Rethinking international subsidy rules

Geo-economic tensions, notably associated with the rise of China, and global collective action problems—climate change and the COVID-19pandemic—call for international cooperation to revise and develop rules to guide both the use of domestic subsidies and responses by governments to cross-border competition spillover effects. Current WTO rules dividing all subsidies into prohibited or actionable categories are no longer fit for purpose. Piecemeal efforts in preferential trade agreements and bi- or trilateral configurations offer a basis on which to build but are too narrow in scope. Addressing spillover effects of subsidies could start with G20 countries launching a work programme to mobilise an epistemic community concerned with subsidy policies, tasked with building a more solid evidence base on the magnitude, purpose and effects of subsidy policies. The need for such cooperation has become even more pressing by the COVID-19 pandemic and associated increase in the use of subsidy programmes in major economies.     

Optimal portfolios under a correlation constraint

Under a correlation constraint the optimal constant/fixed-mix portfolio consists of the market portfolio, the riskless bond and the benchmark     

Ethical issues in international lending

This article deals with the ethical issues faced by commercial banks, governments and international financial institutions in their international lending activities. Such issues include not only to whom and for what purpose such lending takes place but also the more delicate questions of the relations between sovereign lending and economic management, as well of lending to sovereign countries embroiled in situations of conflict. It leads to the ethical issues raised by the present international debt crisis: co-responsibility, burden-sharing, role of the international organisations. Finally, capital flight out of developing countries is studied as a special case.Bernard Snoy born in Bois-Seigneur-Isaac (Belgium) in 1945.Holder of bachelor's degree in philosophy and of doctor's degree in law from Catholic University of Louvain and of Ph.D. in economics from Harvard.Has worked for 12 years with the World Bank in Washington and in Paris.Has been teaching at the Catholic University of Louvain and at the College of Europe (Bruges).Has been for two years Economic Adviser at the Commission of the European Communities.Since May 1988, Bernard Snoy assumed the position of Chief of the Minister's Cabinet at the Belgian Ministry of Finance.This presentation made in November 1987 reflects the views of the speaker and does not necessarily represent the views of the Commission.     

New Estimates of Economies of Scale and Scope in Higher Education

Following Colin, Rhine, and Santos (1989), we reeslimate cost functions for 1492 private and 1450 public institutions of higher education (IHEs) in the United States, using data for fiscal year 1995-1996. Costs are modeled as a function of the level of production of three outputs: undergraduate education, graduate education, and externally funded research. We find that public and private IHEs are characterized by significantly different cost functions. At the sample means of the variables, we estimate that public and private IHEs enjoy both ray economics of scale and product-specific economies with respect to production of all three outputs. However, we also find that, at the sample means, both public and private institutions are characterized by diseconomies of scope in the production of these three outputs. Our findings suggest that both public and private IHEs could reduce their unit costs of operation by growing relative to the current mean levels of production.     

Exporting and Productivity in the USA

Exporting is often touted as a way to increase economic growth.This paper examines the interaction between exporting and productivitygrowth in US manufacturing. While exporting plants have substantiallyhigher productivity levels, there is no evidence that exportingincreases plant productivity growth rates. The higher productivityof exporters largely predates their entry into exporting. However,within the same industry, exporters do grow faster than non-exportersin terms of both shipments and employment. Exporting is associatedwith the reallocation of resources from less efficient to moreefficient plants. In the aggregate, these reallocation effectsare quite large, making up over 40 per cent of total factorproductivity growth in the manufacturing sector. Half of thisreallocation to more productive plants occurs within industriesand the direction of the reallocation is towards exporting plants.     

NEW ESTIMATES OF AUSTRALIAN PUBLIC BORROWING AND CAPITAL RAISED IN LONDON, 1849–1914

Current statistics of Australian public borrowing to 1914 suffer from several limits. On the basis of a comprehensive revision, an upward bias is shown in all the alternative time series of London borrowing, while statistics of local bond issues are derived for the first time. The new time series show the importance of the initial borrowing cycle during the 1850s and 1860s; the scale of debt repatriation from the mid-1890s; the interaction between domestic and overseas borrowing before the 1880s; and the potential significance of remittance as an 'invisible stabiliser' of the exchanges and alternative indirect source of capital imports.     

Policies Facilitating Firm Adjustment to Globalization

This paper focuses on policies facilitating firm adjustmentto globalization. We briefly review the effects of trade andinvestment liberalization on firms, focusing on within-industryeffects. We postulate that governments' role in supporting theprocess is to: (i) ensure that firms face the 'right' incentivesto adjust, and (ii) intervene in areas where market failuresare present. The main message of the paper is that, while manypolicies could be adopted, they need to be carefully designedand implemented in a stable macroeconomic environment. An institutionalinfrastructure that supports the functioning of modern marketsis most important. Pro-active support policies of whatever stripeshould be subject to cost–benefit analysis, based on theexistence of an identified market failure and monitored forperformance and cost effectiveness. Transparency and accountabilityare critical in ensuring that interventions accomplish theirintended objectives rather than being vehicles for rent seeking.