Limits to growth: Tourism and regional labor migration

The paper provides a methodology for considering the carrying capacity and limits to growth of a labor-constrained mature tourism destination. A computable general equilibrium model is used to examine the impacts of visitor expenditure growth and labor migration on Hawai‘i's economy. Impacts on regional income, welfare, prices, sector-level output, and gross state product are considered under alternative migration scenarios. Labor market constraints impose limits to growth in real visitor expenditures. Labor market growth with constrained visitor demand generates falling per capita household welfare.     

Are there long-run implications of analyst coverage for IPOs?

Analyst coverage has been cited increasingly as an important attribute in the selection of an underwriter for a firm about to go public. However, it has also been alleged that affiliated analysts provide biased research. In this study, we examine these interrelated issues by examining the long-run performance of IPOs with coverage from their managing underwriters in a 1993–2003 sample. We find that (1) analysts’ research coverage from their managing syndicate is not related to long-run performance; (2) long-run performance is not different for firms that receive all-star analyst coverage; and (3) investors are not systematically worse off for following lead underwriter recommendations.     

The Vertical Multinational Enterprise and International Trade

This paper analyzes an endogenous vertical multinational enterprise by explicitly modeling a distortion in the intermediate goods sector. Firms invest abroad to lower the cost of multistage production. The implications for international trade and investment differ markedly from the conventional wisdom of multinationals. Particularly, intrafirm trade in intermediates implies vertical investment complements rather than substitutes for trade. The decision to become a multinational depends on the level on foreign factor prices, the nature of the competition with foreign suppliers, transport, tariffs, and subsidiary plant costs. Marginal change in tariff may result in unintended welfare jumps as firm configuration shifts.     

Trade Liberalization in Egypt

A computable general equilibrium model of Egypt is developed to analyze proposed reforms in its trade policies, including a partnership agreement with the European Union. The model has multiple trading regions and allows for administrative trade barriers and tariffs. The paper reports computations of the revenue impacts of trade liberalization and the required changes in distortionary commodity taxes to maintain a fixed real government budget. Egypt's greatest potential gains come from removing its administrative trade barriers while adopting globally free trade. The partnership agreement with the EU could lower or raise Egypt's welfare, depending on prior trade reform.     

Intellectual Property Rights in China: The Changing Political Economy of Chinese–American Interests

We review the evolution of modern Chinese intellectual property right (IPR) laws and enforcement and explore economic and political forces involved in international conflicts over Chinese IPR protection. Our analysis considers why the US and China moved from conflict to cooperation over intellectual property rights. Structural and institutional aspects of the political economy of IPRs within each country are considered, and data on Chinese‐US trade in intellectual property‐intensive goods are examined. We conclude that although enforcement of IPRs within China continues to be relatively weak, Chinese IPR institutions are converging on those in the OECD nations.     

Motivation for Repurchases: A Life Cycle Explanation

This study examines the motives for share repurchases. Whereas most prior research points to either the signaling or free cash flow hypothesis, we find that the motives for repurchases differ depending on the firm’s life cycle stage. Specifically, we find that a firm in the growth stage tends to announce a repurchase program to signal its undervalued stock whereas a firm in the mature stage is prone to buy back shares to dispense excess free cash flow. We also find that the market reaction to repurchase announcements corroborates this life-cycle argument.     

Preferential Trade and Welfare with Differentiated Products

We consider analytically and numerically the welfare tradeoffs inherent in a preferential trade area (PTA) with products differentiated by region of origin. For a small open economy in such a setting, welfare gains are associated with higher trade volumes within the PTA. However, welfare losses are induced by declining tariff revenues on trade with non‐member countries. We show that both effects are concave, while one is a non‐monotonic and the other a potentially non‐monotonic function of pre‐PTA partner trade shares. Therefore, the relationship between initial partner import shares and direct static welfare impacts of a PTA are theoretically ambiguous. This finding contrasts with conventional results in the homogeneous‐goods case, whereby the smaller is the pre‐agreement trade volume with a potential partner the more beneficial is a PTA.     

The Sleeping Giant Awakes: Projecting Global Implications of China's Energy Consumption

China's rapid economic growth has generated a surge in energy demand that is reallocating global fuel balances. We employ a global energy computable general‐equilibrium model to analyze alternative scenarios for economic growth, Chinese currency appreciation, and oil price shocks, with a special focus on China energy markets. Imports from the Middle East, Central Asia, Russia, and Sub‐Saharan Africa are found to comprise a growing share of China's energy. Imports to China grow from 12% of world energy imports in 2010 to 17% by 2050 when over 80% of China's oil demand will be imported.     

Quantifying the impact of services liberalization in a developing country

We compare goods versus services liberalization in terms of welfare, outputs, and factor prices in Tunisia using a CGE model with multiple products, services and trading partners. Restraints on services trade involve both cross-border supply (tariff-equivalent price wedges) and on foreign ownership (monopoly-rent distortions and inefficiency costs). Goods-trade liberalization yields a modest gain in aggregate welfare. Reducing service barriers generate relatively large welfare gains and low adjustment costs. Services liberalization increases economic activity in all sectors and raise the real returns to both capital and labor. The results point to the potential importance of deregulating services provision for economic development.     

The Accrual Effect on Future Earnings

Earnings manipulation has become a widespread practice for US corporations. However, most studies in the literature focus on whether certain incentives would facilitate managers to manipulate earnings and there has been little evidence documenting the consequences of earnings manipulation. This paper fills this gap by examining how current accruals affect future earnings (the accrual effect) and measuring the size of this effect. We find that the aggregate future earnings will decrease by $0.046 and $0.096, respectively, in the next one and three years for a $1 increase of current accruals. Over the very long-term (25 years), 20% of current accruals will reverse. This negative accrual effect is more significant for firms with high price-earnings ratios, high market-to-book ratios and high accruals where earnings management is more likely to occur. We show that incorporating the accrual effect is useful in improving the accuracy of earnings forecasts for these firms. Accordingly, the empirical results are consistent with the notion that earnings management causes the negative relationship between current accruals and future earnings. In addition, this paper shows that one recently developed accrual model has better performance than the popularly cited model in identifying manipulated earnings.