International Process Standards and North–South Trade

This paper examines the choice between alternative trade-based approaches to reducing global environmental damage, such as trade-related process standards and tariff-based approaches. Estimates of the effects of alternative policies are presented, using a calibrated global trade model with pollution externalities. It is found that both trade-related process standards and tariff-based policies are rather ineffective at reducing global emissions. The adoption of general process standards, however, might be exceedingly costly to developing countries.     

Technical Progress and the North–South Terms of Trade

In a classical world where prices of both northern manufactures and southern raw materials are determined by market demand and supply, technical progress in one region leads to a terms-of-trade improvement of the other region irrespective of whether technical progress is labor-saving or raw-material saving. But in a neo-Kaleckian framework characterized by surplus capacity, and an effective demand problem in the North and a capacity constraint in the South, the terms of trade would turn against the South even if the North experienced a higher rate of technical progress than that of the South.     

North–South Trade and Occupational Wages: Some Evidence from North America

The issue of trade and wages in general, and of North–South trade and wages in particular, has recently received a great deal of attention by economists and public policy analysts. This paper offers some empirical evidence of the effects of North–South trade on occupational wages in North America. Using a detailed, applied general equilibrium model, results are obtained indicating that it is possible for trade liberalization among the North American countries to entail real wage benefits for most occupational groups in all three countries. An exception to this general pattern is the case of agricultural laborers in Mexico.     

Endogenous Growth and Equilibrium Unemployment in a North–South Model

A North–South model is developed which incorporates an endogenous rate of equilibrium unemployment in the North in the context of long-run growth. It is shown how increases in the size of public debt and unemployment compensation financed by payroll taxation, all measured relative to productivity, raise the Northern natural rate of unemployment and, consequently, reduce the global rate of long-run growth. The effect of the shocks is also to drive down the rate of employment expansion in the South. A set of the fundamental determinants of the world terms of trade is obtained, which includes policy parameters.     

North–South Trade, Income Distribution, and Welfare Effects of R&D Policy

The paper considers an extension of the Flam and Helpman model of North–South trade in which the government of South organizes and pays for R&D activity to reduce the production cost of quality-differentiated products. The main conclusions are the following: South has a welfare incentive to initiate R&D activity under some conditions on effectiveness of R&D in improving the technology. By doing so, South can increase the production of higher-quality differentiated products. North suffers a welfare loss from this R&D except in the case where the effectiveness of South's R&D activity is unusually high.     

North–South Lending with Moral Hazard and Repudiation Risk

The paper shows that the joint presence of moral hazard and repudiation risk generates an important interaction effect. In order to provide the proper incentives to borrowers, the optimal financial contract under moral hazard calls for all available resources to be paid to the lender in the event of a poor realization for output. Repudiation risk limits the size of this transfer, as the debtor has the option to default. This upper bound on the resource transfer exacerbates the moral hazard problem, reducing lending and the equilibrium level of investment and output.     

Foreign Aid, Innovation, and Technology Transfer in a North–South Model with Learning-by-Doing

The paper examines foreign aid in the context of a dynamic Ricardian model of trade and development that highlights the role of learning in both the initial adoption of new technologies and products and their eventual transfer from developed to developing countries. When aid is paid as a pure unilateral transfer, the conventional short‐run terms‐of‐trade improvement that results from a home bias in consumption causes harmful delays in the transfer of technology that can lead to mutual immiserization. Conversely, aid that directly or indirectly expedites technology transfer and learning in developing countries can be mutually beneficial.     

Skill differentiation and wage disparity in a decentralized matching model of North–South trade

In this paper we develop a North–South trade model in which the South produces food and the North produces both food and a high–tech good. Food production is undertaken by unskilled workers, while the high–tech product is made only by horizontally differentiated skilled workers. Owing to the possibility of a peer–group effect, we allow the unskilled workers in the North to be equally or more productive than in the South. Horizontal matching of skilled workers is generally imperfect and the skilled wages are determined by a symmetric Nash bargain. We characterize two different types of equilibrium: a closed–economy equilibrium without trade and a free trade equilibrium without labour mobility. We then extend the benchmark framework to consider the presence of transport costs. In all cases with trade, the equilibrium properties of goods pricing, the volume of trade as well as between–group and within–group wage inequality are examined. JEL Classification: F10, D51, D63, J31 Différentiation d’habiletés et disparité de salaires dans un modèle décentralisé de commerce nord–sud dans lequel les habiletés sont arrimées. Ce mémoire développe un modèle de commerce international nord–sud dans lequel le Sud produit de la nourriture et le Nord produit à la fois de la nourriture et un bien de haute technologie. La production de la nourriture nécessite seulement une main d’?uvre non–spécialisée, alors que la production du bien de haute technologie réclame seulement une main d’?uvre spécialisée et différentiée horizontalement. On assume que les travailleurs non–spécialisés dans le Nord sont aussi productifs ou plus productifs que ceux dans le Sud. Pour ce qui est des travailleurs spécialisés, l’arrimage horizontal est généralement imparfait et les salaires sont déterminés par une négociation symétrique à la Nash. On définit deux types d’équilibres : un équilibre en économie fermée sans commerce international, et un équilibre de libre échange sans mobilité des travailleurs. On étend alors le cadre de référence pour prendre en compte les coûts de transport. Dans tous les cas où il y a commerce international, on examine les propriétés en équilibre des prix des biens, du volume de commerce ainsi que de l’inégalité de salaires tant entre les groupes qu’à l’intérieur des groupes.     

R&D and Output in a Regulated Vertically Integrated Oligopoly

This paper examines input price regulation's effects on research and development (R&D) and output in a vertically integrated industry. A single integrated firm produces the crucial input and the output. The non-integrated rival does not produce the input but buys it from the integrated firm at a regulated price. Only the integrated firm engages in cost-reducing R&D. Results show that changes in input price have a negative effect on the integrated firm's output and R&D. The non-integrated firm's output response to changes in input price depends upon the slope of the demand curve. The welfare analysis examines the social desirability of such regulation.     

Rules of Origin in North–South Preferential Trading Arrangements with an Application to NAFTA

All preferential trading agreements (PTAs) short of a customs union use rules of origin (ROO) to prevent trade deflection. ROO raise production costs and create administrative costs. This paper argues that in the case of the recent wave of North–South PTAs, the presence of ROO virtually limits the market access that these PTAs confer to the Southern partners. In the case of NAFTA, we find average compliance costs around 6% in ad valorem equivalent, undoing the tariff preference (4% on average) for a large number of tariff lines. Administrative costs amount to 47% of the preference margin. These findings are coherent with the view that North–South PTAs could well be viewed like a principal–agent problem in which the Southern partners are just about left on their participation constraint.     

Measuring the Intensity of Vertically Integrated Multinational Enterprises

Using data collected by the Bureau of Economic Analysis (BEA), this study attempts to measure the intensity of vertically integrated multinational enterprises (VMNEs) for US foreign direct investment (FDI). By comparing the primary industry of US parents and their foreign affiliates, it is found that a significant proportion of VMNEs exists for US FDI abroad, which range over 14 manufacturing and three nonmanufacturing industries. The intensity of VMNEs is found to be negatively related with the host countries' labor cost. Meanwhile, a critical amount of VMNEs arise to take advantage of proximity to customers through FDI.     

A Schumpeterian North–South Growth Model of Trade and Wage Inequality*

The paper presents a dynamic general‐equilibrium model of interindustry North–South trade that is used to analyze the effects of trade liberalization on the Northern wage distribution. Both countries have a low‐tech sector where consumer goods of constant quality are produced by use of unskilled labor. The North also has a high‐tech sector that employs skilled labor and features a quality‐ladder model structure with endogenous growth. Both innovation and skill acquisition rates are endogenously determined. In a balanced trade equilibrium, it is found that Southern‐originated (Northern‐originated) trade liberalization leads to an increase (decrease) in Northern wage inequality both between skilled and unskilled workers and within the group of skilled workers. The endogenous change in the Southern terms of trade determines the direction of change in unskilled wages in both the North and the South.     

Quality-Differentiated Inputs and Trade In Vertically Related Markets*

This paper presents an international trade model of vertically related markets with quality differentiation at the stage of the intermediate good. Domestic input producers are at a disadvantage relative to higher quality foreign suppliers in providing inputs to a domestic final-good producer. the input producer may be driven out of the market unless policies enacted by the domestic government can encourage domestic final-good firms to use the domestic input. Results show that multiple tariffs and direct production subsidies are the most beneficial policy options.     

Monopolistic Competition and North–South Trade

This paper examines the consequences of opening to international trade for a developing economy with open urban unemployment and rural–urban migration, where the urban sector is monopolistically competitive. It is shown that there exists a threshold level of urbanization prior to which increases in product variety will be reflected in increased urban unemployment, that opening to intra‐industry trade with a high‐wage economy (i.e. North–South trade) will reduce the rate of urban unemployment by a greater amount than intra‐industry trade with a similar economy, and that trade intervention in the South may lower welfare by reducing varieties produced in the North.     

FDI纵向一体化、技术转移与东道国产业发展

引进外商直接投资(FDI一直被视为东道国实现技术升级和产业发展的重要途径;然而,FDI纵向一体化的进入模式有可能不利于东道国的产业发展.文章在双边寡占的框架下,将技术转移决策以及技术扩散效果引入Lin和Saggi(2011)的模型中,分析上下游FDI一体化与非一体化进入方式对东道国产业发展和福利的影响.研究表明:在本土企业技术能力不足时,上下游FDI一体化进入方式虽然会给东道国带来更多的先进技术转移,但这更有利于FDI提高自身的竞争优势,而且这种一体化的进入方式通过消除自身面临的“双重边际化”以及加剧东道国本土企业的“双重边际化”来挤压本土企业的利润,进而给东道国企业的利润和福利带来负向影响.文章不仅为外资带来的“产业升级悖论”提供了一种理论解释,而且也为我国引进外资的政策导向和改善引资质量提供了借鉴.     

North–South Trade Liberalization and Economic Welfare

We consider a general equilibrium model of a developing economy (the South) that opens to trade with a developed economy (the North). The southern economy is characterized by open urban unemployment and rural–urban migration, a competitive agricultural sector and a monopolistically competitive manufacturing sector. Hence, there is potential for both inter‐ and intra‐industry trade to arise on liberalization, in addition to distortionary effects of duality. Southern comparative advantage in agriculture may arise from the labor market distortion and the basis for intra‐industry trade is love for variety. We characterize various configurations of the trade pattern, and the resulting welfare consequences of opening to trade in this context. We illustrate a new mechanism under which in some circumstances it may be possible for trade liberalization to lower economic welfare in the South.     

European Integration, Intra-industry Trade in Vertically Differentiated Products and the Balkan Countries

The aim of this paper is to examine the relation between the integration process and the intensity of intra-industry trade between two countries of different levels of development. Our theoretical model and results indicate that trade liberalization and the establishment of the Free Trade Areas between the Balkan countries and the EC have led to the growth of the intra-industry trade between Greece—EC member state—and those countries. The main instruments of this process have been the Europe Agreements and the Stabilization and Association Agreements between the Balkan countries and the EC. The paper presents a model in vertically differentiated products in a Free Trade Area context and proceeds to depict the intensity of intra-industry trade between Greece and the Balkan countries.      

Optimal Trade Policies and Production Technology in Vertically Related Markets*

This paper shows that optimal trade policies for vertically related markets depend crucially on production technology. By employing a production function with variable‐coefficient technology, it shows that return to scale is crucial in determining the direction of government intervention. Therefore, the assumption of fixed‐coefficient production technologies, which has been popular in industrial organization and trade literature when modeling vertically related markets, should be used with caution.