Tariff-Rate Quota Liberalization: The Case of World Price Uncertainty and Supply Management

This paper examines the options for liberalizing tariff-rate quotas when a marketing board controls domestic production and international prices are stochastic. Lowering over-quota tariff and increasing import quota volumes are not equivalent. The trade-offs between the two types of trade reforms are examined through numerical simulations for the Canadian chicken industry. Introducing world price variability results in a distribution of welfare impacts for the different groups in the industry. Consumers and processors gain more with tariff liberalization than with increased import quotas. The difference in producer surplus between liberalization regimes is truncated so that producers only see down-side risk under the tariff liberalization regime.
Le présent article a examiné les options concernant la libéralisation des contingents tarifaires lorsqu'un office de commercialisation encadre la production nationale et que les prix internationaux sont stochastiques. Diminuer le taux de droit hors contingent et augmenter les volumes de contingent d'importation ne sont pas des options équivalentes. Nous avons examiné les deux types de réforme commerciale en effectuant des simulations numériques pour le secteur du poulet au Canada. Incorporer la variabilité du prix mondial provoque une distribution de répercussions sur le bien-être des divers groupes du secteur. Les consommateurs et les transformateurs gagnent davantage en appliquant une libéralisation des droits hors contingent qu'en appliquant une augmentation des contingents d'importation. La différence quant au surplus des producteurs entre les régimes de libéralisation est tronquée de sorte que les producteurs ne voient que le risque de perte sous un régime de libéralisation tarifaire.     

Optimal Taxation in Life-Cycle Economies

We use a very standard life-cycle growth model, in which individuals have a labor-leisure choice in each period of their lives, to prove that an optimizing government will almost always find it optimal to tax or subsidize interest income. The intuition for our result is straightforward. In a life-cycle model the individual's optimal consumption-work plan is almost never constant and an optimizing government almost always taxes consumption goods and labor earnings at different rates over an individual's lifetime. One way to achieve this goal is to use capital and labor income taxes that vary with age. If tax rates cannot be conditioned on age, a nonzero tax on capital income is also optimal, as it can (imperfectly) mimic age-conditioned consumption and labor income tax rates. Journal of Economic Literature Classification Numbers: E62, H21.     

Learning to be overconfident

We develop a multiperiod market model describing both the processby which traders learn about their ability and how a bias inthis learning can create overconfident traders. A trader inour model initially does not know his own ability. He infersthis ability from his successes and failures. In assessing hisability the trader takes too much credit for his successes.This leads him to become overconfident. A trader's expectedlevel of overconfidence increases in the early stages of hiscareer. Then, with more experience, he comes to better recognizehis own ability. The patterns in trading volume, expected profits,price volatility, and expected prices resulting from this endogenousoverconfidence are analyzed.