Trade policy, cross-border externalities and lobbies: do linked agreements enforce more cooperative outcomes?

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”.     

Least-Cost Avoidance: The Tragedy of Common Safety

This article shows that the least-cost avoider approach in tortis not necessarily the optimal way to attain least-cost avoidancewhen accidents can be avoided by either of two parties. Whenparties do not observe each other's costs of care at the timeof the accident and are unable to determine which party is theleast-cost avoider, they fail to anticipate the outcome of theadjudication. Under these circumstances, accident avoidancebecomes a commons problem because care by each individual partyreduces the prospect of liability for both parties. As a result,parties suboptimally invest in care. We show that regulationremoves this problem and is superior to tort liability bothwhen parties act simultaneously and when they act sequentially.We further examine how different liability rules perform inthis respect. (JEL K13, K32)     

Reputation, Honesty, and Efficiency with Insider Information: an Experiment

We conduct an experimental study of sales of insider information about an asset's future value, where the insiders cannot purchase the underlying asset. We examine whether such information is purchased, the quality of the information provided, and the subsequent accuracy of purchase decisions in the underlying asset market. Our design explores whether reputation, in a repeated game of finite (but uncertain) duration, is an effective constraint on deliberate strategic misinformation. The insiders have an immediate incentive to state that the asset value is high when its true value is low. We suggest an application to insider trading in financial information markets. With fixed matching, cooperative outcomes featuring truthful revelation are frequently achieved and sustained, even though this suggests subjects have sophisticated beliefs about the beliefs and behavior of others. As a comparison, we also conduct a control treatment with random rematching. Here, information purchase is less frequent, the rate of truthful revelation decreases, and efficiency is diminished. Our results suggest that most people anticipate that others realize the potential value of a good reputation.     

Classical Surplus Theory and Heterodox Economics

It has recently been suggested that heterodox economics can benefit from an engagement with classical surplus theory. However, caution is often recommended due to the ideological concepts that are embedded in classical political economy. This article argues that many of the ideological concepts that are often attributed to classical political economy are actually not part of classical political economy, but rather of a “vulgar” form of political economy, a project that emerged after Ricardo. This vulgar project, often termed as “Ricardian economics,” is often mistakenly taken to be a development of classical political economy, but it is actually a rupture with the classical political economy of Petty, Smith, and Ricardo, as Marx, and later Sraffa, argued. Once this is acknowledged, the relationship between classical political economy and heterodox economics becomes clearer.     

Infrastructure, Geographical Disadvantage, Transport Costs, and Trade

The authors use different data sets to investigate the dependenceof transport costs on geography and infrastructure. Infrastructureis an important determinant of transport costs, especially forlandlocked countries. Analysis of bilateral trade data confirmsthe importance of infrastructure and gives an estimate of theelasticity of trade flows with respect to the trade cost factorof around –3. A deterioration of infrastructure from themedian to the 75th percentile raises transport costs by 12 percentagepoints and reduces trade volumes by 28 percent. Analysis ofAfrican trade flows indicates that their relatively low levelis largely due to poor infrastructure.     

Do domestic firms learn to export from multinationals?

Attracting inward investment is a major preoccupation of policymakers worldwide, and a wide range of instruments, including direct subventions, are deployed to attract multinational enterprises (MNEs). Intervention is predicated on the assumption that there are direct productivity spillovers associated with the presence of MNEs and the policy of attracting them is targeted at capturing these externalities. Yet robust evidence on direct spillovers is hard to find. An underexplored indirect channel for productivity spillovers is via exports. Exporting firms are more productive than nonexporting firms. Thus, if the presence of MNEs results in more indigenous firms exporting, an indirect productivity spillover will result. In this paper, we identify possible transmission mechanisms for export spillovers and test for their existence on a large panel of firms in the UK. Our results confirm positive spillover effects from MNEs on the decision to export of UK-owned firms as well as on their export propensity.     

Geographical disadvantage: a Heckscher-Ohlin-von Thünen model of international specialisation

We analyse the trade and production patterns of countries located at varying distances from an economic centre. Exports and imports of final and intermediate goods bear transport costs which increase with distance. We show how production and trade depend on factor endowments and factor intensities, and also on countries’ locations and the transport intensities of different goods. Countries divide into zones with different trade patterns, some export oriented and others import substituting. We study the implications of distance for factor prices and real incomes, the effects of changes in transport costs, and the locational choice of new activities.     

Comovements in volatility in the euro money market

This paper assesses the sources of volatility persistence in Euro Area money market interest rates and the existence of linkages relating volatility dynamics. The main findings of the study are as follows. Firstly, there is evidence of stationary long memory, of similar degree, in all series. Secondly, there is evidence of fractional cointegration relationships relating all series, except the overnight rate. The common long memory factor analysis points to a two-factor volatility curve. The most important factor, in terms of proportion of total variance explained, can be interpreted as a level factor (64% of total variance), while the other as a slope factor (13% of total variance). Impulse response analysis and forecast error variance decomposition finally point to non significant forward transmission of liquidity shocks.     

Economic beliefs and institutional politics: Human capital theory and the changing views of the World Bank about education (1950–1985)

One of the main characteristics of economic policy-making in the postwar period was the rise of international agencies and their influence in setting the agenda in various policy aspects. Education was one of the areas that became very important to the activity of international agencies. This article analyses the changing views about education of the World Bank, from the late forties to the mid-eighties, and the way its priorities and approach to education were moulded by the dissemination of human capital theory. The analysis will emphasise the difficulties faced to the diffusion of this approach in a context largely favourable and dominated by manpower planning and different policy views about education, providing an interesting example about the complexities of the dissemination of economic ideas within international organisations.     

A contribution to a multidimensional analysis of trade competition

International trade grew substantially throughout the last decades and international relations became more important for the economic performance of the countries. Simultaneously, new poles emerged in the international arena leading to growing competition for higher market shares. Therefore, trade competition is a critical dimension of analysis for applied international trade studies. We propose a conceptual framework for measuring this phenomenon by combining some critical previous contributions to build a multidimensional and more comprehensive concept, which defines trade competition as a function of the degree of both structural similarity and total exports overlap. Moreover, structural similarity should take into account three elements: sectoral shares similarity, inter‐sectoral similarity (evaluating how different the distinct sectors are) and intra‐sectoral similarity (proximity in terms of quality ranges exported). Several measures are proposed to empirically capture the concept suggested. Finally, we present an example including the exports of six European economies (Germany, France, the United Kingdom, Greece, Hungary and Sweden) to 124 destination markets (in 2007, 2011, 2015) in order to illustrate the application of the concept and measures suggested.