Price equivalent tariffs and quotas under a domestic monopoly

Price-equivalent import tariffs and quotas are compared when domestic production is controlled by a monopolist, say an agricultural marketing board with the power to restrict domestic supply, under endogenous terms of trade. Welfare comparisons boil down to sourcing costs comparisons. Quotas tend to dominate at high domestic prices, ad valorem tariffs at intermediate prices and specific tariffs at low domestic prices. Welfare maxima are achieved with more restrictive policies than under perfect competition. These results rationalize separate negotiations for sensitive products in the Doha Round and the setting of tariff-rate quotas that mimic import quotas for these products. Finally, in ascertaining the robustness of our policy ranking to the choice of variable anchoring the comparisons, we found that specific tariffs unambiguously dominate ad valorem tariffs and quotas when government revenue or imports anchor the comparisons. However, some quota revenues and import levels cannot be achieved with tariffs.     

Production uncertainty and trade policy commitment

Agricultural markets are characterized by production and marketing lags. Uncertainty is also an inherent feature of agricultural markets. This paper investigates if two policy active importers will choose to commit to their import levels or keep the flexibility to revise their ex-ante import levels once production decisions are made and the uncertainty is resolved. This is the constant dilemma faced by prospective WTO members. We assume production in both importing countries is subject to an asymmetric random shock. We show that a government will not want to commit to its import level when there is a high degree of uncertainty in production. However, an importing country is likely to commit to a trade policy in equilibrium although the equilibrium may be Pareto dominated. Under certain conditions, an equilibrium in which one country commits to its ex-ante import level while the other chooses the flexibility option can emerge. In this setting, international trade agreements play an important role.     

Reverse tenancy in Romania: Actors’ rationales and equity outcomes

Following the implementation of the land reform in the 1990s, land rentals have developed in Romania, mainly in a reverse tenancy configuration. The paper provides an analysis of contractual practices in this configuration, based on empirical data collected through intensive field work in Transylvania. The paper depicts the reverse tenancy configuration and the conditions of its emergence in Romania, following the implementation of transition reforms in the agricultural sector. Characterizing the negotiation and enforcement of contracts in this configuration shows that in a situation where no effective enforcement mechanism is available, the market structure is such that tenants can choose “very incomplete” contracts or default on their contractual obligations. The analysis of the landowners’ perspective, taking into account their perception of the contractual relationship, contributes to explain why contractual practices persist in this context. The article concludes with a discussion, from a policy perspective, of the equity-enhancing role of the land lease market in such a reverse tenancy configuration.     

DERIVATIVE ASSET PRICING WITH TRANSACTION COSTS1

In the modern theory of finance, the valuation of derivative assets is commonly based on a replication argument. When there are transaction costs, this argument is no longer valid. In this paper, we try to address the general problem of finding the optimal portfolio among those which dominate a given derivative asset at maturity. We derive an interval for its price. the upper bound is the minimum amount one has to invest initially in order to obtain proceeds at least as valuable as the derivative asset. the lower bound is the maximum amount one can borrow initially against the proceeds of the derivative asset. We show that, in some instances, this interval may be strictly bounded above by the price of the replicating strategy. Prima facie, the cost of a dominating strategy should appear to be higher than that of the replicating one. But because trading is costly, it may pay to weigh the benefits of replication against those of potential savings on transaction costs.     

What crises could teach us about complexity and systemic management: The case of the Nestucca oil spill

In this article we attempt to uncover some systemic management principles for the better management of complex issues. Taking a pragmatic approach we have expanded the case methodology proposed by John Dewey to the case study of a major crisis. By proposing that crises allow for a better apprehension of complexity, we study the changes which were carried out or not, to this day, after the 1988 Nestucca oil spill that occurred in Canada only three months prior to the Exxon-Valdez disaster. After conducting a linear and systemic analysis of the crisis, we propose that the changes institutionalized thus far spring mostly from what we call “behavioral” and “paradigmatic” learning which are weak for addressing complex issues. Proposing that 15% of the people we have interviewed where able to derive a “systemic learning” from this crisis, we suggest several unlocking strategies that allow these systemic lessons to be institutionalized.     

Unambiguous events and dynamic Choquet preferences

This paper explores the relationship between dynamic consistency and existing notions of unambiguous events for Choquet expected utility preferences. A decision maker is faced with an information structure represented by a filtration. We show that the decision maker’s preferences respect dynamic consistency on a fixed filtration if and only if the last stage of the filtration is composed of unambiguous events in the sense of Nehring (Math Social Sci 38:197–213, 1999). Adopting two axioms, conditional certainty equivalence consistency and constrained dynamic consistency to filtration measurable acts, it is shown that the decision maker respects these two axioms on a fixed filtration if and only if the last stage of the filtration is made up of unambiguous events in the sense of Zhang (Econ Theory 20:159–181, 2002).     

Harnessing the political economy of environmental policy: David Pearce’s contribution to OECD

During 34 years, David Pearce made major contribution to OECD work on environmental economic issues, with a particular focus on cost–benefit analysis, economic instruments, biodiversity and distributive issues. This article provides a brief review of David Pearce’s contributions. This work was particularly useful in enhancing the political economy of environmental policy which is at the core of OECD work. The opinions expressed in this paper reflect the author’s perception of this long history of the development of environmental economics at OECD; it does not necessarily reflect the views of the OECD and its member countries. Many thanks to Jonathan Fisher, Nick Johnstone and Michel Potier for their comments on an earlier draft.     

The value of power-related options under spectrally negative Lévy processes

Review of Derivatives Research - We provide analytical tools for pricing power options with exotic features (capped or log payoffs, gap options etc.) in the framework of exponential Lévy...     

A re-examination of the technological catching-up hypothesis across OECD industries

This study re-examines the catching-up hypothesis at the industry level across the main OECD countries, using panel data econometric models involving technological gap indicators calculated with a nonparametric distance function suggested by Färe et al. [Färe, R.S., Grosskopf, M.N., Norris, M., Xhang, Z., 1994. Productivity growth, technical progress, and efficiency change in industrialized countries. American Economic Review 84, 66–83]. The results show that there is statistical evidence of a catching-up process at the industry level. Moreover, both tradables and nontradables sectors exhibit catching-up effects and technology adoption from abroad. This result complements the findings by Bernard and Jones [Bernard, A.B., Jones, C.I., 1996a. Comparing apples to oranges: productivity convergence and measurement across industries and countries. American Economic Review 86(5), 1216–1238., Bernard, A.B., Jones, C.I., 1996b. Productivity across industries and countries: Time series theory and evidence. Review Of Economics and Statistics 78, 135–146], Gouyette and Perelman [Gouyette, C., Perelman, S., 1997. Productivity convergence in OECD services industries. Structural Change and Economic Dynamics 8, 279–295] and Hansson and Henrekson [Hansson, P., Henrekson, M., 1997. Catching up, social capability, government size and economic growth, in V. Bergström, eds, Government and Growth, Oxford: Clarendon Press, 61–126] that there is no (or even a slow) catching-up effect in the manufacturing sector. Moreover, social capability indicators evaluated for each country show that “Non-European” and “Central European” tradables sectors have a rather similar degree of inefficiency while “North European” countries are less efficient for both tradables and non-tradables. Lastly, both the cross country and the cross sectors dispersions of inefficiency levels are smaller for tradables sectors than for non-tradables.