Shifting Armington trade preferences: A re-examination of the Mercosur–EU negotiations

This paper examines the ‘small share’ problem inherent within the constant elasticity of substitution Armington specification. As a de facto research tool in the quantitative trade literature, this structural bias plagues the results of numerous multi-region CGE studies. Kuiper and van Tongeren (2006) proposed a fusion of gravity and CGE specifications to remedy said bias, which the current paper further develops. With a pervasiveness of ‘small-share’ examples on Mercosur–European Union trade owing to the latter's restrictive tariff regime, the results reveal that significant additional trade led gains to Mercosur under a potential preferential trade agreement when compared with the standard Armington treatment.     

Industry-specific determinants of vertical intra-industry trade: the case of EU new member states’ agri-food sector

The determinants of intra-industry agri-food trade are analysed to only a limited extent in the literature. This article investigates the industry-specific determinants of vertical intra-industry agri-food trade between new member states of the EU and the other EU countries for the period 1999–2010 by applying a dynamic panel data model. Results suggest that IIT is mainly low vertical in nature, suggesting regional export of low-quality products to EU markets. Results also show that vertical product differentiation and FDI are positively related to VIIT, suggesting that quality growth and investments foster vertical intra-industry trade. As to productivity and factor endowments a negative relationship with VIIT was found, implying the labour abundant and similar nature of NMS agricultural sectors.     

Import-push or export-pull? An industry-level analysis of the impact of trade on firm exit

Does the selection effect of trade work solely through competition from imports, or does the export market further contribute to firm selection? This paper provides a re-interpretation of the different mechanisms in terms of selection on profitability—rather than productivity—and derives novel predictions regarding the export market and the role of product differentiation. Empirical results for a sample of Danish manufacturing industries confirm the import-“push” hypothesis as well as the export-“pull” hypothesis, but also reveal differences across industries. The selection effect of trade is mainly driven by the “import-push” if product differentiation is high, whereas it is driven by the “export-pull” if goods are homogeneous.     

Nature,roads or hospitals? An empirical evaluation of ‘sustainable development preferences’

While a key proposition is that a sustainable path is one where wealth does not decline, whether losses in natural capital can be compensated in wellbeing terms by more produced, social or natural capital remains an area of controversy. In this paper, we seek to better understand preferences for different combinations of assets that comprise (part of) the asset portfolio of a nation. In a study of coastal and marine natural assets, we test for the existence of weak or strong sustainability preferences using different compensation options (respectively produced capital and natural capital) offered to a sample of the public in Spain in the case of possible future oil spills. As a further element of this test, we provide an empirical reflection on Aldred (2002, 2006) and Turner (2007) who speculate that individuals may not view money as compensating for certain environmental losses whereas investments in social assets may offer a more acceptable compensation option. Our results do appear to circumscribe in some way the acceptability of investing in produced capital and reveal a tendency towards a preference for social capital compensation. Nevertheless, the size of the oil spill and the environmental beliefs of respondents also influence choices over the natural capital compensation option.     

Are international environmental policies effective? The case of the Rotterdam and the Stockholm Conventions

This is the first paper to show that participation in an international environmental agreement has some effectiveness. Our identification strategy consists of applying difference-in-differences techniques in a panel data framework to various levels of data aggregation. We find that ratification of the Rotterdam Convention (RC) and the Stockholm Convention (SC) leads to a reduction in trade of hazardous substances from OECD to non-OECD countries. In particular, we find that when the exporter ratifies the RC, there is a reduction in the import of hazardous chemicals of about 7 percent. In the case of the SC, the results show significant reductions of around 16 percent in trade shipments of persistent organic pollutants. This reduction is more than double the effect found for the RC, which was expected due to a more restricted obligation imposed by the SC convention.     

Whither the terms of trade? An elaboration of the Prebisch-Singer hypothesis

Movements in the prices of primary products and manufacturedgoods are analysed using a model that introduces differencesin wage and price determination between primary production andmanufacturing. Wages and prices in primary production are treatedas competitively determined, while prices and wages in manufacturingare determined by mark-up pricing and union-employer bargaining,respectively. The objective is to capture the influence of structuraldifferences between manufacturing and primary production onthe terms of trade between industrialised and developing worldsas discussed in the seminal contributions to the developmentliterature by Raul Prebisch and Hans Singer. The model is estimatedusing price and wage data from the post-World War II period.Support is found for the Prebisch-Singer hypothesis; however,our estimates suggest that, during periods of particularly rapidmanufacturing growth, there have been intervals of net improvementin the terms of trade of primary producers.     

Does student employment really impact academic achievement? The case of France

Student employment is usually thought to curb academic achievement. Our research relating to a survey at a French university in 2012 emphasizes the significance of the intensity of student working hours. Allowance for the endogeneity of student employment reinforces the negative effects, particularly for young people working more than 16 hours a week. However, the academic achievement of those working fewer than 8 hours per week seems unaffected. The type of employment also affects the chances of success: students with public sector jobs appear to be less prone to failure, possibly because of more flexible working hours.     

Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations

This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the price observed in previous market periods when—by design—individuals’ values should not be affiliated with the market price. This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed, market behaviour does not reveal the underlying true preferences but rather context-dependent preferences.     

Regime changes and the impact of currency depreciations: the case of Spanish–US industry trade

Over the past half century, Western Europe has been part of varying currency regimes. Yet, whether under Bretton Woods, the European Monetary System, or the Euro, exchange-rate fluctuations have had an influence on these countries’ trade flows with the United States at the national and the industry level. This study looks at the case of Spain, examining the role of real exchange-rate fluctuations on trade with the United States for 74 industries. We find that the trade balances of only 40 industries are cointegrated with their macroeconomic determinants, but that 26 of these respond positively in the long run to a real depreciation. While industry characteristics do not seem to explain which industries are more likely to do this, we find that a relatively large share of industries in the Machinery sector see their trade balances improve after a depreciation.     

Are shocks to the terms of trade shocks to productivity?

International trade is frequently thought of as a production technology in which the inputs are exports and the outputs are imports. Exports are transformed into imports at the rate of the price of exports relative to the price of imports: the reciprocal of the terms of trade. Cast this way, a change in the terms of trade acts as a productivity shock. Or does it? In this paper, we show that this line of reasoning cannot work in standard models. Starting with a simple model and then generalizing, we show that changes in the terms of trade have no first-order effect on productivity when output is measured as chain-weighted real GDP. The terms of trade do affect real income and consumption in a country, and we show how measures of real income change with the terms of trade at business cycle frequencies and during financial crises.     

Shipping the good fish out? An empirical study on the EU seafood imports under the EU’s Generalized System of Preferences

The impact of the EU (European Union) Generalized System of Preference (GSP) on the relative EU’s demand for seafood quality was evaluated in the study. We first explored the theoretical Alchian–Allen result of change in ad valorem tariffs in an n–good world, and then tested this result in the empirical study. The theoretical analysis suggests that whether a reduced ad valorem tariff in an n–good case raises the relative demand for high-value goods depends not only on the substitutability between high-value and low-value goods but also on the substitutability between these similar goods with their weak substitutes. In the empirical sections, we first estimated the elasticities of the substitutions and then used these elasticities to evaluate the quality composition of the EU’s seafood imports from the beneficiary countries. The empirical results in general confirm the occurrence of ‘shipping the good fish out’ due to the reduced tariff rates under the EU’s GSP arrangements.     

In search of the good samaritan: estimating the impact of ‘altruism’ on voters' preferences

This paper continues the development of a theoretical foundation for measuring ‘altruistic’ behaviour with respect to tax versus expenditure preferences in three specific spheres: health, education and welfare payments. Particular emphasis is placed on analysing the choice theoretic calculus that underlies individual preferences. Using this theoretical foundation, econometric techniques allow progress to be made in measuring the characteristics of the underlying utility function. The empirical work relates to the UK and confirms that both self-interest and public interest (with a slight emphasis on the latter) determine overall preferences. The implications of this for the public choice school are then examined.     

Self-serving legislators? An analysis of the salary-setting institutions of 27 EU parliaments

It is often criticized in public debates that politicians in many jurisdictions have the power to set their own salaries. This paper scrutinizes this practice from a constitutional political economy perspective. A novel dataset is presented which provides an empirical overview of the methods used to set the pay for members of parliament (MPs) in the national parliaments of 27 member states of the European Union. There is considerable cross-country variation in this respect. While in the majority of national legislatures MPs to some degree decide on their own salaries (i.e., ‘self-service’ model), in some systems MP pay is set by bodies independent from MPs. A multiple regression analysis provides empirical support for the self-serving-legislators prediction derived from Public Choice theory: controlling for population size and living costs, salaries are systematically higher in legislatures in which MPs have some say in their own salaries. However, this result has to be interpreted with caution as (1) independent wage-setting bodies exist only in five parliaments, and (2) this study could only include MPs’ basic salaries.     

Does mutual recognition of qualifications stimulate services trade? The case of the European Union

This article analyses the services trade impact of recognition of professional qualifications using a unique database compiled by the European Commission. It observes that there is large variation in the number of regulated professions across the EU. The number of recognitions is small relative to total employment in regulated professions. Nevertheless, a robust positive relationship between services trade and recognition of qualifications is found. Recognition stimulates two-way trade between the source and the host country, suggesting that arms-length exports as well as cross-border outsourcing take place. Recognitions in health and education professions are most strongly related to services trade.     

An assessment on the quality of China’s preliminary data of quarterly GDP announcements

This article examines the quality of China’s preliminary announcements of the quarterly GDP. We modify the tests for unbiasedness and efficiency by incorporating the Fourier approximation to capture the effect of the state of the economy, and employing the Kiefer, Vogelsang and Bunzel (KVB) approach, developed by KVB in 2000 to reconstruct the tests to improve the finite sample properties. The results show that: (1) there is no enough evidence to support that the preliminary and first revised data are unbiased and efficient; (2) there exist systematic errors related to the state of the economy, and hence information about the state of the economy was not incorporated into the GDP data. Furthermore, we find that there is a possibility that these systematic errors associated with the stages of the business cycle may offset each other, and there is also a possibility that there exist offsetting errors in the underlying components of GDP.     

Is Government Size Optimal in the Gulf Countries of the Middle East? An empirical investigation

The size of government consumption relative to national output is examined to see if it is optimal in five Gulf countries of the Middle East. We follow the methodology suggested in Barro (1990) and Karras (1996, 1997). The 'Barro rule' is examined using regression tests for each country and in panels created by pooling data. Results find that government consumption is productive, but the size of government is larger than optimal.     

What drives inequality and poverty in the EU? Exploring the impact of macroeconomic and institutional factors

Employing panel data techniques, we investigate the macroeconomic and institutional determinants of inequality and poverty in the EU over the period 1994–2008. We pay particular attention to the effects of macroeconomic environment, social protection and labour market institutions. The empirical analysis shows that the social transfers in cash, and principally the transfers that do not include pensions, exert a prominent impact on inequality and poverty. Also significant is the effect of the GDP per capita. The impact of employment on inequality and poverty is not empirically sound. The same holds for the labour market institutions; an exception is the union density, which appears conducive to a less dispersed personal income distribution. Importantly, the results support the view that the social protection system acts as a catalyst in determining the effectiveness of social spending and the distributive role of economic growth and employment.     

Policy tolerance of economic crime? An empirical analysis of the effect of counterfeiting on Italian trade

Some governments seem ambivalent towards economic crime because, on the one hand, there are adverse effects on competition and legal businesses; on the other hand, there are benefits through (shadow) employment and income in less-developed areas, as well as benefits through relations of political clientage. We focus on counterfeiting and its economic effects on trade in Italy during the economic crisis. Using a newly built regional dataset and a dynamic panel model, we find evidence of the dual impact of counterfeiting. The production (and exchange) of fake goods depresses the legal market that relies on intellectual property rights but supports shadow-economic activities for the benefit of illegal workers, criminal organisations, and political clientele. We show that the negative effects outweigh the positive effects.     

On the assessment of the performance in earnings management for the banking industry: the case of China’s banks

Earnings management is popular in the banking industry. Earnings can be manipulated by discretionary loan loss provisions (DLLP). Analysing the trajectories of banks’ DLLP (i.e. their change in DLLP over time) is an effective way to assess the performance in earnings management for the banking industry, but seems not to have been addressed in the earnings management literature. In this study, we analyse the trajectories of DLLP with the yearly data from 2007 through 2012 for four types of banks in China. The results have indicated that state-owned banks, policy banks and city commercial banks seem to manage earnings well. Cautionary notes about bank risks are provided.