INTERNATIONAL TRADE AND REGIONAL DEVELOPMENT

The paper considers a two-region model of trade based on the authors'earlier (HS) model, in which two nontraded goods, one urban and one rural, were introduced into the Harris-Todaro model. The HS framework captures the duality of the labour market, and it is argued that the HS model is suited to the purpose of regional analysis where the urban and rural agents may be in conflict as their welfare (income) may not respond in an identical manner to exogenous shocks and policy changes. The paper examines the implications of a change in capital and the terms of trade on outputs and regional incomes. It is established that in response to a terms-of-trade shock the prices of urban and rural nontraded goods could move in opposite directions, so structural change could also be in opposite directions. The same could also be true of welfare in the two regions.     

Tariff liberalization and trade specialization: Lessons from India

This paper analyzes the effects of policy reform on the structure of India’s trade in manufactures, from 1990 to 2006. It computes comparative advantage indicators on the basis of disaggregated trade flow data and assesses the effects of trade liberalization on the evolution of India’s pattern of trade specialization. Industries where import tariffs have been reduced the most have experienced the highest increase in specialization. Moreover, trade liberalization has helped India improve its comparative advantage in industries with medium- to high-technology content, as well as in some of the industries enjoying the most robust growth in global demand. Liberalization policies have been instrumental in enhancing the international competitiveness of industries.     

Investment Irreversibility and Finance Constraints

This paper analyses the investment behaviour of firms in the presence of irreversibility and of a dividend payout constraint. Estimation of investment equations for a panel of UK firms shows that the Q model performs well, over regions of the sample space, where neither constraint is likely to be binding. The constraints are able to account for the empirical significance of cash flow variables for the remaining firms in the sample.     

Do Other Firms Matter in Oligopolies?

This paper examines how firms interact with their rivals. The main novelty of our approach is that we let conjectural variations depend on the actual ability of other firms to react, which we measure by both the physical capacity and financial status of firms. Our main findings are twofold. First, physical and financial capacity significantly affect conjectures. Second, we recover the implied conjectural variations and reject homogeneous conjectures. We generally find that leaders expect aggressive responses, and followers are Cournot players.     

Tourism, globalization, social externalities, and domestic welfare

One of the impacts of globalisation has been the growth in tourism and mobility of capital. This paper examines the welfare effect of tourism on the host economy with imperfect competition. Three channels that affects domestic welfare by tourism are: social externalities accompanied with tourists, the terms of trade effect via rises in the non-tradable prices, and the resource movement effect to the manufacturing sector. Owing to the positive terms-of-trade effect and/or the beneficial resource movement effect, the optimal levels of tourism occur at the situations that tourists bring negative social externalities to the economy.     

Equity-worthiness and equity-willingness: Key factors in private equity deals

While access to private equity funds (PEFs) provides a unique opportunity for firms to set up sturdy growth paths, how PEFs select companies is an unknown process to entrepreneurs and business owners. This study aims to offer insights regarding the private equity market to entrepreneurs searching for external capital. We analyzed a novel dataset of 240 pre-deal negotiations between small- and medium-sized Italian companies and a closed-end fund. Results indicate that the successful closing of a deal depends on more than just the target firm's equity-worthiness (i.e., the company's ability to meet the expectations of a private equity investor). In fact, there is another dimension: the target firm's equity-willingness (i.e., the company's motivations to accept an outside equity investor). We summarize the results of our study by building a 2x2 positioning matrix on the basis of the target firm's equity-worthiness and equity-willingness. This matrix enables entrepreneurs to grasp how private equity investors evaluate their firms.     

Price distortions,joint production and some international trade theorems

Zusammenfassung Preisverzerrungen, verbundene Produktion und einige Theoreme des internationalen Handels. — In diesem Aufsatz werden Faktorpreisunterschiede in ein Modell mit Kuppelprodukten eingefügt. Im Fall verbundener Produktion ohne Marktunvollkommenheiten fanden Chang, Ethier und Kemp heraus, da\ die folgenden vier Theoreme im gro\en und ganzen die Einführung von Kuppelprodukten überstehen. Die vier betrachteten Theoreme sind das Rybczynski-, das Stolper-Samuelson-, das Faktorpreisausgleichs- und das Heckscher-Ohlin-Theorem. Wenn es Unterschiede in den Faktorentgelten gibt, dann zeigt sich, da\ — abgesehen vom Rybczynski-Theorem — diese Theoreme im allgemeinen nicht mehr gültig sind. Es werden Bedingungen genannt, unter denen die Theoreme so-wohl bei verbundener Produktion als auch bei Marktunvollkommenheiten anwendbar sind.

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Résumé Les distorsions de prix, la production conjointe et quelques théorèmes du commerce international. — Dans cet article des différences dans la rémunération des facteurs sont introduites dans un modèle de la production conjointe. Au cas de la production conjointe et en l’absence des imperfections sur les marchés des facteurs Chang, Ethier et Kemp ont trouvé que les quatre théorèmes suivants, en majeure partie, survivent l’introduction des produits conjoints. Les quatre théorèmes discutés sont ceux de Rybczynski, de Stolper-Samuelson, d’équalisation des prix des facteurs et de Heckscher-Ohlin. Si les rémunérations des facteurs diffèrent le modèle montre que — le théorème de Rybczynski à part — ces théorèmes ne sont pas valables en général. Il y a présenté des conditions sous lesquelles les théorèmes peuvent être généralisés au cas de la production conjointe aussi bien que des imperfections sur les marchés des facteurs.

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Resumen Distorsiones de precios, producción conjunta y algunos teoremas del comercio internacional. — En este artículo se han introducido diferenciales en la retribución a factures en un modelo de producción conjunta. En el caso de producción conjunta sin imperfecciones en el mercado de factores, Chang, Ethier y Kemp encontraron que los siguientes cuatro teoremas subsistieron en gran medida gracias a la introducción de producción conjunta. Los cuatro teoremas investigados son los de Rybczynski, Stolper-Samuelson, Igualación de Precios de Factores y los teoremas de Heckscher-Ohlin. En presencia de diferenciales en la retribución de factores encontramos que, aparte del teorema de Rybczynski, estos teoremas en general no subsisten. Se presentan las condiciones bajo las cuales los teoremas son generalizables con respecte a producctión conjunta e imperfecciones del mercado de factores.

     

Bids for the UMTS system: An empirical evaluation of the Italian case

The aim of this paper is to analyze the licensing of the telecommunication spectrum as a public good and the search for equilibrium prices through bilateral bargaining and multilateral bidding. It develops a general model of price setting under dynamic uncertainty and applies it to the Italian auction for Universal Mobile Telecommunications System (UMTS). The empirical application shows that the model can be used both to determine the base price as well as other desirable characteristics to organize an auction and to better understand, after the auction is closed, what really happened in terms of the critical factors involved. After recalling some basic concepts on spectrum rights and reviewing the general experience with UMTS auctions in Europe, the formal model and its application are presented. The results confirm certain views on the Italian auction, which are widely shared but were never tested before, namely that: (i) given the initial price, the number of licenses offered for the bidding should have been fewer, or alternatively, (ii) given the number of licenses, the base price should have been higher and (iii) the main bidder underpaid for the license. The model also allows us to quantify the bidders’ reservation price and the State and the bidders’ implicit bargaining powers.