Preferential trade areas, multinational enterprises, and welfare

Abstract.  The effects of preferential trade areas (PTAs) on the investments by multinational enterprises and their implications for the welfare of members and non‐members are studied in a model with two types of firms: national firms and multinational firms. In the presence of multinational activity PTAs can create new investment as well as divert investment from non‐members to members. Both affect the welfare of members positively. More interestingly, if the investment creation effect of a PTA is sufficiently strong, then the PTA could be welfare enhancing for non‐members as well. JEL classification: F2, L1     

A hybrid production structure in trade: theory and implications

In models of pure theory of international trade, no unique production structure is dominant. By grafting a specific factor structure onto a Heckscher–Ohlin framework, in a hybrid general equilibrium production model, this paper presents theoretical results with implications such as: (a) the relative price increase of a traded goods sector might have expansionary or contractionary output effect depending on factor intensities; (b) uniform primary-factor augmenting technical progress in the intermediate inputs sector might lead to a decline in the output of one of the sectors; (c) favorable relative price effect in one sector will lead to a drop in the return to the specific capital type depending on the grafted production structure. The proposed framework is useful for explaining stylized facts related to wage inequality, deindustrialization and export-processing, which have a great policy relevance for trade and development.     

Industrial organization implications of QR trade regimes: Evidence and welfare costs

Evidence of the relationship between trade regimes, concentration and profitability in semi-industrial countries' manufacturing sectors is reviewed. This evidence is used to justify the formulation and simulation of a three sector general equilibrium model in which the manufacturing sectors's behavior is linked to the degree of restrictiveness of the QR regime. Simulations are conducted with several variants of the model to ascertain separately the effects of introducing economies of scale, firm entry/exit, departures from competitive pricing, and interactions between entry and pricing rules. Numerical results suggest that a 20 percent rationing rate of intermediates and consumption goods can have welfare costs of about 2.0 percent of national income in the absence of economies of scale and industrial organization interactions with the trade regime. When industrial organization features are included, the costs of the same 20 percent rationing quadruples.     

Multilateral trade liberalization: Some general equilibrium simulation results for Austria

This paper uses the Michigan Model of World Production and Trade for a quantitative evaluation of the general equilibrium effects of various multilateral trade liberalization scenarios on the Austrian economy. The analysis is motivated by the recent incorporation into the model of an original input-output table for Austria, and by a severe shortage of knowledge on the effects of liberalization on the Austrian economy. In addition to the actual Tokyo-round tariff cuts, the paper concentrates on an almost complete multilateral elimination of post-Tokyo-round protection, including the most important non-tariff trade barriers. The paper also reports on some aggregate price and exchange rate effects, but the primary focus of the analysis will be sectoral adjustment, characterized by changes in employment, per-unit value added, and returns to sector-specific capital.

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Zusammenfassung In Österreich besteht ein gewisses Defizit an systematischen quantitativen Analysen der bestehenden Handelsprotektion bzw. der Effekte, die eine Beseitigung dieser Protektion — etwa im Rahmen der laufenden GATT-Verhandlungsrunde — haben kann. In dieser Arbeit wird das an der University of Michigan (USA) entwickelte Welthandelsmodell für eine solche Analyse verwendet. Mit Hilfe dieses viele Länder umfassenden und empirisch implementierten allgemeinen Gleichgewichtsmodells werden die Auswirkungen verschiedener Szenarien der multilateralen Liberalisierung des internationalen Handels, einschließlich der Beseitigung nichttarifärer Handelshemmnisse, auf die österreichische Volkswirtschaft untersucht. Diese Untersuchung wurde möglich durch die mittlerweile erfolgte Aufnahme der österreichischen Input-Output-Daten in das Michigan-Modell. Sowohl aggregierte als auch sektorale Effekte werden berechnet, wobei die letzteren Aufschluß geben können über allenfalls zu erwartende Anpassungsschwierigkeiten.

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All simulations reported on in this paper were carried out while I was visiting scholar at the University of Michigan in 1987–88. I am deeply indebted to Alan Deardorff and Robert Stern for having me participate in their ongoing research project on General Equilibrium Trade Policy Modeling, for offering me unlimited use of their computational model, and for their continuous support and encouragement. I am also grateful to John Alfaro and Jon Haveman for computational assistance. Thanks are due to Josef Richter and Gottfried Tappeiner for their cooperation in providing the Austrian input-output table in machine readable form.     

Choice of currency basket weights and its implications on trade balance

This paper seeks to find an optimal choice of currency basket weights for emerging economies that peg their currencies to a currency basket, and to examine the long-run relationship between the real exchange rates of a group of trading partners. A general equilibrium model is set up to establish an optimal set of currency basket weights, coupled with the choice of fiscal policy, to simultaneously stabilize trade balance and aggregate price level of an economy. This optimal set of weights is a weighted average of two sets of weights; each targets at one policy goal (stabilizing either balance of trade or aggregate price level) at a time. Empirical studies including vector autoregression (VAR) analysis and cointegration analysis on the long-run relationship between the Thai baht and the real exchange rates of its major trading partners are presented.     

Some political determinants of economic growth: Theory and empirical implications

This work studies the effects of the political environs on economic growth. The theoretical result from a mathematical model suggests that regime instability, political polarization, and government repression all have a negative impact on economic growth. A cross-sectional analysis of 88 countries over the period of 1974–1990 provides preliminary confirmation of three implications derived from the theoretical model.     

Effects of trade liberalization on domestic prices: Some evidence from Tunisian manufacturing

This paper presents estimates of the competitive effects of trade liberalization on domestic pricing behaviour of Tunisian manufacturing industries. The theoretical framework is based on a dynamic flexible adjustment model of price determination in a small open economy. It investigates the process of adjustment in price level toward a desired level. The adjustment process is both industrial and time-specific. The empirical results show that, in the long run, domestic price responds greatly to import penetration, followed by demand pressure. There was a negative effect from import competition on domestic price. Trade policy is a viable policy option to promote competitiveness. (JEL: C33, E31, F14, L60)     

Analysing Potential Effects of Preferential Liberalisation in Some Asian Emerging Economies

This paper examines the ex-ante effects of possible trade liberalisation of some Asian emerging economies through forming a regional economic bloc called BIMSTEC by adopting SMART and GTAP models. Based on estimated export supply elasticity, the results of SMART simulation reveal that the highest net trade effect takes place for India, the biggest economy in the bloc, followed by Bangladesh for tariff elimination. The two countries also derive substantial welfare gains. The proportionate revenue loss is remarkably higher for smaller countries such as Nepal, Myanmar and Bangladesh. GTAP simulation suggests that Bangladesh incurs a net welfare loss by joining the FTA. The overall intra-bloc export is likely to increase. These results imply that there is a need for designing proper compensation mechanism and technical support for the smaller economies to offset the possible adverse effects.     

完善我国石油贸易体系的几点建议

近年来,中国经济持续增长,同时对国际石油资源的依赖程度也在逐步提高.     

Short-time work—Some long-run implications

This paper outlines a simple model to examine some long-run implications of short-time work schemes (STWs) on labor market performance and welfare. It is not clear that STWs reduce unemployment as the induced wage push discourages job creation.     

The welfare implications of trade liberalization between the Southern Mediterranean and the EU

The impact on the Southern Mediterranean Countries (SMC) of the current process of trade liberalization with the European Union is explored. The methodology is that of computable general equilibrium modelling under imperfect competition and the model includes ten countries and 11 sectors. This allows for both a cross-country and cross-sectoral analysis of the results. The experiments considered are the full liberalization of tariffs, as well as changes in market access and trade-induced changes in productivity. A key feature of the paper is that the phased introduction of tariff reductions is allowed for as explicitly envisaged in the Agreements. The results show that the process of liberalization may have a substantial, though non-monotonic, impact on the SMC economies in terms of both changes in production and through this on welfare. The welfare impact is potentially very high in particular for the high tariff economies. The sources of the welfare gain tend to derive from perfectly competitive explanations of trade for the high tariff economies, and from imperfectly competitive explanations of trade for the low tariff economies.     

A disaggregated analysis of EU imports: the implications for the study of patterns of trade and technology

This paper examines trends in the unit prices of manufacturedimports into the European Union (EU) in the period 1988–2002.This is undertaken at a high level of disaggregation, and itis this decomposition which we believe has important implicationsboth for a range of bodies of economic analysis and for policy.The analyses undertaken in this paper confirm that disaggregationmatters in helping to identify unit-price trends. We have alsoshown that unit-price trends vary with the type of economy exportinginto Europe and the type of product being exported, and thatthese results are robust at high levels of disaggregation.     

Exchange rates and trade: How important is hysteresis in trade?

This paper looks at the responsiveness of a country's export supply to exchange rate changes and measures its quantitative importance by breaking down export adjustments between changes in output levels by existing exporters (intensive margin) and movements due to changes in the number of exporters (extensive margin). Using data on a representative sample of Spanish manufacturing firms, the paper finds sunk costs hysteresis in entry and exit to be an important factor in determining export market participation, but unrelated to exchange rate uncertainty. The sunk costs of entering the market appear to be much larger than the costs of exiting the market. Finally, although hysteresis exists, its effect on the responsiveness of aggregate trade volumes to exchange rate changes is quantitatively small. A 10% home currency depreciation results in an increases in export volume due to the increase in the number of exporting firms of only 1.4% of export volume.     

Efficient stabilization of economic systems: Some global analytical results for the linear quadratic case

This paper gives analytical results about the global properties of efficiently stabilized linear-quadratic systems. We prove that the process of computing optimal policies can be decomposed into a combinatorial process, any optimal policy being a linear combination of ‘extreme policies’ with remarkable weights. Very strong results are available when there is one instrument less than objectives, the ‘uncertainty frontier’ being then reduced to a hyperplane in the space of standard errors. It is proved furthermore that these results can be extended to dynamic stationary efficient stabilization. An illustration is given on the basis of a small macroeconometric model.     

Some welfare implications of birth,death, and migration

The welfare effects of population change are analyzed using gains-from-trade ideas. This framework does not give rise to the pessimism of Malthusianism and optimal population theory. Overpopulation becomes a consequence of market failures impinging on fertility or migration choice, not the existence of fixed factors. The approach enables a generalization of single-good, single-factor models of population growth into settings where induced capital flows arise due to demographic change.     

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.     

U.S. trade remedy law and agriculture: trade diversion and investigation effects

Abstract .  We study U.S. agricultural antidumping and countervailing duty cases from 1980 to 2005, and gauge the effectiveness of trade remedy law as a form of protection. The purpose is to measure the resulting investigation and trade diversion effects. Previous research on trade in manufactured products has shown that the domestic protection offered by AD and CV duties is largely offset by trade diversion. In contrast, we find that for agriculture, trade diversion is relatively unimportant. So AD and CVD cases are very effective forms of protection for U.S. agriculture.     

Inflation and extraordinary returns on owner-occupied housing: Some implications for capital allocation and productivity growth

This paper examines the effects of inflation on the allocation of resources between residential and nonresidential uses and the productivity of capital in the U.S. We begin by calculating the realized rates of return on homeowner equity and the contributions of fixed-rate mortgages and differences in relative inflation rates to extraordinary earned real returns. The paper then focuses on the implications of the extraordinary real returns on residential capital for stock prices and on the demand for owner-occupied housing. Proposals for achieving efficient allocation of capital between residential and nonresidential uses are also considered.