PRICE DISCRIMINATION: A SURVEY OF THE THEORY

Abstract. The purpose of this survey is twofold. First, it introduces the reader to recent developments in the theory of price discrimination. Simultaneously, the exposition aims at being self-contained and accessible to the non-specialist reader. The paper is structured around Pigou's distinction between perfect, second-degree and third-degree price discrimination.     

MEASUREMENT AND DETERMINANTS OF MULTI-FACTOR PRODUCTIVITY: A SURVEY OF LITERATURE

This paper surveys and synthesizes fast-growing literature on the measurement and determinants of multi-factor productivity (MFP). We identify three strands of the literature to measure MFP: the first is growth accounting, which decomposes observed economic growth into the contribution of factor inputs and technological change, called the Solow Residual; the second is index number methods, accompanied by frontier techniques; the third is growth regressions and econometric methods used to estimate productivity across countries and regions. We keep our focus on assessing the major strengths and weaknesses of commonly used methods for MFP measurement and categorize existing literature on the determinants of MFP growth into macroeconomic and institutional factors. We attempt to provide a reassessment and thematic survey of literature on the drivers of aggregate productivity, enabling policymakers to formulate effective economic policy.     

PROCESSING TRADE BIASES THE MEASUREMENT OF VERTICAL SPECIALIZATION IN CHINA

Vertical specialization (VS) is often measured by the import contents of the exports, using an input–output (I–O) framework. Half of China's exports are processing exports, which largely depend on imported intermediate inputs and tie up upstream as well as downstream trade partners. Thus, one would expect to find strong VS for China. Using the ‘ordinary’ I–O tables, however, this is not the case. Because the production of processing exports is only a small part of total production, the average input structure in the I–O table hides the typical features of processing exports. Using adapted, tripartite I–O tables (for 2002 and 2007) in which the processing exports have been singled out, indeed reveals the expected strong VS in China.     

HEDONIC PRICE INDEXES FOR RESIDENTIAL HOUSING: A SURVEY,EVALUATION AND TAXONOMY

Every house is different. It is important that house price indexes take account of these quality differences. Hedonic methods which express house prices as a function of a vector of characteristics (such as number of bedrooms and bathrooms, land area and location) are particularly useful for this purpose. I consider here some developments in the hedonic methodology, as it is applied in a housing context, that have occurred in the last three decades. A number of hedonic house price indexes are now available. However, it is often difficult to see how these indexes relate to each other. For this reason I attempt to impose some structure on the literature by developing a taxonomy of hedonic indexes, and then show how existing indexes fit into this taxonomy. Also discussed are some promising areas for future research in the hedonic field. In particular, greater use needs to be made of spatial econometric and nonparametric methods to exploit the increased availability of geospatial data. The main criticisms of the hedonic approach are evaluated and compared with those of the repeat‐sales and stratified median methods. The overall conclusion is that the advantages of the hedonic approach outweigh its disadvantages.     

AGRICULTURAL PRICE INSTABILITY: A SURVEY OF COMPETING EXPLANATIONS AND REMEDIES

Abstract There are two explanations for agricultural price dynamics. One follows cobweb logic and models fluctuations driven by expectation errors but emphasises that these expectations create complex dynamics and possibly chaos. The other stems from the rational expectations tradition of dynamics driven by real shocks. The empirical evidence tends to support the latter, but is not conclusive. The rational expectations model generates an optimal dynamic path from which no improvement can be expected from public intervention. However, if we take account of all the potential market failures in agricultural markets, and especially in developing countries, this conclusion might require some qualifications, although an appropriate policy design for stability has still to be achieved. This paper surveys the positive and normative literature on agricultural prices, highlighting empirical evidence and identifying remaining unresolved issues.     

THE DEMAND FOR BEER,WINE AND SPIRITS: A SURVEY OF THE LITERATURE

Abstract The demand for alcohol literature is vast and much conflicting information about the nature of the demand for alcoholic beverages has been published. This paper presents a survey of the literature, and then uses the technique of meta‐regression analysis to establish insights into the nature of the demand for beer, wine and spirits. Unlike previous meta‐studies of the demand for alcoholic beverages this study adjusts for the precision of each elasticity estimate. The analysis presented suggests reported elasticity estimates will be influenced by such factors as estimation technique, data frequency and time period under consideration. With respect to time, the findings suggest that the demand for alcoholic beverages has become less inelastic since the mid‐1950s and that the income elasticity has been falling since the mid‐1960s. The analysis also found support for the idea that alcohol as a commodity group is a necessity, and that consumers respond to price discounting with inventory behaviour rather than true substitution behaviour. Little support is found for the idea that the demand for alcoholic beverages varies fundamentally across most countries, although wine may be an exception.     

CHINESE EXPERIENCE IN THE INTRODUCTION OF A MARKET MECHANISM INTO A PLANNED ECONOMY: THE ROLE OF PRICING

Abstract. A brief review is first presented of the changes in pricing institutions in China since 1949, with particular emphasis on the shift from an equilibrium price system to a distorted price system. The authors argue that distorted prices are harmful to economic growth even in a planned economy, since even an experienced economic planner can never escape from the full implications of a distorted price system. Examples are given showing the detrimental results of such a system. The central point of China's economic reform is the extension of decision-making power to enterprises and the introduction of a market mechanism so as to improve microeconomic efficiency. But such a goal cannot easily be achieved due to the false information provided by the distorted price system. So price adjustment becomes an issue of primary importance, and the authors discuss the difficulties for price adjustment posed by various interest groups.     

THE DEBATE ABOUT THE REVIVED BRETTON‐WOODS REGIME: A SURVEY AND EXTENSION OF THE LITERATURE

This paper surveys the literature dealing with the thesis put forward by Dooley, Folkerts‐Landau and Garber (DFG) that the present constellation of global exchange‐rate arrangements constitutes a revived Bretton‐Woods regime. DFG also argue that the revived regime will be sustainable, despite its large global imbalances. While much of the literature generated by DFG's thesis points to specific differences between the earlier regime and revived regime that render the latter unstable, we argue that an underlying similarity between the two regimes renders the revived regime unstable. Specifically, to the extent that the present system constitutes a revived Bretton‐Woods system, it is vulnerable to the same set of destabilizing forces – including asset‐price bubbles and global financial crises – that marked the latter years of the earlier regime, leading to its breakdown. We extend the Markov switching model to examine the relation between global liquidity and commodity prices. We find an evidence of commodity‐price bubbles in both the latter stages of the earlier Bretton‐Woods regime and the revived regime.     

A SURVEY OF RECENT DEVELOPMENTS IN THE LITERATURE OF FINANCE AND GROWTH

Abstract.  This paper provides a survey of the recent progress in the literature of financial development and economic growth. The survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables. Although the positive role of finance on growth has become a stylized fact, there are some methodological reservations about the results from these empirical studies. Several key issues unresolved in the literature are highlighted. The paper also points to several directions for future research.     

EMBODIED CARBON IN TRADE: A SURVEY OF THE EMPIRICAL LITERATURE

This paper critically reviews the literature on embodied carbon in trade and evaluates our present empirical understanding of these flows. A careful comparison of quantitative results from this literature exposes significant inconsistencies. For instance, estimates for emission embodied in world trade in 2004 range between 4.4 Gt and 6.2 Gt CO2, the difference corresponding to around half of Europe's annual emissions. A few consistent themes do nevertheless emerge from the literature. Most importantly, emissions in trade constitute a large and growing share of global emissions. Uncertainty about country‐level embodied emissions remains large, however, which presents severe limitations for the practical application of embodied carbon principles in climate policy.     

INTERCHANGE FEES IN PAYMENT CARD SYSTEMS: A SURVEY OF THE LITERATURE

Abstract This paper surveys the recent literature about interchange fees in payment card systems. Interchange fees are used by payment platforms to allocate the total cost of a payment card transaction between the cardholder's bank, the issuer, and the merchant's bank, the acquirer. Each time a consumer pays by card, its bank receives an interchange fee from the merchants' bank. Banks argue that interchange fees are needed to encourage the use of electronic payment instruments, whereas merchants claim that they artificially inflate the cost of accepting cards. This paper sheds light on the ongoing debate that opposes banks to the regulatory institutions or the competition authorities in various countries, by reviewing the theoretical results of the literature and highlighting some unanswered issues.     

THE ROLE OF PATENTS IN INFORMATION AND COMMUNICATION TECHNOLOGIES: A SURVEY OF THE LITERATURE

During the last few decades, the number of patents in information and communication technologies has increased considerably. An increasing number of patents and the associated fragmentation of IP rights have generated a series of potentially problematic consequences. Patent thickets, royalty stacking, the emergence of patent assertion entities, increased patent litigation – particularly around standard essential patents – and the difficulties with defining fair, reasonable, and nondiscriminatory licensing terms are some of the most debated issues in the literature that we review in this paper. We devote a specific section of our survey to patent quality, currently one of the most debated issues surrounding the patent system. In our analysis, we mix theoretical and empirical arguments with a more policy‐oriented reasoning. This allows us to better position the different issues in the relevant political and economic context.     

A SURVEY OF TRADE AND WAGE INEQUALITY: ANOMALIES,RESOLUTIONS AND NEW TRENDS

This paper surveys recent studies on trade and wage inequality. We first introduce some trade‐based explanations for increased wage inequality. There are, however, a number of criticisms of this line of thought based on the ‘trade‐wage inequality anomaly’, the ‘price‐wage anomaly’, and the small volume of trade. Mainly due to these criticisms, trade‐based explanations for rising wage inequality have been limited in the economic literature. Rather, the primary explanations for wage inequality have been based on skill‐biased technological change. Some trade models, however, have weakened the above criticisms, and more economists now argue that the effect of trade, though relatively small compared to that of technological change, is more significant than generally believed. Finally, we attempt to link new trends in inequality, such as job polarization and within‐group inequality, to the trade and wage inequality literature.     

A SURVEY OF THE HOLD‐UP PROBLEM IN THE EXPERIMENTAL ECONOMICS LITERATURE

This paper reviews experimental studies on the so‐called “hold‐up problem.” Common features in the experimental design and results are summarized. Most experimental studies show evidence of the hold‐up problem, but to an extent less severe than what standard self‐interest model predicts. Hold‐up occurs at the individual level, but exhibits a less severe pattern than theoretically predicted at the aggregate level. A positive correlation is found between the investment stage decisions and subsequent bargaining behavior. Social preferences largely influence the results in hold‐up games. Remedies that enhance the effect of social preferences can effectively alleviate the hold‐up problem. These laboratory findings are also relevant to real‐life hold‐up situations, but differences in the specific institution and environment may require more variations in the experimental design.     

THE BENEFITS AND COSTS OF MONETARY UNION IN SOUTHERN AFRICA: A CRITICAL SURVEY OF THE LITERATURE

Abstract.  With the 14 members of the Southern African Development Community (SADC) having set the objective of adopting a common currency for the year 2018, an expanding empirical literature has emerged evaluating the benefits and costs of a common-currency area in Southern Africa. This paper reviews that literature, focusing on two categories of studies: (1) those that assume that a country's characteristics are invariant to the adoption of a common currency and (2) those that assume that a monetary union alters an economy's structure, resulting in trade creation and credibility gains. The literature reviewed suggests that a relatively small group of countries, typically including South Africa, satisfies the criteria necessary for monetary unification. The literature also suggests that, in a monetary union comprising all SADC countries and a regional central bank that sets monetary policy to reflect the average economic conditions (e.g. fiscal balances) in the region, the potential losses (i.e. higher inflation) from giving up an existing credible national central bank, a relevant consideration for South Africa, could outweigh any potential benefits of trade creation resulting from a common currency.     

A PATCHWORK SAFETY NET: A SURVEY OF CLIOMETRIC STUDIES OF INCOME MAINTENANCE PROGRAMS IN THE UNITED STATES IN THE FIRST HALF OF THE TWENTIETH CENTURY

Abstract Social welfare programs in the USA are designed to serve as safety nets for people in hard times, in contrast with the universal approach found in many other developed western nations. In a survey of cliometric studies of social welfare programs in the USA, we examine the variation in the safety net in the USA across states in the 20th century, the determinants of the variation and its impact on socioeconomic outcomes. The USA has always displayed substantial variation in the extent of the safety net because the features of most public social welfare programs have been and currently are determined by local and state governments, even after the federal government became involved in the 1930s. Differences across states persist strongly for typically a decade, although the persistence weakens with time, and there are some periods when federal intervention led to a re‐ordering. The rankings of state benefits differ from program to program, and economic and political factors have different weights in determining benefit levels in panel data estimation of their effects. Variation in benefits across programs during the early 1900s had significant impact on labour markets, economic activity, family formation, death rates and crime.     

AUTOREGRESSIVE CONDITIONAL DURATION MODELS IN FINANCE: A SURVEY OF THE THEORETICAL AND EMPIRICAL LITERATURE

Abstract.  This paper provides an up-to-date survey of the main theoretical developments in autoregressive conditional duration (ACD) modeling and empirical studies using financial data. First, we discuss the properties of the standard ACD specification and its extensions, existing diagnostic tests, and joint models for the arrival times of events and some market characteristics. Then, we present the empirical applications of ACD models to different types of events, and identify possible directions for future research.     

SURVEY OF SOCIAL AND ECONOMIC GROWTH IN SE EUROPE – A NEW CONCEPTUAL FRAME FOR SUSTAINABILITY METRICS

The practice so far has indicated that there is a sensitive relationship that exists between social and economic subsystem of sustainable development, therefore this research suggests comparison of the states of these two subsystems as a new conceptual frame which is essential for strategic conceptualization of development. The research pointed out a rather visible collision between the achieved degree of economic and social development in the countries of South Eastern Europe in respect to Germany and France, which were taken into consideration as two of the most developed countries in the European Union and in the entire world. The indicators which are given in this research point to the necessity of further scientific and practical consideration of strategic conceptualization of relationship between economics and society.