Terrorism and international economic policy

We add to the ongoing discussion regarding the policy consequences of terrorism by analyzing the effect of terrorism on international economic policy for a panel of 170 countries between 1970 and 2016. We find that countries resort to less liberal international economic policies when facing the threat of terrorism. This effect is especially relevant to smaller (less populated) countries. Our main finding is robust to an instrumental-variable approach. We argue that governments pursue less liberal international economic policies in response to terrorism to interrupt the organization and financing of terrorism, limit capital flight, stabilize public finances and signal political resolve.     

The Borrower of Last Resort: International Adjustment and Liquidity in a Historical Perspective

The stability of the international monetary system hinges on a dominant country acting as an international lender of last resort, injecting liquidity by recycling surpluses to countries facing balance of payments problems. The efficacy of this mechanism does not depend on the dominant country retaining a “creditor” status. Rather it has depended historically, on the dominant country’s ability to continue to borrow, in the face of growing external deficits without undermining the status of its currency as international money. A pivotal role is played by the institutional mechanisms that allow the dominant country to borrow from surplus countries on one hand and lead to increasing fragility in peripheral debtor countries on the other. The paper argues that such triangular adjustment patterns underlay both the gold standard period where Britain was a net creditor and the present “floating dollar regime” where the United States is a net debtor.     

The deregulation of international trucking in the European Union: form and effect

We describe the regulatory regime under which international trucking operated in Western Europe until the mid-1980s, the deregulatory process that followed, and the effect of this deregulation. We find that deregulation had a large positive effect on the growth of international trucking. We also find that shippers shifted toward more outsourcing of their trucking needs, but this occurred to an even greater extent in local and national road transport. We conclude that other factors beside the deregulation of international trucking affected the organization of the industry at the time. Finally, despite concerns voiced by member countries, we find no evidence that deregulation disproportionately favored carriers of countries that were initially more (or less) involved in international trucking, nor that it has favored low-wage countries.      

International R&D Collaboration and Strategic Trade Policy

We study an international trade model with symmetric countries and symmetric firms, with countries making strategic trade policies, anticipating the decisions of firms on R&D collaboration at the subsequent stage. In general we should observe a conflict between the equilibrium outcome and the efficient one. We find that an asymmetric outcome where one country unilaterally liberalizes trade while the other does not is likely to occur. We also find that while banning international R&D collaboration may help to reach free trade equilibrium in certain situations, it provides little assistance in reaching the outcome that maximizes global welfare.     

INTERNATIONAL AVERAGE PRICES AND COMPARISONS OF NATIONAL AGGREGATE PRODUCTION OF AGRICULTURE

"The whole question of making inter-spatial comparisons between countries is a most complicated and hazardous business" (Mr. Campion); international comparisons of a particular value aggregate between countries present a difficult problem connected with the conversion of national value aggregates into a comparable magnitude. This paper presents an alternative approach in that an internationally comparable value aggregate for each country is prepared by the international average prices of commodities which are determined simultaneously with the partial exchange rates of national currencies to a standard currency. The calculated partial exchange rates are so defined as to reflect the purchasing power of national currencies in respect of the group of commodities selected. Consequently, the resulting value aggregate for international comparison has a quantity dimension, eliminating the effect due to the different purchasing power of national currencies in which original prices are quoted. The other methods of international comparison so far being used by other research workers, such as C. Clerk and M. Gilbert and his associates, are examined in the light of the properties of the present method and the crucial differences are delineated. Using the method proposed, an international comparison is made of the aggregate value of agricultural products for 11 selected countries in the world, with sub-divisions into two regions.     

The Organization of foreign trade under capitalism and socialism

We study the effectiveness of various ways of organizing foreign-trade activities utilized under capitalism and socialism. A normative theory of organization is developed based on the costs and benefits of processing and acting on information by the organization. We survey the forms of organization employed by large American firms, Japanese trading companies, and the socialist countries of Eastern Europe and evaluate their development on the basis of our normative theory. In all systems, there is a steady approach toward organizational forms that produce direct links between producers and international markets. Such ties, however, appear to create greater difficulties for socialist countries than for capitalist firms.     

Financial Mechanism and Enforceability of International Environmental Agreements

We examine how international coordination among countries generates a trend towards establishing an international institution for the provision of global public goods. In the present model, the forces creating international agreement are a politician??s motive for re-election and a financial mechanism for compliance. If a politician expects another politician in a neighboring country to signal his good performance to his citizen by participating in the agreement, and is aware that his ex post deviation will be deterred by the financial mechanism, he too decides to participate in the agreement, which then corrects externality problems.     

Free-Riding and Cooperation in Environmental Games

This paper examines the negotiation of an international environmental agreement in which different countries determine the (nonenforceable) promises of investment in clean technologies to be included in the agreement. Furthermore, it analyzes countries' optimal investment in emission-reducing technologies, considering that, in addition to the utility that a country perceives from an improved environmental quality, it is also concerned about the relative fulfillment of the terms specified in the international agreement either by itself or by others. I show, first, why countries may prefer to shift most promises of investment in clean technologies to other countries, despite the fact that these promises are usually nonenforceable by any international organization. Second, I determine countries' optimal investments in these technologies, and analyze how their particular investments depend on how demanding the international agreement is, and on the importance that countries assign to each others' relative fulfillment of their part of the treaty.     

International co-movements of real and financial economic variables

This study presents a first attempt at investigating whether the international co-movements of real economic activity conform to the same international co-movements of financial activity. This study tests the international co-movements of real economic activity, on the one hand, and financial variables such as stock returns, interest rates, inflation rates and risk premiums, on the other hand. We employ a dynamic correlation model on data from OECD countries for the period 1980–2010. Our findings demonstrate that international stock markets co-react in accordance with the underlying international economic forces. We also document three other results. First, the correlation among countries with respect to real economic activity is statistically positive, but the level of this correlation is lower than that of financial variables. Second, there is a significant increase over time in the international correlation level with respect to the financial variables. Finally, the creation of the Euro Monetary Union and the adoption of an inflation targeting policy in many countries have increased the international correlation of all of the financial variables tested. The article concludes with two implications from these findings: (1) predictions in the context of international portfolio diversification, and (2) policy making at the fiscal and monetary levels.     

A Comparison of Emission Taxes and Permit Markets for Controlling Correlated Externalities

This paper provides an answer to the question: Are emission taxes an efficient and self-enforcing mechanism to control correlated externality problems? By “correlated externalities” we mean multiple pollutants that are jointly produced by a single source but cause differentiated regional and global externalities. By “self-enforcing” we mean a mechanism that accounts for the endogeneity that exists between competing jurisdictions in the setting of environmental policy within a federation of regions. This mechanism incorporates sequential decision making among the jurisdictions and therefore determines an equilibrium based on the concept of subgame perfection. We find that, unlike joint domestic and international tradable permit markets, joint emission taxes and a hybrid scheme of permits and taxes are neither efficient nor self-enforcing.     

Distribution of phosphorus resources between rich and poor countries: The effect of recycling

Phosphorus (P) is an essential input into agriculture with no substitute. Thus international and intertemporal P allocations greatly impact food security which requires increased food production for a growing world population. As high quality phosphorus mines are being depleted, recycling gains importance and developed countries explore new technologies for P recycling. We analyse the effects of P recycling in developed countries on global extraction of rock phosphates and the imports of developing countries. We build a resource extraction model for a competitive fertilizer market that reflects the fact that most developed countries have P-saturated soils while soils in many developing countries are P-deficient. Our model extends a simple cake eating problem. We consider two types of countries that differ in demand and recycling options. We find that P recycling in developed countries does not only prolong the resource life-time, but it also increases the developing counties' share of the resource.     

The effects of tariffs on coalition formation in a dynamic global warming game

The prospects for cooperation on climate protection beyond 2012 are currently uncertain. Thus policy instruments which foster participation in International Environmental Agreements (IEA) are in demand. Among the instruments under discussion are trade sanctions. Multi-region optimal growth models are a state of the art tool for integrated assessment, but introducing trade sanctions distorts the competitive equilibrium, making it difficult to compute numerically. We introduce trade and trade sanctions into a model of coalition stability to assess the potential of trade sanctions to support an IEA. Trade is modeled by having all countries produce a generic output good, but adopting national product differentiation (Armington assumption). Coalitions are free to impose tariffs on imports from non-cooperating countries. We solve the model numerically using a refined version of Negishi's [Negishi, T., 1960. Welfare economics and existence of an equilibrium for a competitive economy. Metroeconomica 12, 92–97] basic algorithm. We then apply the model to analyze the influence of tariffs on international cooperation. The model suggests that there is indeed a significant potential to raise participation through trade sanctions, even when goods from different countries are nearly perfect substitutes. Furthermore we investigate the effect of trade sanctions on global welfare, environmental effectiveness, and the credibility of the tariff mechanism.     

International Trade and Income Inequality*

We propose a simple theory that shows a mechanism through which international trade entails wage and job polarization. We consider two countries in which individuals with different abilities work either as knowledge workers, who develop differentiated products, or as production workers, who engage in production. In equilibrium, ex ante symmetric firms attract knowledge workers with different abilities, and this creates firm heterogeneity in product quality. Market integration disproportionately benefits firms that produce high-quality products. This winner-take-all trend of product markets causes a war for talents, which exacerbates income inequality within the countries and leads to labor-market polarization.     

奥地利与非欧盟国家科技合作新布局

奥地利国际科教合作传统上一直以欧盟及西巳尔干国家为主,但近年来国际经济科技形势的变化迫使奥地利对其国际科技合作战略进行重新思考和定位,将与非欧盟国家的合作提升到前所未有的高度。奥地利实现其国际科技合作的五大目标是:卓越目标、市场目标、资源优化目标、应对全球挑战目标和科技外交目标。为此,奥地利对合作国别进行了深入分析:确立了美国、中国、俄罗斯、印度4个非欧盟国家为其国际科教合作非常重要的国家,其中,中国为最需要加强合作的国家;确定了韩国、巴西、南非、以色列、加拿大、日本、土耳其、新加坡等非欧盟国家为其国际科技合作的重要国家,其中,韩国为需要加强合作的国家。     

Permit markets,carbon prices and the creation of innovation clusters

Innovation clusters combining public and private effort to develop breakthrough technologies promise greater technological advances to slow down climate change. We use a multi-country model with an emission trading system to examine whether and how international climate policy can incentivize countries to create such innovation clusters. We find that a minimal carbon price is needed to attract applied research firms, but countries may nevertheless fail to invest in complementary research infrastructure. We construct a mechanism that leads to innovation clusters when emissions targets are set before uncertainty surrounding technological developments is resolved. It is a combination of low permit endowments for the country with the lowest costs to build the needed infrastructure, compensation for this country by profits from permit trade, and maximal possible permit endowments for the remaining countries. We outline how the EU-ETS can be further refined according to this mechanism.     

International Productivity Differences,Trade and the Distributions of Factor Endowments

This paper presents a model of task assignment and worker matching to explore how the distributions of labor endowments within countries influence aggregate productivity and international trade patterns. Higher moments of the skill distribution have complex relationships with the organization of the labor force. First, labor endowments skewed toward high abilities exhibit positive assortment of workers across tasks, while countries with distributions of ability skewed towards low abilities exhibit underemployment. Second, greater dispersion improves aggregate productivity in countries that experience underemployment, but worsens productivity where there is assortative assignment. Furthermore, the shape and size of factor endowments are shown to jointly determine a global pattern of comparative advantage. Countries are more likely to export their abundant factors when labor markets organize heterogenous workers effectively. These predictions receive empirical support from Organization for Economic Co‐operation and Development (OECD) countries using measures of diversity constructed from educational attainment.     

Are Americans Really Less Happy with Their Incomes?

Recent economic research on international comparisons of subjective well‐being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper we concentrate on self‐reported satisfaction with income in two countries: the Netherlands and the U.S. The comparability problem is addressed by using anchoring vignettes. We find that in the raw data, Americans appear decidedly less satisfied with their income than the Dutch. It turns out however that after response scale adjustment based on vignettes, the distribution of satisfaction in the two countries is essentially identical. In addition, we find that the within‐country cross‐sectional effect of income on satisfaction—a key parameter in the recent debate in the economic literature—is significantly underestimated, especially in the U.S., when differences in response scales are not taken into account.     

Income Inequality and Technology Diffusion: Evidence from Developing Countries*

We study the effect of within‐country income inequality on the diffusion of mobile phones using data on market penetration in a sample of developing countries from 1985 to 1998. Mobile phones are an example of international technology, originating in industrialized countries and diffusing worldwide. We find that income inequality, as measured by the income share of the highest earning deciles, has a positive effect on the early diffusion of mobile phones and that the estimated effect becomes greater when a measure of agricultural endowments is used as an instrument. The instrumental variable results are robust to weak instruments. Our findings suggest that the diffusion of new technologies originating from industrialized countries may generate yet another channel that links inequality and development.     

Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries

Increasingly, a small number of low-wage countries such as China and India are involved in incremental innovation. That is, they are responsible for resolving production-line bugs and suggesting product improvements. We provide evidence of this new phenomenon and develop a model in which there is a transition from old-style product-cycle trade to trade involving incremental innovation in low-wage countries. The model explains why levels of involvement in incremental innovation vary across low-wage countries and across firms within each low-wage country. We draw out implications for sectoral earnings, living standards, the capital account and, foremost, international trade in goods.