Globalization versus Protectionism: Consequences for Long–Term Growth and Welfare in the South

This paper develops an endogenous growth model with two intrinsically symmetric regions, the North and the South. The analysis shows that globalization tends to increase long–term economic growth, but the South may become deindustrialized and suffer a welfare loss. I none the less find that protectionism need not reverse international inequalities: on the contrary, owing to locational hysteresis the South may lageven further behind. However, with continued globalization welfare in the South will unambiguously increase.
JEL Classification Numbers: F12, F13, F15.     

Apple's agency model and the role of most‐favored‐nation clauses

The agency model used by Apple and other digital platforms delegates retail‐pricing decisions to upstream content providers subject to a fixed revenue‐sharing rule. Given competition both upstream and downstream, we consider how, under the agency model, retail prices depend on the firms' revenue‐sharing splits and the degrees to which consumers view the platforms and the goods sold on the platforms to be substitutes. We show that the agency model may not be universally adopted even if adoption would mean higher profits for all firms. Use of most‐favored‐nation clauses in these settings can ensure industry‐wide adoption and increase retail prices.     

R&D policies, trade and process innovation

We set up a simple trade model with two countries hosting one firm each. The firms invest in cost-reducing R&D, and each government may grant R&D subsidies to the domestic firm. We show that it is optimal for a government to provide higher R&D subsidies the lower the level of trade costs, even if the firms are independent monopolies. If firms produce imperfect substitutes, policy competition may become so fierce that only one of the firms survives. International policy harmonization eliminates policy competition and ensures a symmetric outcome. However, it is shown that harmonization is not necessarily welfare maximizing. The optimal coordinated policies may imply an asymmetric outcome with R&D subsidies to only one of the firms.     

Consequences of Imitation by Poor Countries on International Wage Inequalities and Global Growth

The paper presents an endogenous growth model where the level of international transaction costs may be decisive for whether the relatively poor East specializes in agriculture production, imitates goods from the rich West, or makes its own innovations. The author shows that the East produces only agricultural goods if transaction costs are high, while innovation is profitable when transaction costs are low. In between there are a range of transaction costs where the East imitates, possibly resulting in a lower global growth rate and a larger international wage gap than if imitation were not possible.     

Gains and losses from trade when countries differ in public knowledge stock

Following the insight from endogenous growth theory, this paper assumes that countries with advanced production structures have high levels of public knowledge. The purpose of this paper is to analyze whether a developing country should trade with countries that are more or less advanced than itself. It is argued that it is particularly harmful to trade with advanced countries if international transaction costs are high and capital is internationally immobile, in which case welfare may be higher in autarchy than with trade. For low levels of transaction costs, it may be more beneficial to trade with relatively advanced countries, particularly if capital is internationally mobile.     

Do Slotting Allowances Harm Retail Competition?*

Slotting allowances are fees paid by manufacturers to get access to retailers' shelf space. Both in the USA and Europe, the use of slotting allowances has attracted attention in the general press as well as among policy makers and economists. One school of thought claims that slotting allowances are efficiency enhancing, while another school of thought maintains that slotting allowances are used in an anti‐competitive manner. In this paper, we argue that this controversy is partially caused by inadequate assumptions of how the retail market is structured and organized. Using a formal model, we show that there are good reasons to expect anti‐competitive effects of slotting allowances. We further point out that competition authorities tend to use an unsatisfactory basis for comparison when analyzing welfare consequences of slotting allowances.     

Efficiency enhancing taxation in two-sided markets

This paper examines the efficient provision of goods in two-sided markets and characterizes optimal specific and ad-valorem taxes. We show that (i) a monopoly may have too high output compared to the social optimum; (ii) output may be reduced by imposing negative value-added taxes (subsidy) or positive specific taxes.     

Corporate tax systems, multinational enterprises, and economic integration

Multinational firms are known to shift profits and countries are known to compete over shifty profits. Two major principles for corporate taxation are Separate Accounting (SA) and Formula Apportionment (FA). These two principles have very different qualities when it comes to preventing profit shifting and preserving national tax autonomy. Most OECD countries use SA. In this paper we show that a reduction in trade barriers lowers equilibrium corporate taxes under SA, but leads to higher taxes under FA. From a welfare point of view, the choice of tax principle is shown to depend on the degree of economic integration.     

Domestic Regulation and International Trade

We consider the effects of a one-sided price regulation of one of two complementary inputs. The provider of the regulated input is a domestic firm, while the provider of the other input is a foreign firm. This describes the market structure for several digital information and communication services, where the regulated input is access while the non-regulated complementary input is content. We show that one-sided regulation may have negative welfare effects compared to a free market economy, unless the regulator has a first-mover advantage. In the latter case, regulation is welfare enhancing regardless of whether the foreign input provider uses linear or non-linear wholesale prices.     

Access price structure and entrant build-or-buy incentives in mobile markets

Journal of Regulatory Economics - We consider a market structure with three mobile providers, two of which are vertically integrated with nationwide coverage. The third provider (an entrant)...