Assessing Consumer Gains from a Drug Price Control Policy in the United States

We use national data from 1960 to 2000 to estimate the demand for pharmaceuticals in the United States. We then simulate consumer surplus gains from a hypothetical drug price control policy that would have limited drug price increases to the rate of inflation from 1981 to 2000. Using a range of values for the real interest rate, coinsurance rate, and own-price elasticity of demand, we find that the consumer surplus gains from this policy equal $472 billion by the end of 2000. According to a recent study, that same policy would have led to 198 fewer new drugs being brought to the U.S. market. Therefore, the average social opportunity cost per drug developed during this period was approximately $2.4 billion. Research on the value of pharmaceuticals suggests that the social benefits of a new drug are far greater than this estimate. Hence, drug price controls could do more harm than good.     

The trade effects of the U. S. generalized system of preferences

Conclusion Subsequent rounds of multilateral tariff reductions and changes in the GSP and other trade arrangements supersede the analysis presented here, but this study still provides some guidance to future analysis of tariff concessions. The review of the literature suggests a need for greater precision in methods and data. The new technique employed here would appear to be appropriate for future analyses of multilateral trade liberalization and of proliferating free trade areas. Our results indicate that extremely optimistic and pessimistic estimates of GSP trade effects should be regarded with skepticism. The GSP has probably had a modest positive impact on LDC exports to the United States.     

China and the WTO: Tariff offers,exemptions, and welfare implications

China and the WTO: Tariff Offers, Exemptions, and Welfare Implications. — Trade reforms have opened the Chinese economy and the reforms offered for WTO accession involve further liberalization. To assess the implications of these offers, the authors take into account the tariff exemptions that are especially important in China’s trade regime, and the reductions in the variability of tariffs at the tariff line level required by the WTO offers. The offers will result in real income gains of over $ 50 billion, benefitting China and its major trading partners. Omitting the tariff exemptions is shown to result in over-estimation of the benefits from liberalization, while focusing on average tariff reductions leads to under-estimation.     

中美贸易摩擦实际关税加征的测算及其影响——基于细分产品数据的研究

基于中美贸易HS6位码细分产品贸易数据以及美国对华出口产品关税加征清单,本文测算了中美贸易摩擦对中国对美HS6位码细分出口产品实际关税加征幅度及其产业影响.文章结果显示,2018年、2019年中国输美产品承担的加税总金额为540.63亿美元,税率平均增加了5.22％,其中,计算机、电子元器件、家具、汽车零部件及配件等产...     

Do oil tariffs lower wages?

An oil tariff has potential to alter the pattern of production and income distribution across productive factors. This paper use a general equilibrium model of production and trade with inputs of capital, labor, and international energy to examine the effects of an oil tariff. Under a range of conditions, higher energy prices created by oil tariffs would lower the ratio of wages to capital rents, and production of labor intensive goods would fall. This paper concentrates on the potential of oil tariffs to alter patterns of production and income distribution.     

Global rebalancing: Effects on trade and employment

A sustained reduction of global current-account imbalances must include a decline in the share of household consumption in aggregate demand in the United States and the opposite development in China. Accordingly, import demand would decline in the United States and increase in China. Given non-homothetic demand preferences, the resulting change in the income distribution of global import demand affects both the intensity and pattern of other countries’ exports. Simulations suggest that, for the world economy, the net effect of this shift would be a decline in industrial exports, especially from labor-intensive sectors producing consumer durables. A multilaterally coordinated rebalancing that would also include an increase in the share of household consumption in aggregate demand of developed country surplus economies would reduce these adverse effects on trade and employment. Apart from the countries undertaking rebalancing, developing countries in East and South-East Asia face the greatest adjustment pressure from global rebalancing.     

Poverty Effects of the Philippines’ Tariff Reduction Program: Insights from a Computable General Equilibrium Analysis*

A computable general equilibrium micro‐simulation model is used to assess the economic and poverty impacts of tariff reduction in the Philippines. Tariff reduction induces consumers to substitute cheaper imported agricultural products for domestic goods, thereby resulting in a contraction in agricultural output. In contrast, tariff reduction reduces the domestic cost of production, benefiting the outward‐oriented and import‐dependent industrial sector. The national poverty headcount decreases marginally as lower consumer prices outweigh the nominal income reduction experienced by the majority of households. However, both the poverty gap and severity of poverty worsens, implying that the poorest of the poor become even poorer.     

Relevant international experience of real exchange rate adjustment for China

Is the real appreciation of the Chinese yuan essential for correcting global imbalances? The present study offers a new perspective to the debate by drawing upon the rich international experience embodied in World Bank's World Development Indicators database. We find that the price levels of China and the United States are both low relative to the world's average. Therefore, the discrepancy between the price levels of China and the United States has been, in fact, close to zero since 2002. The difference in per capita income can fully account for the price difference between China and the United States. However, the Balassa–Samuelson effect is not a reliable guide for projecting the trend of real appreciation. According to the experience of those economies that have experienced real currency appreciation against the US dollar in 1985–2005, the mode of faster wage growth and inflation is as common as nominal appreciation, far more common for economies with a low initial price level. We do not find empirical evidence to substantiate the claim that low price levels tend to cause external surpluses. But real appreciation has a powerful effect in boosting job creation in the service sector. Therefore, the real appreciation of the Chinese yuan would contribute to restructuring the Chinese economy towards a domestic demand-based growth track.     

中国应积极面对碳关税

当前气候问题成为世界关注的焦点,美国、法国在全球贸易中对碳关税政策的态度,引起了全球普遍的关注和争议。本文根据碳关税产生的背景和实质,分析了碳关税对中国经济发展的不利影响,考虑到未来低碳经济将成为新的经济增长点,这决定了我国必须在碳关税征收前做好准备,同时提出了我国应对碳关税的政策建议。     

Modelling the demand for broad money in the United States

The demand for money function occupies a central role in most theories of aggregate economic activity, especially in the formulation and execution of effective monetary policy. In this paper, estimates of the short- and long-run demand for broad money in the United States are obtained. The empirical evidence suggests that the relationship between the growth of money balances and its economic determinants is more stable than some have argued. Importantly, the out-of-sample forecasts presented here suggest that M2 growth in the 1980s is well predicted by an error-correction model that includes a variable representing the value of time and also uses real consumer spending as the short-run scale variable.     

The U.S.–China trade war: Tariff data and general equilibrium analysis

The current trade war between the United States and China is unprecedented in modern history. This study introduces a database of tariff increases resulting from the trade war and quantifies the impacts using the canonical GTAPinGAMS model calibrated to the recently released GTAP version 10 accounts. We find that the remaining tariff increases as of March 2020 after the phase one trade deal decrease welfare in China by 1.7% and welfare in the United States by 0.2%. Impacts on sectoral revenue are reported for both countries. China's exports to and imports from the United States are reduced by 52.3% and 49.3%. The trade flow between the United States and China will be diverted to their major trade partners resulting in higher welfare in those countries, including many Asian countries. The estimated impacts are robust to using alternative trade elasticities and are amplified in the absence of the phase one tariff reductions.     

Free trade and income redistribution in some developing and newly industrialized countries

A competitive general equilibrium model of production is specified and the long-run comparative static elasticities of changing prices on factor prices are examined in eight developing and newly industrialized countries. Unskilled labor in these developing countries stands to gain from a program of global free trade characterized by increased manufacturing exports and falling prices of imported business services, while capital owners and skilled labor lose. Results are contrasted with developed countries, the United States in particular, where unskilled labor will lose while capital and skilled labor enjoy gains with global free trade.     

Going Home: Evacuation-Migration Decisions of Hurricane Katrina Survivors

In the wake of Hurricane Katrina, many evacuees from the Gulf region began the difficult process of deciding whether to rebuild or restart elsewhere. We examine pre-Katrina Gulf residents' decision to return to the postdisaster Gulf region—which we call the “return migration” decision. We estimate two separate return migration models, first using data from a mail survey of individuals in the affected region and then focusing on self-administered questionnaires of evacuees in Houston. Our results indicate that return migration can be affected by household income; age; education level; and employment, marital, and home ownership status, but the results depend on the population under consideration. We find no effect of “connection to place” on the return migration decision. Although the effect of income is relatively small within subsamples, we find a much higher proportion of middle income households planning to return than lower income households when comparing across the subsamples. In addition, the real wage differential between home and host region influences the likelihood of return. Larger implicit costs, in terms of foregone wages for returning, induce a lower likelihood of return. Exploiting this difference at the individual level, we are able to produce estimates of willingness to pay (WTP) to return home. Average WTP to return home for a sample of relatively poor households is estimated at $1.94 per hour or $3954 per year.     

Level of Economic Development and Income Inequality: Evidence from the Postwar Developed World

Using a recent high-quality panel dataset on income distribution for 19 developed countries, the postwar relation between the level of economic development and income inequality is estimated in terms of several Kuznets-type specifications. Contrary to what one might expect on the basis of Kuznets's hypothesis, inequality does not decline with an increase in income even at such high levels of development, but shows an uninverted-U pattern that is characterized by an initial decline and a subsequent increase in income inequality. The estimates suggest that the position noted for the postwar United States is shared widely in the developed world.     

Dynamic Comovements Between Housing and Oil Markets in the US over 1859 to 2013: a Note

In this study, we examine the dynamic comovements between housing and oil market returns in the United States over the period 1859–2013, while controlling for real gross domestic product growth, inflation, interest rates, and real stock, gold and silver returns that are known to affect both these markets. As such, we provide a bird’s-eye view on the interdependencies between these two markets from a historical perspective. The results of our empirical analysis reveal that comovements between housing and oil market returns are consistently negative over time, apart from several recessions the U.S. economy experienced in the 19th century, wherein correlations were positive.     

Causes and Consequences of Bias in the Consumer Price Index as a Measure of the Cost of Living

The accurate measure of prices is fundamental to almost every important issue in economics, from measuring economic progress to the conduct of monetary policy to the indexation of private contracts and public programs and tax rules. This paper reviews the causes of bias in the United States Consumer Price Index (CPI), updates the estimate of such bias (now roughly 0.8 percent per annum) following several improvements by the Bureau of Labor Statistics (BLS), notes the likely far larger substitution bias than previously estimated and calls for a series of priority improvements. Particular attention is called to the over 40 basis point slower growth of the BLS C-CPI-U compared to the CPI-U, more than double the early 1990s estimates, which highlights the importance of moving to a formula such as the chained Tornqvist C-CPI that corrects for traditional substitution bias. The implications for mismeasuring the growth of real wages, real median income, and real returns to stocks and bonds are developed, as are the budgetary implications of the overindexing of spending and tax brackets resulting from the overstatement of changes in the cost of living.Presidential Address presented at the Fifty-Eighth International Conference, October 7-10, 2004, Chicago, Illinois. I would like to thank Leilei Xu for valuable research assistance.     

The economic consequences of the TARP: The effectiveness of bank recapitalization policies in the U.S.

This study empirically analyzes the impact of the United States’ bank recapitalization program, the centerpiece of the United States’ $700 billion Troubled Asset Relief Program (TARP), on bank portfolios. Through superior empirical analysis and correct model specification, our findings overturn much of the existing literature on the effectiveness of capital injections into the banking sector in Japan and the United States. We show that the TARP program did not achieve the stated policy objective of stimulating bank lending. On the contrary, we find evidence that recipient banks grew assets significantly slower, particularly heavily risk-weighted assets such as loans. These findings are robust to various empirical specifications, including two-stage least squares estimation using instrumental variables, difference-in-difference techniques and generalized method of moments. These techniques control for pre-existing trends in loan growth while addressing potential endogeneity bias.     

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。     

The effects of the United States granting MFN status to Vietnam

Conclusions In this paper, the direct impacts on Vietnam’s trading opportunities of the U.S. granting MFN treatment were first estimated by building up from the resulting level of tariffs applied to individual traded goods. Then, the economic impacts on Vietnam were inferred, using simulations with the Global Trade Analysis model. The results revealed that the increased market access to the United States brings significant welfare gains to Vietnam. The direct terms of trade improvement resulting from increased market access accounts for 60 percent of the total gain, with the remaining 40 percent derived from second-best induced gains in efficiency. Exports to the United States more than doubled, from $338 million to $768 million.¹³ The estimated increase in exports of clothing is especially significant, with these exports increasing almost fifteenfold, while exports of agricultural commodities decreased slightly. Total welfare as measured by Equivalent Variation increased by $ 118 million or 0.9 percent increase in real expenditure per capita. By granting MFN status to Vietnam, the United States also gains from improved resource allocation, although some of the gains are offset by deterioration in its terms of trade. The gains for the United States were estimated to be around $56 million per year.     

What＇s So Special about China＇s Exports？

I. Introduction The phenomenal performance of China constitutes the great economic miracle of the last quarter century. China’s economy has expanded by leaps and bounds, at historically unprecedented rates that few economists would have found plausible or feasible ex ante. More importantly, this growth has lifted hundreds of millions of people from deep poverty and has helped improve health, education and other social standards. China has accomplished all this using its own brand of experime…