Foreign Exchange Accumulation and the Entrapment of Chinese Monetary Power: Towards a Balanced Growth Regime?

This article criticises the notion that China's foreign exchange reserves have strengthened its monetary power. While some scholars have argued that China's international monetary influence has been ‘entrapped’ by the domestic interests of its export sector, a one-sided focus on the export sector fails to identify the significant constraints on its macroeconomic autonomy. This article proposes an extension of the concept of entrapment that draws attention to the key role of state-owned enterprises (SOEs) and their domestic fixed-asset investment in its growth regime: China's external monetary dependency – which is understood as both export dependency and the need to maintain foreign exchange accumulation – has been caused by a disparity between fixed-asset investment and private consumption that reflects a redistribution of income from the household sector to the SOE sector. In particular, I expose the SOE sector's rising interests in foreign exchange accumulation by uncovering a mutually reinforcing dynamic between China's external monetary dependence and the financial repression of its banking system. By entrenching an investment-led growth regime that provides key benefits the SOE sector, this dynamic is found to have seriously constrained the macroeconomic policy autonomy of Chinese authorities to rebalance growth away from investments and exports towards private consumption.     

Dynamic Lobbying Conflicts

This paper analyzes a dynamic lobbying model in which two antagonistic lobbies compete with each other for a prize over two time periods that are linked through status quo bias. The attacker has to decide whether to attempt an attack on the status quo already in the first period or whether to wait. We identify how the attacker’s behavior in the dynamic model differs from that in a comparable static model. Two antagonistic effects are the “option value effect” that is similar to the real option effect in the theory of investment decisions under uncertainty; and a “defender discouragement effect” that often makes change cheaper to achieve than in a comparable static model.      

Information and crowding externalities

Summary. We analyze a model in which agents have to make a binary choice under incomplete information about the state of the world, but also care about coordination with other agents who have the same problem. In some of these situations, the larger the share choosing the same alternative, the better off are agents. In others, if too many people choose the same alternative, agents could be worse off, due to crowding externalities. Agents receive public and private information about the state of the world. We determine whether agents rely more on private or public information, and whether or not their choice behavior is socially efficient. We characterize existence conditions for equilibria in which either all available information, or only the public information is used for decisions, compare the two equilibria in terms of welfare, and analyze the effects of better information. Surprisingly, increasing signal accuracy may be welfare decreasing.Received: 24 March 2004, Revised: 19 November 2004, JEL Classification Numbers: D82. Correspondence to: C. Robert ClarkWe would like to thank Ig Horstmann, Gilbert Laporte, Andrew Leach, Matthias Messner, Bernard Sinclair-Desgagné, Howard Thomas, Nicholas Yannelis, and two anonymous referees for helpful comments. The first author wishes to acknowledge the Strategic Research Grant he received from HEC Montreal for this project.     

What are public services worth, and to whom? Non-parametric estimation of capitalization in Pune

The availability and quality of basic public services are important determinants of urban quality of life. In many cities, rapid population growth and fiscal constraints are limiting the extent to which urban governments can keep up with increasing demand for these services. It therefore becomes important to prioritize provision of those services to best reflect local demand. We present a strategy to estimate the demand for public services, which is sensitive to heterogeneity in preferences across types of households, and the non-parametric estimation addresses problems arising from functional form restrictions. Using data from Pune, India, we estimate the demand for public services, as represented by the marginal change in the self-assessed monthly rental price of dwellings from the services. We find that the value of publicly-provided services accruing to the poor is greater than that going to wealthier households, and even untargeted across-the-board investment in specific services can be progressive.     

Implications of alternate policies on welfare of slum dwellers: Evidence from Pune,India

In this paper we examine how slum dwellers value location-based amenities. In most developing country cities, residents living in slums have poor-quality dwellings and limited access to basic public services and amenities. Using data from Pune, India, we estimate the residential location choices of slum dwellers, which are conditional on housing quality, neighborhood amenities, and community structure. We use these estimates to simulate the impact of alternate interventions on household welfare. We find that households derive benefits from housing quality and neighborhood amenities. While relocating households to the periphery has adverse consequences for household welfare, we show that households could be adequately compensated out of the increased tax revenue accruing from alternative uses of the vacated central land.     

Least-cost allocation of measures to increase the amount of coarse woody debris in forest estates

Coarse woody debris (CWD) is crucial for maintaining biodiversity in forests but conservation measures to increase CWD must be performed cost efficiently. We estimate least-cost combinations of CWD-increasing measures in a spruce-dominated Swedish forest estate. Specifically, we investigate how using combinations of the measures tree retention, creating high stumps, manual scarification, prolonged rotations, and retention of dying trees impacts the amount of CWD and net present value at the estate level. We found that by combining CWD-increasing measures in an optimal way the amount of CWD on the estate could be increased 322% with a decrease in present value of only 10%. The optimal combination of conservation measures depends on the desired increase in CWD. The analysis thus shows that huge improvements in cost-efficiency of biodiversity-oriented forestry are possible.     

Reciprocal Dumping with Product Differentiation*

This paper examines if international trade can reduce total welfare in an international oligopoly with differentiated goods. We show that intra‐industry trade, i.e. “reciprocal dumping,” can result in lower total surplus than autarky in a Cournot model for any degree of product differentiation. Moreover, trade can reduce welfare compared to autarky in a Bertrand model when the local markets are sufficiently competitive and products are sufficiently close substitutes. Otherwise it unambiguously increases welfare.     

Optimal agenda-setter timing

Abstract .  We analyze the optimal timing problem of an agenda setter who can propose a project that is then voted on by a committee. The payoff consists of a common stochastic component and an idiosyncratic component that differs among committee members. The agenda setter may be biased for or against the project, relative to the median committee member, and chooses when to call the vote. We analyze how the timing decision depends on the political environment and the bias of the agenda setter. We show that both positively and negatively biased agenda setters can implement decisions that differ from those preferred by the median committee member.     

Get Out The Vote: How Encouraging Voting Changes Political Outcomes

How do measures to increase turnout affect election outcomes? I use a novel approach to analyze how these measures influence both voter turnout and the candidates' political positions. In general, lowering the net expense of voting reduces political polarization. If the net expense of voting is made very low, then candidates no longer have an incentive to take partisan positions to motivate turnout and will converge at the median voter's ideal point. For small changes in the net expense of voting, however, decreasing the cost of voting and penalties for not voting (two common measures) can result in drastically different political outcomes. Counter intuitively, measures that make voting cheaper might not increase turnout: since these measures decrease the difference between the candidates' political positions, they also decrease the benefit of voting.     

Use of explorative scenarios in environmental policy-making—Evaluation of policy instruments for management of land, water and the built environment

In order to achieve the Swedish Environmental Quality Objectives (EQOs), three action strategies have been adopted by the Swedish parliament. The strategy addressed in this paper deals with the management of land, water and the built environment. The paper reports on a project involving authorities and researchers in which policy measures required for achieving relevant targets for the strategy were gathered, structured and analysed regarding their potential assuming alternative futures. Measures with proposed policy instruments were qualitatively evaluated against one business as usual scenario and four explorative scenarios varying along two dimensions; level of governance and level of embeddedness. The results show a heavy predominance of administrative policy instruments. This policy strategy depends on a future development where such policy instruments are accepted. In order to achieve the EQOs regardless of future developments, more robust packages of measures including a larger variation in policy instruments need to be developed.