A General Equilibrium Approach to the Nonequivalence of Tariffs and Quotas under International Duopoly

We examine the nonequivalence of tariffs and quotas under international duopoly in a simple general equilibrium trading model; in particular, we study the welfare effects of a change in regime from a tariff to a quota. We first show that the results established by our predecessors in a partial-equilibrium segmented domestic market model do not straightforwardly carry over to a general equilibrium context. We next extend the segmented domestic market model to an integrated world market model and re-examine the equivalence of tariffs and quotas as well as the welfare aspects of the change in the regime.     

Voluntary Export Restraints under Imperfect Competition

The paper studies the effects of a change in the level of voluntary export restraints (VERs) on the behavior of the domestic firm and on the welfare of the importing country. The author constructs a simple two‐country Cournot duopoly model in which each firm produces a homogeneous good at constant marginal cost. It is shown that the results obtained by predecessors based on linear demand, constant‐elasticity demand, strategic substitutes and so forth all emerge as special cases.     

Combining ecological and recreational aspects in national park management: A choice experiment application

Increasing pressure to diversify development of national parks emphasizes the need for new and relevant information for park management decisions. In this paper, we use choice experiment to value different tradeoffs that evolved in park development scenarios. Specifically, we examine which kind of development profiles are worth considering and which paths not to follow. We focus on biodiversity and recreational services provided by Oulanka National Park in Finland, which represents a popular recreation site attracting a large number of visitors. The increase of biodiversity was the most highly valued feature by the respondent national park visitors. Thus, our results show that the protection of biodiversity and recreational and tourism use of national parks can cause conflicting welfare effects if managed in inappropriate ways. Increasing the number of visitors, expanding present resting places, constructing new resting places and an intense increase in information boards, especially if combined with shrinking biodiversity, are welfare reducing managerial actions in national parks.     

Hypothetical Bias Reconsidered: Payment and Provision Uncertainties in a Threshold Provision Mechanism

We extend research on the consequentiality of stated preference choices to a threshold provision mechanism for public goods. We develop a simple theoretical model of option price to analyze how option price varies with payment and provision uncertainty. We explore whether threshold provision contributions are similarly influenced by payment and provision uncertainty using an induced value contribution experiment. Results suggest that: (1) the probability of payment has a negative effect on contributions; (2) the probability of provision has a positive effect on contributions. We offer subjective beliefs regarding payment and provision as a plausible systematic explanation for hypothetical bias.     

Using OLS to Estimate and Test for Structural Changes in Models with Endogenous Regressors

We consider the problem of estimating and testing for multiple breaks in a single‐equation framework with regressors that are endogenous, i.e. correlated with the errors. We show that even in the presence of endogenous regressors it is still preferable, in most cases, to simply estimate the break dates and test for structural change using the usual ordinary least squares (OLS) framework. Except for some knife‐edge cases, it delivers estimates of the break dates with higher precision and tests with higher power compared to those obtained using an instrumental variable (IV) method. Also, the OLS method avoids potential weak identification problems caused by weak instruments. To illustrate the relevance of our theoretical results, we consider the stability of the New Keynesian hybrid Phillips curve. IV‐based methods only provide weak evidence of instability. On the other hand, OLS‐based ones strongly indicate a change in 1991:Q1 and that after this date the model loses all explanatory power. Copyright © 2013 John Wiley & Sons, Ltd.     

Gravity in International Finance

The past decade has witnessed an explosion of papers estimating gravity equations for cross-border financial holdings without much of a theoretical foundation. In this paper we develop a theory for bilateral asset holdings that takes a gravity form. We discuss how to estimate international financial frictions and conduct comparative statics analysis within the context of the theory. We also find though that reasonable extensions of the model no longer generate a gravity form. While this does not significantly complicate estimation and comparative statics analysis, it raises questions about the empirical validity of gravity specifications for cross-border financial holdings that need to be addressed in future work.     

International Income Transfer under Imperfect Competition

This paper examines the effects of an international income transfer under international monopoly. One of the markets in the donor country is monopolized and there exist two distinct types of agent: monopolist and factor owners. The transfer is provided by the agents with different lump sum tax (burden‐share) rates. The burden‐share rate plays a key role concerning the welfare effects of a transfer. We show that the government of the donor country can raise both its social welfare and the wellbeing of the recipient country by providing a further transfer and by simultaneously adjusting the burden‐share rates.     

Factor Price Equalization under Imperfect Competition

The paper describes a class of imperfectly competitive world economies for which factor price equalization is inevitable. Specifically, it is shown that factor price equalization must prevail if the trading economies differ at most in scale, if they share a constant-returns no-joint-products technology, and if each oligopolistic industry produces a commodity which, directly or indirectly, is internationally tradable.     

Welfare‐improving Coordinated Tariff and Sales Tax Reforms under Imperfect Competition

This paper studies the welfare effects of coordinated domestic sales tax reform associated with a reduction of the import tariff under imperfect competition. We set up a simple oligopoly trading model where domestic and exporting firms compete in the home market. We show that, if the initial levels of import tariff and sales tax are positive, there always exist welfare‐improving sales tax reforms. In some cases, a reduction of the sales tax accompanied by a reduction of the import tariff increases social welfare, whereas in other cases, raising the sales tax can increase social welfare.