The effect of the Canada–China canola trade dispute on canola prices

In March 2019, China revoked the canola export licenses of two major Canadian exporters. We estimate the impact of these restrictions on Canadian canola prices. Using a vector error correction model to generate counterfactual prices, we estimate that between March 2019 and February 2020 canola prices were 3.6% lower than would have been expected in the absence of the import restrictions. We discuss the implications of our finding for both the ongoing negotiations between Canada and China and producer support in Canada.     

Potential Errors in Detecting Earnings Management: Reexamining Studies Investigating the AMT of 1986*

In this paper we seek to document errors that could affect studies of earnings management. The book income adjustment (BIA) of the alternative minimum tax (AMT) created apparently strong incentives to manage book income downward in 1987. Five earlier papers using different methodologies and samples all conclude that earnings were reduced in response to the BIA. This consensus of findings offers an opportunity to investigate our speculation that methodological biases are more likely when there appear to be clear incentives for earnings management. A reexamination of these studies uncovers potential biases related to a variety of factors, including choices of scaling variables, selection of affected and control samples, and measurement error in estimated discretionary accruals. A reexamination of the argument underlying these studies also suggests that the incentives to manage earnings are less powerful than initially predicted, and are partially mitigated by tax and non‐tax factors. As a result, we believe that the extent of earnings management that occurred in 1987 in response to the BIA remains an unresolved issue.     

Determinants of FDI-induced externalities: New empirical evidence for Mexican manufacturing industries

This paper presents new statistical evidence on foreign direct investment (FDI)-induced externalities in Mexican manufacturing industries for 1993. The new empirical results are important in three respects. First, the size of technological differences between FDI and Mexican firms is positively related to positive externalities, indicating the importance of sufficient scope of potential externalities, incentives to make externality-facilitating investments and the absence of negative competition effects. Second, geographical concentration is identified as a structural determinant of positive FDI externalities. Finally, the effect from FDI cleared from the influence of technological differences and agglomeration is the creation of positive externalities, especially when endogeneity of the foreign participation variable is controlled for.     

Food Safety and Adverse Selection in Rural Maize Markets

Without enforced standards or reliable third-party verification, food safety threats such as pesticide residues and aflatoxin contamination are generally unobservable or only partially observable to both buyers and sellers, especially of staple foods in rural maize markets in sub-Saharan Africa. As a result, sellers have more information about food quality than do buyers. Such information asymmetries can impede market development and undermine human health. We study farm household behaviour in the context of imperfect food safety information. We pool observations obtained from 707 food storage containers maintained by 309 farm households in Benin, surveyed following the maize harvests of 2011/2012 and 2013/2014. Our results indicate that when a household perceives a food safety risk associated with application of insecticides, on average it is 33 percentage points less likely to apply insecticides to maize it intends to consume than it is to maize it intends to sell. These individuals are also more likely to sell maize than households without food safety concerns. Results highlight the potential value of improved storage technologies and quality control to promote market transactions and reduce hidden health risks.     

Quantal Response Equilibrium and Overbidding in Private-Value Auctions

This paper applies the quantal response equilibrium (QRE) model to study overbidding in private-values auctions. Experimental evidence shows that the prevalence of overbidding depends on the cost of overbidding relative to underbidding, as predicted theoretically. We use QRE as an error structure to estimate parameters of several competing models of overbidding. A QRE model based on risk averse bidders closely tracks the exact distribution of bids. The estimated parameters are significant and consistent across treatments. Journal of Economic Literature Classification Numbers: C72, C92, D44.     

Policymakers’ Coalitions and Stabilization Policies in the EMU

A highly integrated area like the EMU features a large amount of interactions between the participating countries. In this context the interactions of monetary and fiscal policies are a crucial issue. This paper focuses on how coalitions among policymakers are formed and discusses their effects on the stabilization of output and price. We emphasize the role played by the institutional design of cooperation forums (as, e.g., the ECOFIN). If the coalition formation game is played without communication among the policymakers, full cooperation is an unlikely outcome. On the other hand, if policymakers can communicate, full cooperation becomes a possible equilibrium, while the complete non-cooperative solution is, in general, not a stable equilibrium. This supports the view that institutions for discussions can play a crucial role in achieving international cooperation even when these institutions are not endowed with enforcement powers.revised version received August 1, 2003