International migration,non-traded goods and economic welfare in the source country

"This paper examines the economic effects of emigration in a source country producing both traded and non-traded commodities. It is shown that, even if the economy faces fixed terms of trade, emigration can still affect the welfare of the non-migrants, and the direction of the effect in this context will always be negative." The focus is on migration from developing countries.     

A note on international migration,non-traded goods and economic welfare in the source country

"This note extends the work of Rivera-Batiz to the case where capital is collectively owned and the decision to emigrate entails both a withdrawal of labor services from the source-country and the surrender of the ownership of capital. In this framework, which seems to have wide real-world relevance for socialist, labor-managed and peasant economies, it is found that emigration helps increase the welfare of the non-migrant. This result, which seems quite robust to its specifications, is exactly the opposite of that of Rivera-Batiz and points to the need for great caution in drawing policy conclusions with regard to issues pertaining to emigration."     

International migration,non-traded goods and economic welfare in a two-class economy: A reply

This paper sketches a formal model of an economy producing traded and non-traded goods in which two classes of individuals are differentiated, each owning different endowments of capital and labor and allocating different proportions of their income to the consumption of each commudity. The effects of emigration on prices, income distribution and the real income of each class is then examined.     

Unemployment and the welfare effects of trade policy

Abstract.  In this paper the welfare effects of tariffs and import quotas in the presence of involuntary unemployment are derived and compared. The framework used is the standard model of a competitive small open economy with many goods and factors. Optimum levels of the respective trade policy instruments are derived, as well as welfare increasing reform strategies. In all cases, the labour intensity of the import‐competing sectors turns out to be a crucial variable for deriving the welfare effects. JEL classification: F13, F16     

On the welfare effects of trade and investment liberalization

Using a three-factor knowledge- and physical capital model of trade and multinational activity, we consider a set of policy experiments to assess the welfare effects of trade and investment liberalization in general equilibrium. Specifically, we address the question of whether and under which circumstances a single versus a combined trade/investment liberalization strategy or a unilateral versus a bilateral policy change is preferable from a single country's and the world's point of view. The focus of this paper is to look at three relevant questions. First, when is investment liberalization beneficial and when is it harmful for a single economy or the whole world? Second, is pure investment liberalization a welfare maximizing strategy? Third, when is either kind of liberalization (trade, investment, or both) welfare improving and when neither of them?     

Development policies in the presence of unemployment and non-traded intermediate goods

The role of non-traded intermediate goods has not been satisfactorily studied in the context of a developing economy with involuntary unemployment. In this paper we examine this phenomenon within the framework of a Harris-Todaro-type migration model. We show that the presence of the intermediate good creates a strong linkage between the rural and urban regions. Under certain reasonable assumptions on factor intensities, this linkage causes an increase in the price of the urban good to benefit the intermediate good as well, and an expansion in the urban output to drive an expansion in the production of the intermediate good. Finally, wage subsidies to urban firms increase the unemployment rate, despite the ameliorating effect of the inter-sectoral linkage.We would like to thank M. Ali Khan, Bela Balassa, Will Carrington, and the members of the J. H. U. Trade and Development and Summer Seminars for advice and comments. We would also like to thank two anonymous referees for pointing out several errors in an earlier draft. Any remaining errors are, of course, ours.     

Exchange rate changes and endogenous terms of trade effects in a small open economy

This paper shows that the small-country assumption of dependent-economy models is unlikely to hold for many of the cases in which this class of models is used, for example, in the analysis of a terms of trade shock in the “commodity currency” models. When a shock affects most or all of the small countries exporting a commodity, the combined exchange rate effects will result in endogenous terms of trade changes even for those countries too small to individually affect world markets. The paper also explores the possible implications of these secondary terms of trade changes for the dependent-economy models.     

An assessment of the Europe agreements’ effects on bilateral trade, GDP, and welfare

The so-called Europe Agreements had been enacted in the 1990s to initiate the integration of goods markets between the 15 EU incumbent economies as of 1995 and 10 potential entrants located in Central and Eastern Europe. This paper evaluates the trade, GDP, and welfare effects of these agreements by means of structural analysis of a bilateral trade flow model. The results support three conclusions. First, the agreements exerted significant positive effects on goods trade between the EU15 incumbents and the CEEC and, at the same time, they induced trade redirection from other countries. Second, EU15 GDP responded by an increase of much less than 1% while that in the 10 CEEC increased by several percent in response to the agreements. Third, the effects on welfare were moderate in the EU15 but amounted to more double-digit percentage changes in the involved CEEC.     

Location and ownership of public goods

We introduce location choice for the public good in the property rights framework. We find that it can be optimal to separate location from ownership.     

Real exchange rate dynamics in the presence of non-traded goods and transaction costs

This paper studies the role of non-traded goods and transaction costs in accounting for the puzzling behavior of real exchange rates. We show that introducing the transaction costs and non-traded goods in an otherwise standard competitive model dramatically improves its ability to rationalize observed real exchange rate dynamics.     

Foreign ownership and the credibility of national rating agencies: Evidence from Korea

By analyzing bond price reactions to rating changes in Korea, this study adds a new angle to the existing literature on Global Rating Agencies (GRAs, i.e. Moody’s, S&P’s, Fitch) with higher reputation/independence vs. National Rating Agencies (NRAs) with more in-depth local knowledge. Faced with substantial regulatory burdens, GRAs have chosen to operate indirectly in the Korean domestic market by acquiring local NRAs. In our event study, cumulative abnormal returns following downgrades by a wholly domestically owned NRA tend to dominate those from downgrades by two affiliates of GRAs. This casts doubt on the additional information value of reputation capital acquired through GRA ownership as perceived by emerging markets.     

Taxation,inflation, and the terms of trade

The interaction between changes in the rate of inflation and tax systems can have potential terms of trade effects. An open-economy macroeconomic model is presented in which such effects are analyzed. The asset menu consists of money, corporate capital whose nominal income is subject to taxation, and consumer durables whose return is tax exempt. This may be contrasted with the conventional menu of money and capital and/or bonds. Durables are imported. An increase in the rate of inflation then implies that the terms of trade of the country in question deteriorates in the long run.     

Recession,terms of trade,and immigrants

The current literature does not adequately analyze how economic crisis affects employment of immigrants in host countries. It is generally believed that immigrants lose jobs and return home during recession. We show that recession may instead help relatively unskilled immigrants when it leads to terms-of-trade improvement in the host country, and when the unskilled sector is protected by minimum wage regulations. We also derive the condition under which the income gap between natives and immigrants falls.     

对外贸易、制度变迁与地区经济增长的差异性

国际经验表明对外贸易能促进制度变迁,从而加速经济增长.鉴于中国各地区对外贸易发展水平和结构非常不均衡,针对单一省份的实证检验显得更有意义.本文采用协整的向量误差修正模型.以省份为单位检验了对外贸易、制度变迁与地区经济增长之间的协整关系和因果关系,针对"对外贸易发展--促进制度变迁--加速经济增长"的作用机制在不同地区的不同表现,本文提出了相应的政策建议以促进对外贸易与地区经济协调发展.     

Household inequality, social welfare, and trade

Working with Sen social welfare functions (meaning explicit separability between mean income and income dispersion), we develop a generalized dual approach to tracking household inequality aspects of social welfare in general equilibrium. We highlight how household equity can be examined analytically alongside production efficiency in duality-based models, using our dual framework to explore potential trade-offs between efficiency and equity effects of trade policy. Our results complement the set of standard inequality results in trade theory focused on functional rather than household inequality. We also find that the relative distributional impact of tariffs on welfare is conditional on the initial level of inequality.     

Parallel trade,product quality,and welfare

We study the welfare effects of parallel trade (PT) considering investment in quality. We thus revisit the case for PT in research-intensive industries. We find that PT may raise quality, depending on how preferences for quality differ across countries. Conditional on quality, consumer surplus may rise (fall) in the PT-source (PT-recipient) country. While PT reduces ex post welfare, improving quality is a necessary condition for PT to increase welfare ex ante.     

Paradoxical trade patterns and terms of trade

It is shown that, when a monopoly is present in a two-country, two-commodity world, the terms-of-trade do not necessarily fall in between the pre-trade relative prices of the two countries, and that these pre-trade prices do not unequivocally determine the pattern of trade.     

Transfers, the terms of trade, and capital accumulation

Abstract .  In the context of a two-sector overlapping-generations model it is demonstrated that a steady-state transfer paradox may arise under commodity trade with stability and without distortions or bystanders. The existence of the paradox is due to the effect of the transfer on world capital accumulation, which is shown to always (i.e., for any ranking of factor intensities and savings rates) improve the donor's terms of trade. Transfers may also improve steady-state welfare for both donor and recipient and produce paradoxical welfare results along the transition path.     

Agricultural trade liberalization,price changes,and environmental effects

Many analyses of agricultural trade liberalization have been undertaken but few have considered the effects on the environment. For the developed countries, reducing the degree of protection would result in less intensive production; therefore, environmental stress would be reduced. A reduction of trade barriers in industrial countries would result in higher world prices and in a somewhat lower world price variability. Assuming initially no policy changes for developing countries, the question is how the liberalization would affect the environment. Higher Prices in developing countries increase the level of production by intensifying production, particularly in the commercial sector, and by an area expansion. Both result in negative environmental effects. These could be partly offset by an increase in hired labor in the commercial sector, which might reduce pressure at the frontier and on marginal lands, as well as by the income effect. These off-setting effects may be small; however, the direction of the overall environmental effects cannot be determined unambiguously without empirical examination. At the global level, the beneficial economic effects of agricultural trade liberalization probably outweigh the expected negative environmental effects in developing countries, but this cannot be unambiguously established without valuation.