Arrow's impossibility theorem

Summary It is the purpose of this article to give an exact formulation of Arrow's famous impossibility theorem and its proof. Although the results presented here are not new in the sense that the theorem is refuted or questionned, it may be of some interest especially for the reader who wants to get a more or less complete view of the argumentation leading up to the theorem. Special attention is paid to the logical structure of the argument in the conviction that a lot of misunderstanding exists about what Arrow and subsequent writers tried to say. By way of introduction to the central theme some remarks are made concerning the relation of the Arrow problem to welfare economics.The author would like to thank Mr. W. R. de Jong of the Department of Philosophy of the Free University for his valuable advice in the field of logic and in particular Keimpe Reitsma, student of economics at the Free University, for the extensive discussions which formed an indispensable element in realizing this article. Thanks are due also to two referees for their useful suggestions.During the preparation of this article I was Assistant Professor at the Faculty of Economics, Free University, Amsterdam, The Netherlands. At present I am with the Ministry for Social Affairs, Directorate for General Economic Affairs.     

上合组织自贸区经济效应的前瞻性研究--基于GTAP模型的模拟

文章在分析中国同上海合作组织成员国贸易现状的基础上,运用GTAP模型实证研究了建立上合组织自贸区可能带来的经济影响。研究发现建立自贸区虽然在短期内可能存在一定的困难和冲突,但是符合各成员国的长远利益。具体结论如下:从短期来看,大部分成员国贸易放大效应较为明显;各成员国会扩大对比较优势产品的出口,增加对比较劣势产品的进口;各成员国贸易条件和福利水平变化不一,一些小国和落后国家贸易条件恶化,福利水平下降。从长期来看,自贸区的建立能有效拉动各成员国经济增长;随着区域内分工纵深发展,各国产业结构均出现调整。总体来说,完全自由贸易情形下的经济效应要大于设置关税减让例外情形。     

Early Analytical Agricultural Economics in Australia

Analysis of home consumption pricing by Giblin and Copland in the 1930s preceded the development of an identifiable Australian agricultural economics profession. They demonstrated that costs of increasing domestic prices of agricultural products above export levels would be borne largely by lightly assisted exporters and hinder their development. This work was taken up later within a framework of computable general equilibrium modelling. Now largely of historical interest, their work sheds light on likely consequences of some past policy debates ? of protection all round in the 1920s and tariff compensation in the 1970s.     

Trade and Tax Reforms in a Cash‐in‐Advance Economy

We examine the effects of both tariff‐only and coordinated trade‐tax reforms on market access, government revenue, and welfare for a small monetary economy, under the assumption that a certain fraction of purchases of each good must be financed with cash held in advance. We show that if the cash requirement ratio in the exportable sector is greater than that in the importable, then, contrary to previous results, (i) a uniform radial reduction of tariffs has ambiguous effects on both welfare and market access, (ii) tariff and consumption tax reforms that leave consumer prices unchanged may be more efficient in improving market access and welfare than a reform that involves only tariffs, and (iii) export and production tax reforms that keep producer prices unchanged may be welfare deteriorating.     

On simultaneous explanation of long and medium-term employment cycles

Summary Long and medium-term employment cycles are simultaneously analyzed in a dynamic disequilibrium model, which applies the Goodwin (1951)-type nonlinear accelerator to capital widening and capital deepening investment separately. Capacity utilization and profitability are the variables that control this — purely endogenous — dynamic process. A link is provided between the disequilibrium analysis of unemployment by Malinvaudet al. and nonlinear cycle theories. Different unemployment regimes,i.e. deficient demand, deficient capacity, deficient labor intensity as causes of unemployment, emerge in a dynamic context. Time path and periodicity have a straight interpretation in terms of the behavioral parameters of the model.Two mathematical appendices belonging to section 3 below have been omitted for reasons of space. These are available on request.This article appeared in a preliminary form as a Research Memorandum of the Department of Economics of the University of Amsterdam, No. 8717. The author would like to thank H. Amman, W. Driehuis, C. van Ewijk, C. Teulings and an anonymous referee for their comments on earlier drafts of this paper.     

贸易摩擦背景下关税与货币政策反制策略研究

通过将贸易品美元定价约束、外汇噪声交易和关税反制等特征融入两国DSGE模型,文章对贸易摩擦背景下美国进口关税冲击的传导渠道以及中国的关税反制策略与货币应对政策有效性等问题进行了数值分析。研究发现,关税反制措施能够有效地对冲美国加征进口关税对中国实际产出、消费和净出口的消极影响,并有助于抑制人民币实际汇率贬值。若进一步搭配将出口品关税纳入利率调控框架的积极货币政策,对于经济扩张与保持汇率稳定都更加有效。但从长期社会福利角度看,积极货币政策对美国经济也具有明显的正向溢出作用,关税反制则会产生显著的福利转移效应,不采取任何关税与货币应对政策将使中国遭受最大的福利损失。因此,基于"打击最大化、自损最小化"原则,中国应对美国采取坚决有力的关税反击,同时保持货币政策相对中性、克制,以期实现"以战促和"的战略目标。     

Coauthorship and publication efficiency

This study extends a recent paper by Jean Louis Heck and Peter A. Zaleski [1991] on trends in economics journal publication from 1969–89. The primary purpose of the work is to analyze the impact on article production of an observed dramatically increasing tendency toward coauthorship among scholars in economics. A simple model is tested with total (per capita) articles as a function of time, American Economic Association (AEA) membership, and articles coauthored per year. Results suggest that the increasing trend toward coauthorship enhances productivity in total and per-capita article production. The authors would like to thank Gary Shelley, Janet K. Smith, Peter Zaleski, and an anonymous referee for comments on previous versions of this paper.     

Trade policies,imperfect competition,and endogenous growth

Summary This paper analyses the effects of trade policies in a general equilibrium two-conutry model with imperfect competition. This model generalizes the models of monopolistic and Cournot competition. Trade is shown to be welfare-increasing in the monopolistic completition model. The same holds true in the case of endogenous growth. In the model of Coumot competition, the welfare effects of trade policies depend upon the type of entry and exit. Indeed, it is possible for two countries to increase their welfare by pursuing a coordinated policy of protection. In an endogenous growth setting, the validity of the latter finding depends upon the consumer rate of time preference.At the time of writing, the author was affiliated with the Ministry of Economic Affairs. An earlier version of this paper was presetned at the ECOZOEK-day, June 11, 1993, Tilburg and was awarded theKVS-prize 1993 of the Royal Netherlands Economic Association. The author would like to thank an anonymous referre, P.A.G. van Bergeijk, R.A.de Mooij, A. Nieuwenhuis, F. van der Ploeg, J. van Sinderen, S. Smulders, and P.M. Waasdorp for useful comments. The views expressed in this paper are strictly presonal.     

IS-LM: The Hicksian journey

Summary In the economics profession John Hicks is mainly known for his work during the 1930s. This paper is aimed at tracing the further development of Hicks' thinking, focussing on his IS-LM apparatus. During the 1950s Hicks used IS-LM to elucidate several issues, as in his Trade Cycle book and his review of Don Patinkin's Money, Interest and Prices. In the ensuing exchange Patinkin showed several weaknesses of IS-LM and pointed to new directions for research: the development of more elaborate models of the transmission mechanism and disequilibrium theory. But Hicks did not really participate in these developments, since, owing to methodological considerations, his thinking diverged more and more from mainstream economics.I would like to thank Jürgen Backhaus, Peter de Gijsel, Jan Snippe, Vic Van Rompuy, Arjen van Witteloostuijn and an anonymous referee for their comments on a former draft. Naturally, only the author is responsible for the opinions here expressed, as well as for any remaining shortcomings.     

Trade uncertainty and the two-step procedure: The choice of numeraire and exact indexation

Summary In a small open economy it is optimal to first maximize national income and second choose the best consumption point.The same two-step procedure under (quantitative) uncertainty is suboptimal if one of the goods is used as numéraire. Optimality is restored however, if nominal prices are deflated by the exact price index. Hence there is equivalence between the appropriate two-step procedure and the introduction of a stock market under uncertainty (Diamond 1967) under ideal circumstances.I would like to thank, without implicating, Peter van Bergeijk, Steven Brakman, Willem Buiter, Richard Gigengack, Jean-Marie, Viaene, Casper de Vries and an anonymous referee for useful comments and Angelique van Haasteren and Martijn Herrmann for graphical assistance.     

Demand and supply as factors determining economic growth

Summary In models of economic growth the long-run rate of growth is usually determined by exogenous factors like the increase in working population and technical progress. In this article the rate of technical progress is treated as an endogenous variable depending on the increase in real wages and the degree of capacity utilization. A clay-clay production model is presented. Moreover, consumption, investment, changes in wages and in prices are explained by additional equations. Numerical steady state solutions for different values of the parameters are discussed. In each case the specific role played by demand and supply is stressed.The authors are Professor of Economics and Assistant Professor of Economics, University of Tilburg, The Netherlands. They are indebted to Professor S. K. Kuipers for valuable comments on an earlier version of the article.     

How to derive keynesian results from first principles: A survey of new-Keynesian economics

Summary In the 1980s theoretical research in macroeconomics was dominated by what has become known as new-Keynesian economics. The principal aim of new-Keynesian economics is to explain how Keynesian results can be reconciled with the neo-classical principles of utility and profit maximization. This paper provides a survey and an assessment of New Keynesian economics. In our view, the theoretical foundation of new-Keynesian economics would be strengthened if more institutional detail is added to the analysis. The real challenge for new-Keynesian economics is to develop macroeconomics (and microeconomics) from a theory that takes the working of markets seriously.We would like to thank David Colander, Paul Davidson. Theo van de Klundert and Simon Kuipers for their comments on this paper and Esther Langeveld for research assistance. Of course, the usual disclaimer applies. An extended version of this paper, which addresses teh empirical evidence in substantially more detail is available as Research Memorandum no. 488 of the University of Groningen. Parts of section 3 are based on Van Ees (1991) and Garretsen (1992).     

An integration of short run neokeynesian analysis and growth theory

Summary The paper provides a synthesis of short run Neo-Keynesian theory and long run growth models. The general approach is illustrated with the analysis of the short run and long run effect of changes in government spending when government budget deficits and surpluses are bond-financed. Such pure fiscal policy actions are shown to have long run effects on real variables even in a full employment model. The stability properties of the model turn out to depend crucially on the speed of adjustment of inflationary expectations.This paper is based on my Ph.D. DissertationTemporary Equilibrium and Long-Run Equilibrium. The advice and help of James Tobin, Gary Smith and Katsuhito Iwai are gratefully acknowledged. I have also benefitted from discussions with Gregory Chow. The detailed and wide-ranging comments of Dr. Th. C. M. J. van de Klundert and Dr. S. K. Kuipers on earlier drafts of this paper were most valuable, both as regards substance and form.Assistant Professor of Economics and International Affairs, Princeton University.     

Welfare cost of higher tax rates: An empirical laffer curve for The Netherlands

Summary On the basis of a simple general equilibrium model calculations are made of the welfare cost of higher tax rates. Furthermore, the Laffer curve for The Netherlands is estimated. Taking 1970 as the basic year and assuming that all tax revenues were paid back in lump-sum benefits, the Laffer curve topped at a marginal rate of 66.9076 and theMEB stood at 1.24. This means that an additional guilder in tax revenues involves a welfare loss of Dfl. 1.24 on top of the direct tax burden. Considering the true proportion of government income being spent on benefits, the Laffer curve is found at a marginal tax-rate of 70.1016. In that case theMEB amounts to 0.83 in 1970. The most striking finding was the sharp rise in theMEB, from 0.83 in 1970 to 6.36 in 1985. This high welfare cost is an indication that The Netherlands is nearing the limits of taxation on income. It is found that market signals are disturbed most when tax revenues are used for income transfers in a form which does not influence allocation decisions at the margin (lump-sum benefits). In that case relative prices are affected, whereas income effects are neutralized.The authors wish to thank Professor F. W. Rutten, J. van Sinderen and other colleagues at the Directorate for Macro-economic Policy of the Ministry of Economic Affairs for their stimulating support and critical remarks. J. Hulsman translated the original Dutch draft.     

A simple multisector model with six sectors of production estimation and simulation results for the 1950–1968 period

Summary In this article a simple multisector model for the Netherlands is presented with six sectors of production. Estimation and simulation results are based on input-output data for the period 1950–1968. Simple log-linear equations (containing both relative price factors and scale factors) are used to describe the demand for (intermediary and primary) factors of production and the demand for final output (including private investment). Sectoral product prices and wage rates are determined within the model. This applies to the generation of disposable income of households as well. Using this simple multisector model, actual economic developments during the 1955–1968 period can be simulated in a reasonably satisfactory way.I am indebted to Professor S.K. Kuipers of the University of Groningen, Professor J. Muysken of the University of Limburg and an anonymous referee for their advice and their critical remarks. The Netherlands Organisation for the Advancement of Pure Scientific Research subsidized the multisector modelling project, of which this article summarizes the results (grant number 46–73).     

Prediction of two periods by simple autoregressive models with one lag

Summary Three different methods are compared by their ability to predict two periods ahead in simple autoregressive models with one lag. In this study both artificial and historical time series are used. In spite of intuitive objections the usual least squares method performs relatively well. Moreover attention is paid to the estimation results, as they provide some links with other studies of the autoregressive model.I am indebted to Dr. M. M. G. Fase and professor A. H. Q. M. Merkies for useful suggestions and remarks and above all to professor J. S. Cramer for his critical comments and his great help in drafting this article. Currently I am research associate of the Econometric and Special Studies Section of the Domestic Research Department at De Nederlandsche Bank N.V., P.O. Box 98, Amsterdam, but the main part of this study was completed at the Instituut voor Actuariaat en Econometric of the University of Amsterdam.     

Coordinating unions,wages and employment

Summary In this paper we consider a two-sector economy in which individual unions are affiliated into a federation of unions. We analyze the consequences of two different types of wage setting. Firstly, individual unions set wages in their own sector without taking into account the effect of their wages on the employment level in the other sector. There may be positive as well as negative externalities. A positive (negative) externality may exist if a higher (lower) wage in one sector implies a higher level of employment in the other sector. Both cases may occur in our model. Secondly, wages in the two sectors are set by the federation of unions. We show that in this case higher (lower) wages result than in the first case if a positive (negative) externality exists.Preliminary versions of this paper were presented at seminars at the University of Oldenburg and the University of Groningen and the Fourth Annual Congress of the European Economic Association, Augsburg, September 2–4, 1989. The authors would like to thank W.H. Buiter, H. van Ees, J. Hartog, Th. v.d. Klundert, S.K. Kuipers, Chr. Mulder and T. van Veen for their comments on an earlier version of this paper.     

Notes and Communications

Summary This essay explores the occurrence of illusionary images or trompe-l’oeil in economics and their role in economic policy design. In this context four specific examples are discussed, relating to money illusion, the bias in the consumer price index to measure purchasing power, the econometrics of hyperinflation and the measurement of scholarly productivity. Fellow Tinbergen Institute and the Managing editor of De Economist. Until 2001 deputy executive director as well as head of research with De Nederlandsche Bank and from January 2003 professor emeritus in monetary economics, University of Amsterdam. I am grateful to professor J.S. Cramer and dr Peter van Els for their useful comments.     

Free trade zones,tariffs and the real exchange rate

This article examines the consequences of changes in final and intermediate good tariffs on structural adjustment, urban unemployment, and the real exchange rate in the presence of a free trade zone (FTZ) and foreign capital in the host country. The location of the FTZ and the disaggregation of the economy allows us to examine the consequences of a tariff change on regional incomes. It is shown that as a consequence of a tariff change the urban and rural incomes need not necessarily move in the same direction (hence the potential for rural and urban conflict in policy making). It is also shown that an increase in the tariff on an immediate good may result in both export promotion and an increase in welfare. Such expansion is a nonconventional result, since raising barriers to trade normally leads to a contradiction in the volume of the trade. The interconnection between the real exchange rate and intermediate good tariff is also explored in this article. It is shown that a policy of imposing tariffs on these goods may result in the appreciation of the real exchange rate.     

The influence of debt management on the term-structure of interest rates

Summary This article focuses onthe influence of debt management on the term-structure of interest rates. Four theories are discussed which try to explain the factors influencing the term-structure. It proved that the four theories could be distinguished according to three aspects which have been investigated by means of analysis of variance and of the estiamtion of two reduced form equations with Dutch data during the period 1950 through 1973. It could be concluded that the liquidity preference theory and to a smaller extent the preferred habitat theory fitted the data relatively well. From this it followed that the influence of debt management on the term-structure of interest rates is rather small. This article is an elaboration of a paper written at the end of the author’s study at Groningen State University. He thanks Dr. S. K. Kuipers, Mr. P. W. Otter and Mr. B. S. Wilpstra, all connected with the Groningen State University, for their advice during the writing of the paper. He also thanks Mr. A. van der Veen, who took care of all the calculation which was necessary for the elaboration. He further thanks Dr. M. M. G. Fase for the comments he made on a previous version of this article. The author works at the Central Bureau of Statistics in The Hague.