The political economy of naturalization

This paper presents a political economy model in which self‐interested natives decide when citizenship and/or voting rights should be granted to foreign‐born workers. Native voters know that immigrants hold different ‘political’ preferences and would thus tend to postpone their enfranchisement as much as possible. They also consider, however, that a more restrictive naturalization policy may reduce the gains from immigration. We find that the optimal timing of naturalization depends on the quantity, quality (productivity), and preferences of potential immigrants, the political composition and the age structure of the native population, as well as the sensitivity of migration choices to the citizenship issue.     

The chilling trade effects of antidumping proliferation

Advocates of antidumping (AD) laws downplay their negative effects by arguing that the trade flows that are subject to AD are small and their distortions negligible. But while the adverse effect of AD on product-level trade has long been established, the question remains whether there are trade effects at the aggregate level. The recent proliferation wave of AD laws and their use provides us with a unique policy change to estimate the true trade effects of adopting and enforcing AD laws. For this purpose, we estimate the effect of AD on bilateral trade flows between the “new adopters” of AD laws and their trade partners. Using a gravity model of annual observations (1980-2000) our estimates show that AD has trade chilling effects on aggregate import volumes but the impacts are heterogeneous across sectors. We find that new tough users experience a chilling of their aggregate imports of 14 billion US$ a year (or 5.9%) as a result of AD measures. For some countries like Mexico and India, the dampening effects of AD laws on trade flows are found to substantially offset the increase in trade volumes derived from trade liberalization.     

Subsidizing (and taxing) business procurement

This paper studies the effect of a subsidy (or tax) on a market where a downstream manufacturer uses a competitive tender to procure inputs from upstream suppliers. Subsidizing input production can result in input price decreases that are greater than the effective decrease in marginal costs. That is, overshifting occurs. When the size of the subsidy is not too large, the downstream firm can enjoy an increase in profits greater than the government expenditure on the subsidy. A relatively weak sufficient condition for these results to hold is that suppliers earn a positive profit margin on the marginal unit sold, before taking into account any subsidy payment. Stronger sufficient conditions, tailored to each result, are provided.     

Hit and (they will) run: The impact of terrorism on migration

We analyze the influence of terrorism on migration for 152 countries during 1976-2000. We find robust evidence that terrorism is among the ‘push factors’ of skilled migration, whereas it is not robustly associated with average migration.     

The returns from rent-seeking: campaign contributions, firm subsidies and the Byrd Amendment

Abstract .  This is the first empirical study to examine Congressional support of a new law that distributes antidumping duties to protected firms. Because the law produces a transparent measure of how much each firm was rewarded for its efforts to secure the bill's passage, it provides researchers with a unique opportunity to study the link between the expected financial returns to firms, campaign contributions, and Congressional behaviour. Our results indicate that campaign contributions from beneficiaries increased the likelihood that lawmakers would sponsor the law, while contributions from the law's beneficiaries increased with the rewards they expected to receive.     

The signaling power of trade protection

This paper proposes an empirical analysis to provide new insight into the trade diversion effects of antidumping (AD) policy. Trade diversion is the shift in trade from named countries in an AD investigation to non-named countries. Previous studies have concluded that AD action causes a considerable drop in exports from named countries, however the extent to which trade is diverted to non-named countries is still an open debate. This paper examines to see whether AD action on named countries can have signaling effects on non-named countries. To examine the trade effects on non-named countries, a time series data at an 8-digit product level is constructed for all cases initiated between 1997 and 2003 in the European Union. The paper provides evidence that antidumping policy has signaling effects on non-named imports.     

The second Engel law: Is it a paradox?

The second Engel law says that the Engel curve for food moves out as family size increases, thus showing a decrease in welfare. What is puzzling, though, is that this regularity does not hold for equivalent income functions expressed in per capita terms. Deaton and Paxon [1998. Economies of scale, household size, and the demand for food. Journal of Political Economy 106 (5), 897-930] show that holding per capita total household expenditure constant, per capita expenditure on food falls with the number of heads. Deaton and Paxson's empirical evidence from developed and less developed countries seems to invalidate the claim of the second Engel's law. The main objective of this paper is to understand such paradoxical relationship between food consumption and household size. Our nonparametric empirical evidence, drawn from the Colombian 1985 urban survey, shows that the food share is negatively related to total household per capita expenditure in line with Deaton and Paxson's claim, but equivalent incomes shift to the right as theory predicts. The regularity of our nonparametric results is an indication of a problem in the parametric specification of the Engel curve modified by family size. In fact, using also the surveys of Italy, Nepal, Djibouti, and Bangladesh we show that a theoretically plausible modified Engel curve is coherent with the claim of the second Engel law and explains Deaton and Paxson's paradox.     

On general periodic time-varying bilinear processes

We study in this note the class of bilinear processes with periodic time-varying coefficients. We give necessary and sufficient conditions ensuring the existence of strict and second order stationary solutions (in periodic sense) and for the existence of higher order moments. The given conditions can be applied to periodic ARMA or periodic GARCH models. The central limit theorem and the law of iterated logarithm (LIL) for higher order sample moments are showed.     

Protecting consumers through protection: The role of tariff-induced technology transfer

We consider a duopolistic trade model where a tariff induces the foreign firm to transfer its superior technology to the domestic rival. Contrary to the conventional wisdom, such a tariff raises consumers’ surplus relative to the free trade situation. We characterize the optimal tariff with and without precommitment on the part of the local government. Possibility of technology transfer reduces the optimal tariff rate compared to the no-transfer situation.     

Welfare effects of 1992: A general equilibrium assessment for EC and EFTA countries

In this paper production, trade and welfare effects of European integration are discussed, with particular emphasis on the effects for the EC and EFTA. Insights from previous partial and general equilibrium analyses of the internal market are reviewed, and new model simulations are presented. In addition to the standard experiments of 1992 — as reduced trade costs and as full market integration — for the EC alone, and for the European Economic Area (EEA), an intermediate case, with full integration in the EC but only lower trade costs between the EC and EFTA, is analysed. All cases show that EFTA will benefit significantly from freer trade and closer integration with the EC. With regard to non-European regions, the simulations of European integration show some degree of trade diversion, but stylized model experiments indicate that a successful outcome of the Uruguay-round may more than offset the trade-diverting effects of 1992.     

Return migration, wage differentials, and the optimal migration duration

In simple static models, migration increases with the wage differential between host- and home-country. In a dynamic framework, and if migrations are temporary, the size of the migrant population in the host country depends also on the migration duration. This paper analyses optimal migration durations in a model which rationalises the decision of the migrant to return to his home country, despite persistently higher wages in the host country. The analysis shows that, if migrations are temporary, the optimal migration duration may decrease if the wage differential grows larger. Using micro data for Germany, the second part of the paper provides empirical evidence which is compatible with this hypothesis.     

On the trade-diversion effects of free trade agreements

Trade-diversion effects of free trade agreements (FTAs) have not been thoroughly examined empirically. Using a novel empirical approach, we confirm that FTAs divert trade away from non-member countries and even more so from internal trade (domestic sales) in member countries.     

A swing state theory of trade protection in the Electoral College

This paper analyzes trade policy determination in the Electoral College in the presence of swing voters. It determines the circumstances under which incumbent politicians have an incentive to build a reputation for protectionism, thus swaying voting decisions and improving their re‐election probability. Strategic trade protection is shown to be more likely when protectionist swing voters have a lead over free trade supporters in states with relatively strong electoral competition and in states representing a larger proportion of Electoral College votes. An empirical test using a measure of industrial concentration in swing and decisive U.S. states lends support to the theoretical findings.     

Rent-seeking activities and the 'brain gain' effects of migration

Abstract .  This paper studies migration and rent-seeking activities in a framework of heterogeneous ability. It is shown that, despite the depletion of productive resources known as the 'brain drain,' the possibility of migration could sufficiently reduce participation in rent-seeking activities and increase participation in productive activities such that the net effect of migration is a 'brain gain.' Moreover, the possibility of migration that sufficiently enlarges the relative reward to ability in the productive sector could result in qualitative improvements in the allocation of talent.     

Labor supply, home production, and welfare comparisons

We consider the collective model of labor supply with marketable domestic production. We first show that, if domestic production is mistakenly ignored, the ‘collective’ indirect utility functions that are retrieved from observed behavior will be unbiased if and only if the retrieved from observed behavior will be unbiased if and only if the profit function is additive. Otherwise, in the non-additive case, the direction and the size of the bias will depend on the complementarity-substitutability of spouses' time inputs in the production process. We then show that, even if domestic labor supply functions are not observed, valid welfare comparisons are possible. This identification result generalizes that in Chiappori [Chiappori, P.A., 1992. Collective labor supply and welfare. Journal of Political Economy 100, 437-467].     

Timing constraints and the allocation of time: The effects of changing shopping hours regulations in The Netherlands

A 1996 change in shopping hours regulations in The Netherlands provides an opportunity to study the effects of timing constraints on total time spent in shopping, working, and other activities as well as the timing of these activities. We develop a simple structural model to make predictions about the effects of imposition and relaxation of a timing constraint on time use patterns, and utilize time diary data from 1995, 1997, 1999, and 2000 to examine time use patterns by demographic group before and after the change. In addition to a change in the timing of shopping, we find a nonnegligible increase in the total time spent shopping.     

Migrant smuggling when exploitation is private information

This study contributes to the small theoretical literature on human smuggling by assuming for the first time asymmetric information in analysis. The assumption raises the possibility of an adverse selection equilibrium where only exploitative smugglers are employed at a low fee even though migrants are willing to pay non‐exploitative smugglers a high fee. More important, I find that improved inland apprehension of migrants may increase the incidence of migrant exploitation while failing to decrease smuggling attempts. Furthermore, improved border apprehension of migrants and smugglers may not affect the market at all.     

Trade effects of monetary agreements: Evidence for OECD countries

This paper analyses the effects of monetary agreements on trade flows using a sample of 25 OECD countries over the period 1950-2004. We find that these agreements have boosted intra-bloc trade. This result especially applies to the case of the euro. More importantly, in contrast to regional trade agreements, all monetary agreements analysed show evidence of trade-creating effects with third countries. Finally, only the euro shows a symmetric impact for the trade-creating effect with non-members, that is, using the euro promotes both the Eurozone's exports and its imports to non-Eurozone markets to a similar extent.     

The Income Splitting Method: Is it Good for Both Marriage Partners?

Abstract. This paper analyzes how deviating from individual taxation affects married couples. The focus is on time allocation, on investment in family‐specific human capital and on distribution of income within the family. Two insights are discussed in detail. First, the distribution of tax‐reduction gains due to the income splitting system depends on whether the family has been started or not. After marriage, joint taxation increases redistribution among family members. Second, although joint taxation reduces the tax burden of the family, it might harm the marriage partner that is more productive in household production provided that potential marriage partners foresee the effects of joint filing on the time allocation within the family.     

Skilled–unskilled wage inequality,product variety,public input and increasing returns: A static general equilibrium analysis

The paper develops a four sector small open economy model with two traded final good sectors, a public intermediate good producing sector and a nontraded good sector producing varieties of intermediate goods. There are three primary factors: capital, skilled labour and unskilled labour. Industrial sector producing a traded good uses capital, intermediate goods and skilled labour as inputs. Intermediate goods producing sector also uses capital and skilled labour. Public input producing sector and the agricultural sector producing the other traded good use capital and unskilled labour as inputs. It is shown that, if production technologies are the same for the agricultural sector and the public input producing sector and if the scale elasticity of output is very low, then an increase in capital stock (unskilled labour endowment) raises (lowers) the skilled–unskilled wage ratio. However, an increase in skilled labour endowment does not produce any unambiguous effect. On the other hand, an increase in the tax rate on industrial output and/or an increase in the price of the agricultural product, armed with the same set of assumptions, lowers the skilled–unskilled wage ratio.