scenario tree generation in this paper three approaches are presented for generating scenario trees for 3nancial portfolio problems these are based on simulation optimization and hybrid simulation optimization in the simulation approach the price scenarios at each time period are generated as the centroids of random scenario simulations generated sequentially or in parallel the optimization method generates a number of discrete outcomes which satisfy speci3ed statistical properties by solving either a sequence of non linear optimization models one at each node of the scenario tree or onelargeoptimization proble m in thehybrid approach theoptimization proble m is re duce d in size by 3xing price variables to values obtained by simulation these procedures are backtested using historical data and computational results are presented 2003 elsevier b v all rights reserved

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

are interest rate options important for the assessment of interest rate risk abstract fixed income options contain substantial information on the price of interest rate volatility risk in this paper we ask if those options will also provide information related to other moments of the objective distribution of interest rates based on dynamic term structure models within the class of affine models we find that interest rate options are useful for the identification of interest rate quantiles two three factor models are adopted and their adequacy to estimate value at risk of zero coupon bonds is tested we find significant difference on the quantitative assessment of risk when options are or not included in the estimation process of each of these dynamic models statistical backtests indicate that bond estimated risk is clearly more adequate when options are adopted although not yet completely satisfactory

four theories of public policy making and fast breeder reactor development the recent revival of the discipline of political economy challenges purely economic explanations of economic growth technological innovation and sectoral change this approach recognizes that political actors institutions and strategies to organize the economic process together shape the economic development of industrial societies whereas economists have emphasized determinants of growth such as savings and investment rates degrees of domestic and international competition in an industry or the supply of labor the new political economists view the political definition of property rights the nature of state intervention in the economy the resources of politically mobilized groups and political actors belief systems as critical determinants of economic transformations both economists and political economists however share the assumption that actors are rational they pursue their interests in a calculated manner within a given system of institutional constraints

a test of a theory of strategically retaliatory trade barriers within a game theoretic lobbying model the formation of strategic trade barriers is examined trade barriers are modeled as comprising a political component as well as a strategically retaliatory component that serves to deter foreign protectionism within this theoretical framework the optimal policy is to erect retaliatory barriers against all imports even though the partner country protects only a subset of goods that are traded the theory is described and tested using cross industry u s nontariff barrier ntb data against nine developed countries in 1983 a three equation simultaneous tobit model is estimated for this purpose whether u s ntbs against these partner countries are retaliatory and if so whether the cross industry structure of protection validates the predictions of the theory are empirically addressed

disguised protectionism global trade rules and alien invasive species current international law strongly favors policies designed to make imports safer e g in terms of invasive species over policies explicitly designed to discourage imports we show that this preference may be counterproductive a externality in trade is incorporated into a political economy model of policy formation nations can address the externality by inspecting cargo and imposing a fine on contaminated imports we compare the equilibrium when inspection is the only policy option relative to the equilibrium that emerging when nations may also manipulate the tariff ruling out the tariff causes socially excessive stringency in general social welfare losses if domestic supply is highly inelastic and in some circumstances an increase in the real tariff measured as the difference between world and domestic prices

unfair trade practices the case for a differential response trade distorting practices by other states did not seriously affect u s commercial interests until the mid 1960 s however growing overall and sectoral trade deficits as well as rapid changes in trading patterns have made such practices a more salient political issue the modal and preferred american policy response has been to rely on u s supported liberal institutions notably the general agreement on tariffs and trade gatt to provide a framework for multilateral negotiations designed to eliminate

a probability based stress test of federal reserve assets and income to support the economy the federal reserve amassed a large portfolio of long term bonds we assess the fed s associated interest rate risk including potential losses to its treasury securities holdings and declines in remittances to the treasury unlike past examinations of this interest rate risk we attach probabilities to alternative interest rate scenarios these probabilities are obtained from a dynamic term structure model that respects the zero lower bound on yields the resulting probability based stress test finds that the fed s losses are unlikely to be large and remittances are unlikely to exhibit more than a brief cessation

monetary policy shifts and the term structure we estimate the effect of shifts in monetary policy using the term structure of interest rates in our no arbitrage model the short rate follows a version of the taylor s 1993 discretion versus policy rules in practice carnegie rochester conference series on public policy 39 195 214 rule where the coefficients on the output gap and inflation vary over time the monetary policy loading on the output gap has averaged around 0 4 and has not changed very much over time the overall response of the yield curve to output gap components is relatively small in contrast the inflation loading has changed substantially over the last 50 years and ranges from close to zero in 2003 to a high of 2 4 in 1983 long term bonds are sensitive to inflation policy shifts with increases in inflation loadings leading to higher short rates and widening yield spreads

strategic trade and investment policies implications for the study of international political economy b usiness gurus point out that successful firms often carefully strategise about what to sell where to sell how to sell and how and where to manufacture their goods and services suppose a country drawing inspiration from such firms were to formulate a set of economic policies to become globally competitive in leading economic sectors how specific or encompassing would such policies be and what might be the justifications for them even though the theory and practicality of such policies the strategic trade and industrial policies stips is contested they retain their appeal for politicians and policymakers in this paper we discuss how and why stips have created a new agenda for the study of international political economy state intervention to directly guide industrial activity is called industrial policy and to guide foreign trade is called trade policy industrial policies differ from macroeconomic policies in that they target only a subset of the economy whereas macroeconomic policies such as tax rates level of deficit spending and interest rate policies generally do not discriminate among types of firms or industries industrial policies such as r d subsidies tax subsidies preferential loans and credit allocations are targeted at specific firms or industries

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

targeted export promotion with several oligopolistic industries abstract we study export promotion policies in situations where several oligopolistic industries compete for the services of a sector specific factor of production the partial equilibrium argument for strategic subsidies must be modified to incorporate general equilibrium effects working through the factor market we find that these effects generally weaken the case for profit shifting subsidies in a benchmark case with symmetric exporting industries fixed coefficients technologies and an inelastic supply of the specific factor free trade is shown to be optimal

tariffs with private information and reputation abstract several tariff games are examined in which the home country has private information about whether its government is a low or high tariff type if the foreign government is uncertain about this type in a one shot game its nash equilibrium tariff will be lower higher than if it knew the home government were a low high tariff type in two multistage games misleading behavior by the home government is an equilibrium strategy for sufficiently high discount factors whether or not uncertainty is persistent is important for welfare results tariff rules do not necessarily dominate discretionary policy in these models

measuring market power in multi product oligopolies the us meat industry this paper develops and estimates an economic model for measuring market power in a quantity setting oligopoly engaged in the joint production of demand related goods the model which allows for firms conjectures about both same and cross market responses to own output variation is applied to the us meat beef and pork industry he hypothesis that the industry s equilibrium reflects price taking behaviour is rejected the hypothesis of no cross effects cannot be rejected roughly half of the farm to retail price spreads for beef and pork appear to be attributable to market power

oligopolistic behavior by public agencies in international trade the world wheat market a model of the world wheat market is presented which treats public policies as endogenous the oligopolistic nature of international wheat trade is captured by assuming policy makers form conjectures on the slope of the excess demand function they face and use that information to determine domestic and trade policies the policies reflect differing influences of political interest groups a u s crop shortfall scenario illustrates the different results with endogenous policies compared to the traditional model

trade policy cross border externalities and lobbies do linked agreements enforce more cooperative outcomes abstract we analyze whether linking international cooperation in trade policy to environmental policy or other issues with nonpecuniary externalities promotes more cooperation in both policies or whether cooperation in one is strengthened at the expense of the other in the context of self enforcing agreements we show that if the policies are independent in the government s objective function then linkage promotes cooperation in one policy at the expense of the policy that is easier to enforce under no linkage however if the linked policies are not independent and if these policies are strategic complements then linkage can sustain more cooperation in both issues than no linkage the policies are strategic complements only if i the production externality has cross border effects ii the weight on the externality cost is high iii import competing lobbies are not powerful

the state and american trade strategy in the pre hegemonic era trade policy is commonly seen as a product of domestic interest group politics despite the obvious economic distortions introduced by trade barriers protectionism recurs we are often told because producers organize more readily than consumers and dominate the political process in this demand side explanation of protection the state is seen as the empty receptacle of societal bargaining with no independent voice or role

an empirical investigation of the pollution haven effect with strategic environment and trade policy abstract using a new dataset on the stringency and enforcement of environmental policy this study is the first to find robust confirmation of a pollution haven effect in a cross country context by accounting for strategically determined environment trade and intellectual property right ipr policies a simple game theoretic approach to policy determination is described which suggests an identification strategy based on other country characteristics it is found that for the top 20th percentile of countries in terms of growth in u s multinational affiliate value added as much as 8 6 of that growth between 1999 and 2003 can be attributed to declining relative stringency and enforcement of environmental policy the results are robust to a number of identification tests weak iv tests and third country spatial effects further evidence is found that relatively footloose industries are more likely to be affected by environmental policy than more traditionally dirty industries and enforcement of environmental policies tends to be a more important deterrent than the stringency of the policy set

tariff retaliation from a strategic viewpoint one of the most perplexing questions in international trade concerns the rationale for the existence of widespread barriers to trade in the current world economy 1 the numerous explanations that have been offered for the existence of tariffs are generally based on one of the following four arguments a the existence of market imperfections monopolies externalities etc invalidates the free trade theorem and thus free trade is not desirable or perhaps not obtainable b sluggish adjustment of the world economy to free trade implies that the existing tariffs are a temporary phase c non economic phenomena such as nationalism induce political or institutional tariff arrangements or d protectionist motives to improve the welfare of a country or a group of individuals in that country induce all countries to simultaneously impose tariffs while all of these factors can be important in the explanation of the existence of tariffs the purpose of this paper is to develop an extended analysis of the protectionist view the protectionist view is based on the optimal tariff theorem which states under very restrictive assumptions that a country can improve its welfare by imposing a tariff 5 12 a serious difficulty with this explanation is that the optimal tariff theorem assumes that no retaliation occurs as scitovsky 12 points out a country that could benefit from charging a tariff has monopoly power in trade surely a country sophisticated enough to exercise monopoly power in trade would expect its rivals to respond when tariffs are erected hence scitovsky argues that if protection is the monopolistic behavior of a collectivity two countries raising tariffs against each other are bilateral monopolists and we know that bilateral monopoly results in the two parties coming to some working agreement whose terms depend on their bargaining skill and are analytically indeterminate scitovsky concluded that a tariff war would result in an indeterminate solution with both countries worse off johnson 6 formalized scitovsky s agrument by allowing each country to adopt a cournot type assumption regarding its rival s reaction to a change in its own tariff thus

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

cooperation in the liberalization of international trade after hegemony what nations dwell in perpetual anarchy for no central authority imposes limits on the pursuits of sovereign interests because as states they cannot cede ultimate control over their conduct to an supranational sovereign they cannot guarantee that they will adhere to their promises the possibility of a breach of promise can impede cooperation even when cooperation would leave all better off yet at other times states do realize common goals through cooperation under anarchy

an empirical investigation of customer market analysis a microfoundation for macroeconomics the slow adjustment and stickiness of output prices is widely regarded as an important determinant of macroeconomic behaviour recently a number of writers have argued that customer market analysis can provide a microfoundation for price stickiness this paper develops the theory of a firm selling in a customer market and investigates the empirical implications of the theory the model is shown to imply a particular pattern of behaviour between retail prices and wholesale prices data on retail and wholesale prices for the united states the united kingdom and australia at various levels of aggregation is investigated and found to support the predictions of the customer market model in the conclusion the macroeconomic implications of the empirical conslusions are drawn out

customs unions and the core abstract customs union formation is modeled as a two stage game in the first stage countries make coalitional choices according to core theory in the second stage optimal tariffs are determined this yields a theory that predicts which customs unions form an example shows that a customs union can be an equilibrium even when both member countries do better at free trade

wto tariff commitments and temporary protection complements or substitutes abstract there is a long held notion in the trade policy literature that traditional tariff instruments and temporary protection tp measures are substitutes despite this prediction there is only mixed empirical evidence for a link between tariff reductions and the usage pattern of antidumping safeguard and countervailing duties based on recent theoretical advances i argue in this paper that the relevant trade policy margin for implementing tp measures is instead tariff overhangs the difference between wto bound and applied tariffs lower tariff overhangs constrain countries to raise their mfn applied rates without legal repercussions independent of past tariff changes using detailed sectoral data for a sample of 30 wto member countries during the period 1996 2014 i find strong evidence for an inverse link between tariff overhangs and tp activity this result implies that tariff overhangs and tp measures are substitutes vindicating the importance of existing tariff commitments as a key determinant of alternative protection instruments

new theories of trade among industrial countries most students of international trade have long had at least a sneaking suspicion that conventional models of comparative advantage do not give an adequate account of world trade this is especially true of trade in manufactured goods both at the macro level of aggregate trade flows and at the micro level of market structure and technology it is hard to reconcile what we see in manufactures trade with the assumptions of standard trade theory in particular much of the world s trade in manufactures is trade between industrial countries with similar relative factor endowments furthermore much of the trade between these countries involves two way exchanges of goods produced with similar factor proportions where is the source of comparative advantage furthermore most manufacturing industries are characterized by at least some degree of increasing returns especially if we include dynamic scale economies associated with rd the arguments of many observers that much trade among industrial countries is based on scale economies rather than comparative advantage and the common argument that a protected home market can promote exports until recently however none of these alternatives was presented in a form which economists would properly call a model that is a formal structure in which macro behavior is derived from micro motives this lack of formalization essentially barred alternatives to comparative advantage however plausible from the mainstream of international economics in the last five years or so however there has been a significant change a number of theorists have begun to apply methods drawn from the theory of industrial organization to international trade to produce a new genre of trade models these models offer a new way of looking at tradeand particularly at manufactures trade among the industrial countries a characteristic feature of the new models is that they often rely on very special assumptions this is probably inevitable given the inherent complexity of the world once the great simplifying device of constant returns is dropped only special assumptions will yield tractable analysis in spite of the specialness of individual models however the new literature on trade is starting to give rise to concepts which look more general than the particular models used to illustrate them the purpose of this paper is to sketch out two such concepts which i believe are important and more general in application than the particular models in which they have been expressed the first is the theory of intraindustry trade a view which incorporates scale economies as well as comparative advantage as major causes of trade and gains from trade the second is the less well developed theory of technological competition which may begin to shed some light on the dynamics of international competition in research intensive industries

free trade equilibria to multi country quota games abstract we consider a symmetric n country competitive general equilibrium endowment economy in which countries select quotas in a stsic nash game to maximize the welfare of representative citizens unlike tariffs quota revenues need not accrue solely to the quota setting country the only possible equilibrium outcome other than autarky is free trade free trade prevails unless the quota setting country receives a fraction of quota rents greater than n 1 n we conclude that the prevelance of binding quotas in contrast to tariffs cannot be explained within the accepted rubric in which countries maximize the welfare of representative citizens

trade wars and trade talks when governments meet in the international arena their actions reflect the political situations at home previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest here we introduce domestic politics into the analysis of international economic relations we study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups our analysis sheds light on the determinants of the structure of protection in non cooperative and cooperative policy equilibria

stress testing interest rate risk exposure abstract in the current low interest rate environment the possibility of a sudden increase in rates is a potentially serious threat to financial stability as a result analyzing interest rate risk irr is critical for financial institutions and supervisory agencies we propose a new method for generating yield curve scenarios for stress testing banks exposure to irr based on the nelson siegel 1987 yield curve model we show that our method produces yield curve scenarios with a wider variety of slopes and shapes than scenarios generated by the historical and hypothetical methods typically used in the banking industry and proposed in the literature we stress test the economic value of equity of a bank balance sheet based on call report data from a large u s bank we show that our method provides more information about the bank s exposure to irr using fewer yield curve scenarios than the alternative historical and hypothetical methods

international trade and industrial organization this survey reviews recent contributions to the interface between international trade and industrial organization import competition places a substantial limit on domestic market power in the short run competitive conditions can influence the speed and efficiency of a domestic market s adjustment to international disturbances exports effects on competition among national sellers are unclear and depend on the scope for price discrimination models of trade with monopolistic competition explain intra industry trade and also the widely observed sensitivity of firm size to market size exposure to trade also increases the technical efficiency of production diverse policy issues turn on the distinction between national and global welfare and the scope for commitment

absolute and relative gains in international relations theory the problem of absolute and relative gains divides neoliberal institutionalism and structural realism the former assumes states focus primarily on their absolute gains and emphasizes the prospects for cooperation the latter supposes states are largely concerned with relative gains and emphasizes the prospects for conflict existing work in international relations theory generally traces the differences between these two theories to different assumptions about states preferences using a simple game theoretic model this essay offers a reformulation of the problem of absolute and relative gains that links changes in the states behavior the feasibility of cooperation and especially the states concern for relative versus absolute gains explicitly to changes in the constraints facing the states many of the differences between neoliberal institutionalism and structural realism appear as special cases of the model

up the average cost curve inefficient entry and the new protectionism abstract a two country model is developed in which each country produces one good with increasing returns the goods being perfect or imperfect substitutes with cournot nash behavior and free entry certain restrictive trade policies have effects opposite to their favorable effect under noentry assumptions import tariffs and export subsidies lead to inefficient entry that raises rather than decreases the average production cost of and price charge by the domestic industry with negative welfare consequences we argue that these predictions of our model are closely consistent with extensive canadian data on entry exit and firms responses to trade liberalization

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

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

market structure in the us electricity industry a long term perspective we estimate changes in market structure in the us electric power industry during the last three decades using two independent approaches first we estimate an industry wide conjectural variations parameter we find that industry concentration was generally rising during the 1970s but has been gradually and consistently falling since the early 1980s to check the robustness of these results we then use a translog production function to estimate the lerner index the results confirm that the industry was becoming less concentrated during the 1980s though the lerner index tended to fluctuate during the late 1980s and early 1990s our results suggest that the current state of the electricity industry may have more to do with long term changes in market structure than recent attempts to establish competitive wholesale electricity markets

multimarket market power estimation the australian retail meat sector a new technique for estimating market power in several markets simultaneously is developed and applied to the australian retail beef lamb and pork markets the hypotheses that market power is zero and that market power is the same for each meat cannot be rejected nor is there evidence that market power increased over the period of analysis little bias is created by examining markets is isolation rather than within a system when markets are competitive but that bias can be large when market power exists in some markets in the system

determining the need for issue linkages in multilateral trade negotiations in multilateral trade negotiations trade offs usually are made within the issue areas that are on the agenda in the absence of cross issue trade offs linkages agreement may not be possible to maximize both the potential gains from trade and the scope for agreement negotiators need to be willing and able to consider the feasibility of issue linkages this raises the practical problem of determining when such trade offs are likely to be necessary although quantitative methods of policy analysis have been developed they have not been widely used by policymakers in part owing to the fact that negotiations focus largely on nontariff measures this article proposes a qualitative approach to the problem and applies it to the tokyo and uruguay round negotiations on safeguards to protect domestic industries from problems related to increases in imports

a structural model of the analysis of retail market power the case of fluid milk we derive a structural model of firm behavior that is composed of the generalized quadratic almost ideal demand system to represent both consumers milk preferences and firm profit maximization conditions that allow for a range of competitive scenarios the importance of this specification is found in its fuller representation of consumer preferences as opposed to the linear approximate almost ideal demand system used in previous analyses we apply this structural framework to investigate retailer conduct in the sale of beverage milk in a u s market using product level data our lerner index estimates show that retailers are not perfectly competitive however this deviation is small copyright 2012 oxford university press

disagreement points in trade negotiations abstract this paper analyzes trade negotiations between two large countries in the framework of an alternating offer bargaining model with endogenous interim disagreement actions despite of the flexibility in disagreement tariff selection the countries would keep the status quo tariffs in disagreement periods as far as the country which benefits from keeping the status quo tariffs compensates for the other country s foregone gains from deviating in disagreement actions each equilibrium outcome converges to a corresponding nash bargaining solution whose disagreement point reflects the status quo tariff rates as well as the threat of raising the tariff to the nash tariff rate

strategic interaction among nations negotiable and non negotiable trade barriers trade policy is modelled as a two stage game between governments governments choose a negotiable trade barrier in the first stage of the game which is co operative the level of this barrier is treated as a binding commitment in the second stage of the game where the non negotiable trade barrier is chosen non co operatively hence governments choose trade barriers during negotiations with a view to influencing the equilibrium of the non co operative game to follow this proves to be a convenient framework in which to analyse the idea that trade agreements contain loopholes which can be exploited by protectionist governments trade negotiations induce substitution toward less efficient instruments of protection but are nevertheless welfare improving as long as the negotiations are relevant i e the negotiable barrier is actually in use and the two instruments are not perfect substitutes

why is the doha development agenda failing and what can be done a computable general equilibrium game theoretical approach we use a world computable general equilibrium model to simulate 143 potential trade reforms and seek solutions to the issues hampering progress in the doha development agenda dda inside the domain defined by all these possible outcomes we apply the axiomatic theory of bargaining and select the nash solution of cooperative games the solutions vary according to the objective functions adopted by the trade negotiators when real income is the objective and services are excluded or when optimising terms of trade is the objective the nash solution is the status quo trade liberalisation is feasible only when the negotiators focus on national exports or gross domestic product gdp our assessment of some possible solutions reveals that excluding members having a gdp below a certain threshold improves the bargaining process regardless of the governments objective formation of coalition such as the g20 constitutes an option for its members to block outcomes imposed by rich members we also find that side payments may be a solution but represent a very high share of the global income gain

a conjectural variation approach to strategic tariff equilibria abstract this paper examines tariff equilibria in a static two country trade model under a general class of conjectures regarding foreign retaliation we assume that each country chooses its optimum tariff given some conjecture in this class and derive the associated conjectural tariff equilibrium which can be thought of as a nash equilibrium conditional on each country s conjecture about how the foreign country will retaliate our main contribution is to show that when marginal propensities to consume imports are sufficiently small increased expectation of retaliation results in lower equilibrium tariffs for both countries since countries in general probably do expect some retaliation it therefore appears that the traditional cournot nash analysis probably overstates the trade restrictiveness of tariff wars

dynamic tariffs with asymmetric information recent developments in dynamic game theory are applied to determine when two countries can sustain freer trade given that they determine trade policies non cooperatively countries know their own level of protection but not the other country s level of protection using import trigger strategies cooperation in the form of low tariffs can be supported although there are periodic reversionary high tariff episodes however if terms of trade trigger strategies are used cooperation does not occur

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

domestic policies national sovereignty and international economic institutions to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world this question is at the center of the debate over the future role of the wto formerly gatt in the realm of labor and environmental standards in this paper we establish that the market access focus of current wto rules is well equipped to handle the problems associated with choices over labor and environmental standards in principle with relatively modest changes that grant governments more sovereignty not less these rules can deliver globally efe cient outcomes i introduction to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world at a broad level this question probes the limits of any international economic institution whether geared toward real or e nancial concerns that is designed to promote global efe ciency while respecting national sovereignty naturally the answer depends upon the particular problem that the institution is meant to solve in other words the answer depends upon the inefe ciency that would arise under unilateral policy choices at a more specie c level this question is at the center of the debate concerning the appropriate scope of the world trade organization wto formerly gatt recently member countries have considered ways to broaden the wto s orientation beyond conventional trade policy measures to include labor and environmental standards there are now initiatives to introduce the issue of labor standards directly onto the negotiating agenda of the wto with the purpose of creating a wto social clause the social clause would specify a set of minimum international labor standards and then permit restrictions to be placed against imports from countries not complying with these minimum standards with regard to environmental policies a wto committee on trade and environment has been established to identify the relationships between trade and environmental measures and to

reexamination of the international export quota game through the theory of social situations abstract it is well known in international trade that a unique nash equilibrium of a static quota game is no trade and the rodriguez tower alternating retaliation process yields the same outcome yet they fail to capture the notion of retaliation appropriately using the framework of the theory of social situation we construct a model of the quota retaliation as an individual contingent threats situation in a static non cooperative setting we show that every solution called a stable standard of behavior supports at least one pareto efficient combination of quotas and vice versa free trade can be rationalized by a solution journal of economic literature classification numbers c79 f13

one factor interest rate models and the valuation of interest rate derivative securities this paper compares different approaches to developing arbitrage free models of the term structure it presents a numerical procedure that can be used to construct a wide range of one factor models of the short rate that are both markov and consistent with the initial term structure of interest rates

trade negotiations in a nash bargaining model abstract this paper examines the impact on trade negotiation outcomes due to different feasible utility payoff sets when a country s tastes or endowment patterns are biased towards a single commodity or rely heavily on international exchange to improve utility the negotiated outcome in a two country nash shapley bargaining framework generally benefits its opponent

us trade wars in the twenty first century with emerging countries make america and its partners lose again in a context of rising protectionist rhetoric this paper looks at the potential impact of trade wars initiated by a change in us trade policies we use a static multicountry multisector general equilibrium model to evaluate six modalities of three potential trade wars for a total of 18 scenarios between the usa and china between the usa and mexico and a combination of the two previous conflicts in each case we evaluate various forms of trade retaliation by the us partner s the same level of import duty as the one imposed by the usa an import duty that minimises welfare loss a duty that minimises terms of trade deterioration a duty that generates the same amount of collected revenue and finally a nash equilibrium we conclude that there is no scenario in which the us government augments its domestic welfare or gdp there may be sectoral gains in value added in the usa but they are small and to the detriment of other sectors while losses for china are relatively small potential losses for the mexican economy are significant there are also free riders of these trade wars finally the way in which trade retaliations are designed matters greatly

u s trade policies in a changing world economy this collection of original essays focuses on issues of international trade and trade policy in a world that is undergoing structural adaptation and in the face of a serious increase in the us trade deficit they bring a new consolidation of analytical perspective to a wide variety of current trade policy issues in their overview chapter alan v deardorff and robert m stern discuss developments in trade and protectionism review the case for free trade and address the arguments in favor of trade intervention rudiger dornbusch and jeffrey frankel analyze the macroeconomic setting in which changes have been made in us tariffs and ntbs stephen p magee and leslie young develop a model of endogenous protection and use it to search for microeconomic and macroeconomic variables that may help to explain changes in tariff and nontariff protection in the us since 1900 paul krugman takes up the question of identifying strategic sectors and the extent to which international competition and national government policies may affect the returns to such sectors under conditions of imperfect competition or when externalities are present avinash dixit analyzes the responses that the us might make to other countries trade policies in terms of how these policies affect us real national income and national security he concludes that the us could use strategic advance responses to alter other countries trade policies in a mutually beneficial way richard n cooper evaluates trade policy as foreign policy by looking at changes through three periods of us history t n srinivasan scrutinizes the national defense argument for government intervention in foreign trade john h jackson in discussing alternative negotiation approaches for the conduct of us trade policies observes that the pursuit of multilateralism may be frustrating and that what may be needed instead is a minilateral approach to trade liberalization in conclusion w max corden offers a package of rules that he believes may be both desirable and possible for the international trading system to attain robert m stern is professor of economics at the university of michigan and director of the institute of public policy studies he is coauthor with allan v deardorff of the michigan model of world production and trade mit press 1985

regime shifts in a dynamic term structure model of u s treasury bond yields this article develops and empirically implements an arbitrage free dynamic term structure model with priced factor and regime shift risks the risk factors are assumed to follow a discrete time gaussian process and regime shifts are governed by a discrete time markov process with state dependent transition probabilities this model gives closed form solutions for zero coupon bond prices an analytic representation of the likelihood function for bond yields and a natural decomposition of expected excess returns to components corresponding to regime shift and factor risks using monthly data on u s treasury zero coupon bond yields we show a critical role of priced state dependent regime shift risks in capturing the time variations in expected excess returns and document notable differences in the behaviors of the factor risk component of the expected returns across high and low volatility regimes additionally the state dependence of the regime switching probabilities is shown to capture an interesting asymmetry in the cyclical behavior of interest rates the shapes of the term structure of volatility of bond yield changes are also very different across regimes with the well known hump being largely a low volatility regime phenomenon jel g12 this article develops and empirically implements an arbitrage free dynamic term structure model dtsm with priced factor and regimeshift risks the risk factors are assumed to follow a discrete time gaussian process and regime shifts are governed by a discrete time markov process with state dependent transition probabilities agents are assumed to know both the current state of the economy and the regime they are currently in this leads to regime dependent risk neutral pricing and an equilibrium term structure that reflects the risks of both changes in the state and shifts in regimes

estimating the degree of market power in the beef packing industry a technique for assessing the degree of monopoly power developed by appelbaum 1979 1982 is extended here to permit measurement of monopsony power as well data from the u s beef packing industry are examined the results reveal small but statistically significant monopoly monopsony price distortions in slaughter cattle and wholesale beef markets but in spite of a recent trend toward heightened concentration in the industry give no indication that performance has become appreciably less competitive of late this abstract was borrowed from another version of this item

optimal tariffs in consistent conjectural variations equilibrium abstract this paper analyzes the determination of the optimal tariff under the assumption of consistent conjectural variations ccv a general characterization of the ccv equilibrium is given we show that i there are in general a multiplicity of each equilibria and ii under certain restrictions the cournot equilibrium which is based on the assumption of no retaliation can also be a ccv equilibrium by contrast free trade is never a ccv equilibrium finally the ccv equilibrium is solved explicitly in a simple example

country bashing tariffs do bilateral trade deficits matter abstract this paper investigates the impact of restricting bilateral trade imbalances in a three country three good model bilateral trade balances matter because in the nash equilibrium each country will impose tariffs on countries with whom they have bilateral deficits or promote trade with countries with whom they have bilateral surpluses all countries lose from a nash country bashing war each country loses from the unilateral elimination of its bilateral imbalances but a country can gain from a bilateral agreement with its deficit partner provided that country has a surplus with a country devoted to free trade

elasticities in aids models in the literature a variety of approaches have been used to calculate demand elasticities in almost ideal demand system aids models of demand it is common to estimate the linear approximate almost ideal demand system la aids instead of the aids when the la aids is estimated all of the previously reported approaches to compute elasticities are theoretically incorrect this paper presents correct formulas for la aids elasticities and illustrates the potential errors from using incorrect computing the almost ideal demand system aids of deaton and muellbauer 1980a b has become popular in recent years anderson and blundell blanciforti and green 1983a b blanciforti green and king chalfant eales and unnevehr fujii khaled and mak fulponi heien and willett murray parsons ray a variety of approaches to computing elasticities has been used and some of the approaches may lead to significant errors this paper clarifies the differences between alternative approaches to estimating demand elasticities in aids models

accounting for changes in tastes health concerns are thought by many to have shifted consumption away from red meats though econometric evidence is mixed testing for structural change is difficult especially when one time series is used for both estimating demand equations and testing their stability specification errors may suggest a shift where none has occurred using nonparametric demand analysis we find that meat consumption patterns in the united states and australia can be explained using only relative prices and expenditures only imposing particular functional forms can reverse the conclusion suggesting that specification errors in econometric demand studies can account for findings of taste changes

bilateral trade negotiations and trade diversification abstract this paper employs the nash bargaining framework to bilateral trade negotiations since country specific goods are imperfect substitutes for each other the amount of imperfection dictates a country s overall diversification or trade options which in turn determine bargaining gains evidence for semi industrialized countries tends to support this hypothesis

optimum tariffs north south abstract this paper investigates optimum north south tariffs by taking into consideration the fact that tariffs serve mainly as trade policy in the north but serve as revenue policy as well as trade policy in the south a statically and endogenously determined conjectural variation is devised to approach the problem we show that among other things there are many possibilities for the north optimally to choose the zero tariff other than only in the case where the elasticity of the south s supply of export is infinite

the resistibility and shiftability of depletable externalities abstract in their recently revised book baumol and oates the theory of environmental policy 2nd ed cambridge univ press cambridge uk 1988 accept bird s argument on the optimal taxation policy when externalities are shiftable and depletable their conclusion is that the standard pigouvian tax which is placed upon the generator of a negative externality can be extended to tax the victims who shift the externality to others or extended to compensate recipients in order to achieve pareto optimality it is shown in this paper that their conclusion is not free from error because the possibility of resisting a shifted externality and conjectural variations by recipients is not recognized whether an externality is shiftable depends not only on the shifting activity of the original victim but also the resisting activity of his neighbors and their conjectures about each other s action as such the shifters should be taxed and the recipients should be compensated at the same rate per unit of externality shifted if the tax base is the output of the shifting and resisting activities on the other hand if the tax base is the input which produced the shifting of the externality then both the shifters and the recipients should be subject to a tax or subsidy per unit of input that they have engaged in whether it is a tax or a subsidy depends on the direction and magnitude of the conjectural variation the model and its policy implication can be generalized to cover the omnipresent and wasteful rent seeking activities

effects of wholesaler concentration on retailers by format evidence from japanese brand level price data using unique brand level wholesale price data this article examines how purchase prices of commodities for retailers are influenced by wholesale concentration compared with studies focusing on retail prices little empirical work has measured the impact of wholesale concentration on wholesale prices economic theory suggests that the sensitivity of purchase price in response to degree of wholesale concentration is smaller for large retail formats than for small retail formats in the presence of intra format retail competition to test the validity of the theoretical implication i measure the impact of the concentration on purchasing prices for retailers by format empirical findings support the hypothesis that the large retail format tends to draw advantageous purchase prices when wholesalers become increasingly oligopolistic

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

is free trade passe abstract if there were an economist s creed it would surely contain the affirmations i understand the principle of comparative advantage and i advocate free trade yet the case for free trade is currently more in doubt than at any time since the 1817 publication of ricardo s principles of political economy and this is due to changes that have recently taken place in the theory of international trade while new developments in international trade theory may not yet be familiar to the profession at large they have been substantial and radical in the last ten years the traditional constant returns perfect competition models of international trade have been supplemented and to some extent supplanted by a new breed of models that emphasizes increasing returns and imperfect competition these new models call into doubt the extent to which actual trade can be explained by comparative advantage they also open the possibility that government intervention in trade via import restrictions export subsidies

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

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

prices and market structure an empirical analysis of the supermarket industry in chile this article investigates empirically the relationship between market structure and consumer prices in the supermarket industry in chile a panel of monthly data from 16 cities in the period january 1998 september 2006 is used we find that the more concentrated the industry in a city the higher the prices while the participation of major national chains in cities tends to lower prices in terms of magnitude this latter effect prevails over the former moreover the dominant local chain is found to behave differently depending on whether or not one of the national chains is present in the city finally we find that prices rise when a national chain acquires another chain and both were previously in a city inmerge while if only one of the two was present outmerge prices fall

trade wars a comparative study of anglo hanse franco italian and hawley smoot conflicts three trade wars are examined using variable sum game theory the anglo hanse trade wars 1300 1700 are explained as an iterated prisoners dilemma that failed to evolve into cooperation due to transaction costs rent seeking and economic recession the late igthcentury tariff war between france and italy is a case of an asymmetric trade war that illustrates the danger to a weak country of provoking a trade war with a strong country with the result that the former is forced to make major concessions the hawley smoot conflicts of the 1930s are cited as an example of the cooperation inhibiting effect of publicness in trade negotiations

trade liberalization in oligopolistic industries the quota case abstract this paper analyzes the short and long run effects on domestic price and output of partially liberalizing quota restrictions in a general model of oligopolistic interactions it is shown that perverse outcomes are possible in a number of cases including that of rational conjectures a larger quota may result in an increase in domestic output in the short run and a higher price in the long run the relationship between oligopolistic conjectures and the number of firms in the industry is critical in determining the long run outcome