On the need to compensate the compensating variation in CGE modeling

The message of this research is that in the standard calibrated setting of Computational General Equilibrium (CGE) models, the welfare measures typically used to compare benchmark with counterfactuals are numéraire dependent. This evaluation bias affects the compensating variation and the Konüs index of cost of living. We show that the equivalent variation is neutral regarding the choice of value units in calibrated models but would be affected as well in uncalibrated CGE models. We illustrate with a simple example and propose an even simpler theoretical solution to overcome these biases; all that is required to have correct welfare estimates is to compensate normalizing with a suitable price index. This type of correction is necessary to overcome the sometimes blind implementation of welfare measures in numerical general equilibrium analysis. We show that the induced quantitative errors may be substantial providing biased welfare estimates and misleading results.     

Dynamic modelling of agricultural policies: The role of expectation schemes

The highly disputed effects of agricultural trade liberalisation are mostly simulated with static models. Our main objective in this paper is to evaluate the robustness of the static simulation results to the consistent modelling of dynamic behaviours and to the linked specification of price/return expectations. Focusing on the scenario of a complete trade liberalisation of arable crop markets by developed countries, we find that available static results are quite robust compared to dynamic specifications and to most expectation schemes. Endogenous market fluctuations due to expectation errors may appear following trade liberalisation. These fluctuations are nevertheless limited by the many feedback effects revealed by our general equilibrium framework.     

On the European Responsibility in the Agricultural Multilateral Trade Negotiations: Modelling the Impacts of the Common Agricultural Policy

The present round of multilateral trade negotiations is still deadlocked over agricultural trade. The European Union (EU) is urged by its trading partners to open its agricultural markets. Economic evaluations of trade liberalisation scenarios unanimously conclude that a substantial opening of agricultural markets is required for a successful (welfare‐improving) Doha Round. In this paper, we perform new evaluations to identify precisely the contributions of the European farm policy and to examine the robustness of these evaluations in the representation of this complex policy. Using the same specifications as in major previous studies, our first simulations show that the EU has a major responsibility in delivering significant gains to the developing countries. On the other hand, when we conduct the same experiments with a more relevant calibration and modelling of the European farm policy instruments, the gains that these developing countries may reap from the EU liberalisation are considerably reduced. Accordingly the current charge against the EU is simply inopportune.     

Foreign Investors in The Netherlands: Heterogeneous Employment and Productivity Effects

Recent academic research suggests that the effects of inward foreign direct investment for productivity and employment may vary across foreign investors with different characteristics. Using a newly created dataset that integrates micro-level information from The Netherlands Foreign Investment Agency and Statistics Netherlands, this paper explores the role of several of these characteristics, including e.g. the country of origin, activities and tasks, age and strategic role of foreign affiliates in The Netherlands in the 2000–2007 period. Our analysis shows that important employment and productivity differences exist for nearly all these dimensions.     

European Merger Control: Do We Need an Efficiency Defence?

The European Commission recently published a Green Paper on the review of the Merger Regulation, which, amongst other things, invites comments on whether the Merger Regulation should be amended to make explicit allowance for an efficiency defence. This paper is a contribution to this debate. After discussing the economic and political reasons that justify the introduction of an efficiency defence, it reviews the legislation and practice in the European Union, the United States and Canada. Finally, it examines the methodological and implementation problems raised by the efficiency defence and suggests a sequential approach as a way of minimizing these difficulties.     

Estimating Price Elasticities of Food Trade Functions: How Relevant is the CES‐based Gravity Approach?

The main objective of this article is to examine econometric estimates of price elasticities of food trade functions. We investigate the relevance of the prominent gravity approach. This approach is based on the assumptions of symmetric, monotone, homothetic, Constant Elasticity of Substitution (CES) preferences. We test all these assumptions using intra‐European trade in cheese. In general, the assumptions made on preferences by the gravity approach are not supported by our dataset. The bias induced in the estimated price elasticities is ambiguous.     

Tomorrow will die

Human beings’ resilience to extinction is much higher than what is usually imagined. Almost no single event, except a sudden burst of the planet, seems able to drive the species to death. However a chain of events such as those created by climate change or the intertwined threads of current trends, amplified by some inadequacy of human beings to cope with reality (inefficiency, apathy, underestimation, politician considerations, etc.), could challenge our survival. This paper aims to provide such a set of multiple events, interconnected or independent, evolving over a rather short period of time, 150 years. This period can seem unrealistic to drive to a plausible extinction. Yet this was a condition to set up a situation as realistic as possible, based on current facts and extrapolations. More or less 50 years in the timeline make no difference in the coherence of this evolution. The choice has been done to work out this scenario with the help of no new element, no radical rupture, nothing that would be unknown today, at least in theory. Thus, this future is a very possible one. Whether it is an about-to-happen one or not is left to the reader's judgement. Whether human beings will react this way in case it would happen is just our daily responsibility.     

Taking the ivory from the tower to coat the economic world: Regional strategies to make science useful

In this paper, we aim at providing a critical appraisal of academic research valorisation models adopted in three regions in the world: the Provincia di Milano in Italy, the Technology-Region Karlsruhe in Germany and the Chinese municipality of Chongqing.Our first originality consists in developing a literature-based analytical grid to characterise and classify existing tools. In a second step, we depict and compare, thanks to a qualitative analysis run on fine-grained data (collected through in depth interviews and frequent interactions with actors of the regional innovation systems), the mechanisms adopted in the three regions so as to test for specificities in the implementation of academic knowledge transfer.Our analysis exhibits on the one hand a strong similarity among regions in terms of variety of existing tools. On the other hand, we also notice some specificities in the nature of the tools: European regions are characterised by an under-representation of absorption and appropriation tools, whereas the Chinese region seems to put great stress on direct valorisation mechanisms. Finally, rather than supporting the imitation, multiplication and superposition of newly created tools, our study encourages policy makers to be more selective and adapt their tools to regional innovative needs.     

Rhetoric vs realism in economic methodology: a critical assessment of recent contributions

This paper reviews the relatively new debate on rhetoric andrealism in economic methodology, concentrating on its main exponents:Deirdre McCloskey on the side of rhetoric, Tony Lawson as theadvocate of critical realism, and Uskali Mäki, arguingfor a combination of rhetoric and realism. The review highlightsa blind spot in the debate, namely the opportunity to rethinkcritically the project of epistemology.     

REVISITING THE ORIGINAL GHOSH MODEL: CAN IT BE MADE MORE PLAUSIBLE?

We reconsider in this paper the alleged implausibility of Ghosh's model and we do so reformulating the model to incorporate an alternative closure rule. Our proposed closure rule is in line with the original allocation rules defined by A. Ghosh. The closure solves, to some extent, the implausibility problem that was pointed out by Oosterhaven, for then value-added is correctly computed and responsive to allocation changes resulting from supply shocks. Some numerical examples illustrate the sectoral and aggregate consistency of the allocation equilibrium.