Optimal Trade Policies and Production Technology in Vertically Related Markets*

This paper shows that optimal trade policies for vertically related markets depend crucially on production technology. By employing a production function with variable‐coefficient technology, it shows that return to scale is crucial in determining the direction of government intervention. Therefore, the assumption of fixed‐coefficient production technologies, which has been popular in industrial organization and trade literature when modeling vertically related markets, should be used with caution.     

Vertically Related Markets: Export Rivalry Between DC and LDC Firms*

We present a model of export rivalry in vertically related markets where a DC firm produces a high-quality good as well as a key input utilized by an LDC firm to produce a low-quality export good. the DC firm acts as a Stackelberg leader by setting the price of the input and the quantity of its export good. We show that the DC firm's decision on vertical supply depends on the cost, demand, and quality parameters of both producers, and that the LDC government should tax either its final good exports or its key input imports.     

纵向关联市场间的价格传递

本文运用均衡移动模型研究农业生产者与食品零售商之间的纵向价格传递关系。模型建立在如下假设之上：即农产品（食品）营销企业在零售环节拥有寡占卖方力量、在农产品收购环节拥有寡占买方力量、营销企业所需要的农产品投入与其他营销投入之间存在一定替代关系并拥有规模报酬可变的技术。结果表明，市场力量和规模报酬对价格传递的影响十分复杂，一方面取决于农产品供给函数和食品需求函数的具体形式，另一方面还取决于外生冲击作用下农产品收购环节与食品零售环节市场力量变化的相对幅度。     

Exchange Rate Pass-Through in Vertically Related Markets

The paper provides a theoretical framework which addresses exchange rate pass-through within the setting of vertically related markets. In particular, foreign firms' price adjustment in response to an exchange rate shock is evaluated. This permits study of the importance of cost effects of the exchange rate shock. Recent empirical evidence indicated the relevance of these cost effects. It is shown that one can decompose the effects of an exchange rate shock on the final goods market into direct and indirect components. The indirect effect works through the input market. The degree of pass-through then depends on the relative importance of direct and indirect effects, which in turn depends on the nature of vertical structures and strategic firm behavior. It is shown that the institutional aspects of vertically related markets play a role in explaining incomplete price adjustments in both intermediate and final goods markets and the failure of PPP in the short run.     

Tariff and Quota Equivalence in Vertically Related Markets

This paper re‐examines the issue of tariff and quota equivalence by introducing an upstream market into the Hwang and Mai (1988 ) model, and then allowing the two downstream firms to cross‐haul within each other's market. We assume the upstream monopolist can select either a two‐part or a one‐part tariff pricing strategy. It is found that if the upstream firm adopts a two‐part (one‐part) tariff pricing strategy, then the market price of the final good under a tariff will be higher (lower) than that under an equivalent quota; that is, the quota is set at the import level under the tariff regime. This result stands in stark contrast to the prior findings of both Hwang and Mai (1988 ) and Fung (1989 ). Moreover, if the quota rent is set as being equal to the tariff revenue, the social welfare under a tariff will necessarily be lower than that under an equivalent quota.     

Vertically Related Markets,Foreign Competition and Optimal Privatization Policy

This paper examines the optimal privatization policy in vertically related markets in which an upstream public firm competes with a foreign private rival in supplying a produced input to the domestic and foreign downstream firms competing in the domestic market. It shows that if the upstream public firm's market share is sufficiently high, full nationalization is optimal and the resulting profit margin is positive. However, complete privatization is never optimal. Numerical simulations reveal both the diverse optimal privatization regimes and the patterns of optimal privatization levels with varying numbers of the domestic and foreign downstream firms.     

Location for Foreign Direct Investment in Vertically Related Markets

This paper studies a multinational enterprise's (MNE's) location decision in a vertically related market with endogenous vertical technology transfer (VTT). We show that, even though VTT is more costly in a less developed country, an MNE can transfer more technology there than in a developed country (DC). When the opposite occurs, the MNE sometimes locates in a DC where, although it faces stronger competition, it obtains the input at better terms. Therefore, by arguing that the MNE's decision can be crucially affected by the upstream market's outcomes, an alternative explanation is provided for the commonly observed foreign direct investment (FDI) in DCs.     

Strategic Trade Policy in a Vertically Related Industry

This paper investigates strategic export intervention in a final-good industry which uses an intermediate good supplied by a foreign monopolist. An export tax-cum-subsidy leads to horizontal and vertical rent extraction. The optimal government intervention in the final-good market is shown to depend on the pricing scheme employed by the intermediate-good producer.     

贸易自由化、纵向关联市场与战略性环境政策——环境税对发展绿色贸易的意义

本文在一个两国出口至第三国的连续双寡模型中,研究贸易自由化对均衡环境政策及社会福利的影响。分析发现:(1)战略性环境政策的租金攫取效应可通过中间产品出口实现,但不一定会通过最终产品出口实现。(2)当污染的环境损害程度不大时,贸易自由化将降低各国环境税,从而使各国的环境保护出现"向底线赛跑";当环境损害系数较大时,贸易自由化将提高各国环境税。(3)社会福利水平为双边关税壁垒的凹函数(呈"倒U型"),贸易自由化对社会福利的影响不确定。此外,本文还分析了合理征收环境税对发展我国绿色贸易的意义。     

Conjectural Variations, Market Power, and Optimal Trade Policy in a Vertically Related Industry

The paper introduces the conjectural variations and bargaining approaches into a vertical model wherein a foreign upstream firm supplies one input to two downstream firms that produce differentiated products for the export market. Various downstream firms’ competition modes and upstream's pricing schemes emerge as special cases of this formulation. The authors show that the optimal export policy of a downstream country depends crucially on the downstream firms’ conjectures of rivals’ responses, the upstream firm's pricing schemes, their relative bargaining powers, and the degree of product differentiation. If the upstream's pricing or bargaining power is strong (weak) and if the downstream's degree of competition is high (low), a tax (subsidy) is optimal owing to a strong (weak) vertical profit‐shifting effect and a weak (strong) horizontal effect.     

Trade Liberalisation of Intermediate Inputs

This paper considers the effects of tariff cuts in the intermediate inputs market. Traditional trade theories predict that upstream industries would contract and downstream industries would expand. In contrast, new trade theories show that trade liberalisation of the intermediate inputs market may expand both upstream and downstream industries.     

Human Capital Accumulation In the Middle-Income Country and World Trade*

I construct a dynamic three-country model of trade and growth in which a worker determines how long he takes training. the path of human capital accumulation of a worker is analyzed. I consider the case in which per capita human capital grows in the middle-income country while it stagnates in the high-income and low-income countries. Effects of the middle-income country's growth are studied.     

Tax Competition in Vertically Differentiated Markets with Environmentally Conscious Consumers

This paper analyses the effects of tax competition on environmental product quality, pollution and welfare in a two-country, vertically differentiated, international duopoly, in which consumers are environmentally conscious. The firm in each country chooses first the environmental quality of its product (which reflects the emissions generated in the production process) and then the price. In equilibrium one country will be more polluted than the other because firms choose different levels of environmental quality of their products. We find that a country’s optimal commodity tax is higher if the domestic firm is the more polluting supplier. Furthermore, non-cooperative commodity tax rates are inefficiently high in equilibrium. This is because, in this framework with environmentally aware consumers, commodity taxes affect the choice of firms regarding their emissions. Therefore, a domestic tax reduction not only raises the profits of the foreign firm but also lowers its emission levels, resulting in higher welfare for the other country. We also analyse the optimal cooperative and non-cooperative commodity and emission taxes with border tax adjustments. With these two policy instruments available, commodity taxes are higher.     

Asset Markets and Investment Decisions*

In an incomplete asset market, firms assign values to investment plans by projecting their payoffs on the span of the payoffs of marketed assets. This is a criterion that does not require firms to possess information, such as the marginal valuation of revenue across date‐events by shareholders, which is not directly observable; rather, it is based on the prices and payoffs of marketed assets. Under standard assumptions, competitive equilibria exist. However, even in the absence of nominal assets, competitive equilibrium allocations are generically indeterminate. The set of competitive equilibria is indexed by the price level at each state of the world, which has implications for the effectiveness of monetary policy.     

Vertically Integrated North–South Trade and the Redux Model

The paper uses the framework of Obstfeld and Rogoff's Redux model to study the impact of monetary shocks on exchange rate, terms of trade, and welfare in the context of a North–South trade. The authors show that a relative Northern monetary expansion can depreciate or appreciate its currency depending on whether the consumption elasticity of money demand and the degree of monopolistic distortion are low or high enough. This shock has asymmetric effects on welfare in such a way that “beggar‐thyself” or “beggar‐thy‐neighbor” effects always occur.     

Natural Resources and Missing Inputs in International Productivity Comparisons*

Standard theory for cross-country productivity comparisons assumes all countries use the same factor inputs in production. This assumption is violated when including natural resources, such as oil, gas and gold, because countries do not extract the full set of resources. In this paper we propose a solution by viewing it as a “missing goods” problem and assigning missing inputs a reservation price equal to the world resource price. We show that this has a substantial impact on relative productivity levels for countries heavily reliant on natural resources for generating their income. Under our new productivity measure, resource-rich countries are no longer uncommonly productive.     

Dual Labor Markets and Trade Reform in China

This paper specifically models rigidities in the labor market in China and analyzes the effect of labor market liberalization on economic growth using a computable general equilibrium (CGE) model. Our results indicate that labor market reforms are essential to the realization of significant gains from China's accession in November 2001 to the World Trade Organization (WTO). In the absence of labor market reform, the gains to accession to the WTO are estimated to be minimal.