Exchange Rate Pass-through in a Small Open Economy: the Importance of the Distribution Sector

The degree of exchange rate pass-through to domestic goods prices has important implications for monetary policy in small open economies with floating exchange rates. Evidence indicates that pass-through is faster to import prices than to consumer prices. Price setting behaviour in the distribution sector is suggested as one important explanation. If distribution costs and trade margins are important price components of imported consumer goods, adjustment of import prices and consumer prices to exchange rate movements may differ. We present evidence on these issues for Norway by estimating a cointegrated VAR model for the pricing behaviour in the distribution sector, paying particular attention to exchange rate channels likely to operate through trade margins. Embedding this model into a large scale macroeconometric model of the Norwegian economy, which inter alia includes the pricing-to-market hypothesis and price-wage and wage-wage spirals between industries, we find exchange rate pass-through to be quite rapid to import prices and fairly slow to consumer prices. We show the importance of the pricing behaviour in the distribution sector in that trade margins act as cushions to exchange rate fluctuations, thereby delaying pass-through significantly to consumer prices. A forecasting exercise demonstrates that exchange rate pass-through to trade margins has not changed in the wake of the financial crises and the switch to inflation targeting. We also find significant inflationary effects of exchange rate changes even in the short run, an insight important for inflation targeting central banks.     

Contingent valuation and actual payment for voluntarily provided passive-use values: Assessing the effect of an induced truth-telling mechanism and elicitation formats

A fundamental question about the contingent valuation (CV) method is to what degree it predicts actual payments (AP). This has particularly been an intriguing matter related to voluntary provision of public goods representing primarily passive-use values. This paper reports the results from such a CV–AP comparison. Applying a voluntary payment mechanism there exists a theoretical expectation of upward bias in CV estimates and downward bias in AP. This study applied an induced truth-telling mechanism in one treatment group to assess the hypothetical bias effect in CV. The CV estimates in this treatment group were significantly lower than in the group that did not face this mechanism. But this effect was limited to those responding/acting to dichotomous choice, not affecting those responding to open-ended questions about willingness to pay.     

Quota Enforcement in Resource Industries: Self-Reporting and Differentiated Inspections

Quotas are frequently used in the management of renewable resources and emissions. However, in many industries there is concern about their basic effectiveness due to non-compliance. We develop an enforcement model of a quota-regulated resource and focus on a situation with significant non-compliance and exogenous constraints on fines and enforcement budget. We propose a new enforcement system based on self-reporting of excess extraction and explicit differentiation of inspection rates depending on compliance history. We use differentiated inspections to induce firms to self-report excess extraction. This system increases the effectiveness of the quota by allowing the regulator to implement a wider range of aggregate extraction targets than under traditional enforcement, while ensuring an efficient allocation of extraction. In addition, inspection costs can be reduced without reductions in welfare.     

Does the impact of plant closure on labour market attachment differ between immigrants and native workers across the business cycle?

This article investigates the effect of plant closure on the labour market attachment of immigrants and how these effects vary with business cycles. The research covers two periods: one of economic upturn and one of economic downturn, and uses a rich employer–employee dataset. Results show that experiencing a plant closure in a recession has more severe individual repercussions than experiencing a plant closure in an expanding economy, particularly for immigrants. In good times, the long-term effects of plant closure are very small for both immigrants and natives, while in a recession, effects are more severe for immigrants, possibly leading to lasting scars for this group. These results appear robust using both matching techniques and fixed-effect models.     

Dealing with globalisation: the Nordic countries and inward FDI, 1900–1939

This article examines the different ways in which the four Nordic countries chose to regulate the inflow of foreign direct investments (FDI). By studying the laws regulating foreign ownership, as well as their implementation, it becomes clear that the four countries followed a pragmatic and tolerant policy towards inward FDI, but that the resource rich countries actively tried to prevent foreign ownership of their most important natural resources. The article also shows how the countries’ stricter policy on foreign ownership in the early twentieth century was not a casualty of World War I, but more predominantly a reaction to the increasing international economic integration before the war.     

Can deunionization lead to international outsourcing?

We analyze unionized firms' incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining in-house production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many countries. We further show that globalization - interpreted as either market integration or increased product market competition - will increase incentives for international outsourcing.     

“Nobody Told Me I was a Nano-Consumer:” How Nanotechnologies Might Challenge the Notion of Consumer Rights

Regarding nanotechnologies and the consumer, a central paradox is the absence of a regulatory framework while more than 1,000 nano-enabled products are already available on the consumer markets. This represents a serious challenge for the consumer interest. Even though the prospects of nanotechnologies are truly fascinating and represent possibilities to solve major problems—for instance in the realms of health, energy and poverty—it is important to also discuss the potential risks of nano-enabled products. The present study reports on a Norwegian study with data derived from focus groups, a content analysis of advertisements, packaging and labels for cosmetics as well as on a Norwegian consumer survey. Conceptually, the paper is based on the notion of consumer rights introduced by President J.F. Kennedy in 1962. Based on the results of these studies, consumer policy implications are sketched.     

Short‐run and long‐run dynamics of farm land allocation: panel data evidence from Denmark1

This study develops and estimates a dynamic multi‐output model of farmers’ land allocation decisions that allows for the gradual adjustment of allocations that can result from crop rotation practices and quasi‐fixed capital constraints. Estimation is based on micro‐panel data from Danish farmers that include acreage, output, and variable input utilization at the crop level. Results indicate that there are substantial differences between the short‐run and long‐run land allocation behaviour of Danish farmers and that there are substantial differences in the time lags associated with different crops. To our knowledge, this is the first dynamic micro‐model of land allocation estimated on data from the temperate climate zone. Since similar farming conditions are found in northern Europe and parts of the United States and Canada, this result may be of wider interest.