TRADE SIZE AND INFORMED TRADING: WHICH TRADES ARE “BIG”?

We find adverse‐selection spread components increase sharply in the ratio of trade size to quoted depth, and spike when trade size equals quoted depth. We find that two previously documented and prominent indicators of informed trading, raw trade size and high‐trading volume half‐hours, offer almost no explanatory power for informed trading measures beyond trade size to quoted depth, and a third indicator, time of day, offers no explanatory power among trades with high trade size to quoted depth. Our results suggest trade size to quoted depth is perhaps the single most important indicator that a trade is informed.     

Interlinked credit and farm intensification: evidence from Kenya

This paper addresses the potential for interlinked credit/input/output marketing arrangements for particular cash crops to promote food crop intensification. Using panel survey data from Kenya, we estimate a household fixed-effects model of fertiliser use per hectare of food crops, using an instrumental variables approach for addressing the endogeneity of participation in interlinked credit arrangements. Results indicate that households engaging in interlinked marketing programs for selected cash crops applied considerably greater fertiliser on other crops (primarily cereals) not directly purchased by the cash crop trading firm. These findings suggest that, in addition to the direct stimulus that interlinked cash crop marketing arrangements can have on small farmer incomes, these institutional arrangements may provide spill-over benefits for the productivity of farmers' other activities such as food cropping.     

Management reporting incentives and classification credibility: The effects of reporting discretion and reputation

In this study we investigate how the level of discretion in the reporting environment and management’s reporting reputation influence the extent to which management’s reporting incentives are important in determining the perceived credibility of management’s classification choices. Consistent with prior research, we show that users view incentive-inconsistent classifications as more credible than incentive-consistent classifications. We extend this finding by showing that the strength of this relationship (i.e., the extent to which users consider the consistency between the classification and management’s reporting incentives) depends on the level of discretion in the reporting environment and management’s reporting reputation. We find that users rely less (more) on the consistency between management’s reporting incentives and the classification in a mandated (discretionary) reporting environment and when managers have a good (poor) reporting reputation. We conclude by discussing the implications of our findings and potential future research.     

The common external tariff of a customs union: Alternative approaches

The most prominent exception to the cardinal ‘most favoured nation’ principle of the General Agreement on Tariffs and Trade (GATT) of 1947 is in its Article XXIV relating to Customs Unions (CUs) and Free Trade Areas (FTAs). This article required, first, the general incidence of the duties and regulations of commerce imposed by members of the CU with respect to trade with non-members shall not on the whole be higher or more restrictive than those that were applicable prior to the formation of CU or FTA, and, second, that substantially all the trade among members be free. Neither requirement was very operational, because the phrases ‘general incidence’ and ‘substantially all’ being difficult legal concepts to apply. The agreement of 1994 establishing the World Trade Organization (WTO) has made ‘general incidence’ precise by defining it import-weighted average of height of barriers but without offering any rationale for the definition. Now that preferential trading arrangements such as FTAs are proliferating, reform of Article XXIV is of importance. This paper describes alternative approaches to the central question of common external tariffs of a CU. Taking off from the work of Kemp and Wan who showed the existence of a common external tariff of CU that keeps the welfare of non-members unchanged while revising that of the CU as compared to the situation prior to the formation of CU, it characterizes such a tariff structure for two leading benchmark examples as consumption-weighted average of pre-union tariffs and subsidies in the member countries.     

TECHNICAL CHANGE AND EC-US AGRICULTURAL TRADE LIBERALISATION

The paper aims to investigate the biases produced by assessing the effects of partial liberalisation of EC and US farm policies through comparative-static simulations, when a more adequate approach would require time, or more precisely technical change, to be explicitly accounted for. Three points are underlined: taking into account technical change (i) alters the trade-off between farm income and budgetary expenditures, (ii) has different effects according to the policy instruments used, and (iii) may reverse the sign of cross-effects, particularly on the budget, in the case of large price-support reductions which result in trade reversal. The relatively limited fall in farm income losses in scenarios corresponding to full harmonisation makes the associated support-price cuts more acceptable, both politically and socially.