Systems of cities in closed and open economies

This paper investigates the equilibrium properties of the system of cities in an economy. First, for a closed economy, the numbers of each type of city, their capital-to-labor ratios and their wages and costs of living, are solved for. Then the characteristics of international trade between open economies composed of systems of cities are examined, through an evaluation of standard trade theorems. This leads into topics in regional economics, such as migration and regional specialization.     

The Impact of Negativity on Separability Testing

During separability testing, it has not been common practice to verify if the data satisfy the negativity condition. The impacts of imposing negativity on separability test results are examined for two groups of commodities using Barten's generalized demand system and with Monte Carlo simulations. Results indicate that imposing negativity did not alter model estimates when negativity was spontaneously satisfied. Also, imposing negativity rarely altered separability test results when the data did not spontaneously satisfy negativity.     

Corruption and local democratization in Indonesia: The role of Islamic parties

Indonesia has a tradition of corruption among local officials who harass and collect bribes from firms. This paper examines whether corruption is affected by local democratization and by the party composition of local assemblies. Democratization occurred in 1999 and decentralization in 2001. We have firm-level data for 2001 and 2004. The 2001 data benchmark corruption at the time of decentralization. We find that corruption declines between 2001 and 2004 overall, but much less so in districts with more secular party as opposed to Islamic party representatives in district assemblies. For a larger sample of districts, correspondingly, we find that corruption in 2004 is more in districts which voted more in favor of secular party representatives in the first elections in 1999. We argue that the effects seem to be causal, over above any effects of changing religiosity and economic circumstances across districts.     

United States - The Downgrade Scenario

Summary The US debt-ceiling negotiations in Washington are showing little progress as the 2 August deadline approaches.Based on the latest proposals under discussion, the chances of a debt-ceiling hike which also incorporates USD 4trn worth of deficit cuts over the next decade are slim.This is important, as it means that S&P is likely to downgrade the US sovereign rating from AAA to AA, even if the debt ceiling is raised.Note that in an interview with Dow Jones, one of S&P's credit analysts said that to avoid a downgrade, the US needs to agree to reduce the fiscal deficit by over USD 4tm over the next ten years.This is what S&P sees as the required amount to prevent the total government debt-to-GDP ratio from rising.Therefore, a debt-ceiling deal with deficit cuts falling short of this could mean a downgrade by at least one of the three key rating agencies.