PASSPORT OPTIONS

We relate the theory of passport options with general principles from martingale theory as well as with the theory of Bessel processcs. The calculation of the price of a passport option leads to an equality between two norms on continuous martingales. We also solve the discrete time case for passport options.     

Informal economy, wage goods and accumulation under structural adjustment theoretical reflections based on the Tanzanian experience

Economic development in sub-Saharan Africa under structuraladjustment witnessed the upsurge of informal sector development—thedevelopment of unregulated labour-intensive activities, in partexport-oriented. This paper argues that two factors played animportant role in shaping the dynamics of informal sector development:(1) the process of the relative cheapening of wage goods asa result of their importation, partly financed through foreignaid, thereby lowering unit-labour costs in labour-intensiveproduction, and (2) the processes at work of subsidising realwages by other forms of economic security as a result of multiple,diversified and spatially extended livelihood strategies. Whilethese factors undoubtedly brought a new vitality to economicdevelopment, this paper questions the long-run sustainabilityof this new trend for two reasons. One is its dependence onforeign aid to finance imports. The other is that it does notappear to propel endogenous increases in productivity by achievinggreater synergy in intersectoral linkages between agricultureand industry.     

Tariff rate quotas and the economic impact of agricultural trade liberalization in the world trade organization

Since their implementation at the Uruguay Round, tariff rate quotas (TRQs) have become a widely used instrument of trade policy in agricultural trade. With almost 1,300 TRQs scheduled at the World Trade Organization, this paper will examine their economic effects more closely. First, the theoretical background of TRQs is examined. Then, a short overview of the Uruguay Round and their institutional background is given. We demonstrate that official statistics, which do not count TRQs as nontariff barriers, are at least highly misleading. Very often, their effects are the same as those of regular quotas, including redistributive effects. The prominent example of the European banana regime is used to illustrate all of these points.A first draft of this paper was presented at the International Atlantic Economic Conference, March 14–21, 2000, Munich, Germany. The results are part of the research project "The Influence of the Institutional Design on the Actual Impacts of Agricultural Trade Liberalization after GATT." Financial support by Volkswagen Stiftung is gratefully acknowledged.     

Joint Management of Emission Abatement and Technological Innovation for Stock Externalities

We investigate how emission abatement and technological innovation provide different solutions to reduce pollutant emissions. In the case of a stock externality emission abatement leads to a smooth and continuous adjustment of emissions. Conversely, technological innovation has to be interpreted as an option on a less polluted environment and can justify the use of a pollution threshold above which it is optimal to start a research and development programme for a less polluting technology. It is shown that technological innovation interferes with the traditional emission abatement approach. The optimal abatement level is logically lowered once the less polluting technology is available; nevertheless a temporary increase in emissions is optimal during the research and development period. The usual Pigouvian tax system proves to remain an efficient corrective instrument. A numerical application to the Greenhouse effect is provided.     

Cow-calf profitability and leptin genotyping

Profitability of cow-calf production is determined largely by market prices, calf weaning weights, and cow productive life. While producers individually have no effect on prices, weaning weights and productive life have genetic influences and hence can be altered by selection programs implemented by producers. We investigate the impact of a mutation in the leptin gene (exon 2; single nucleotide polymorphism [SNP] 305) on cow-calf profitability. Prior research shows that this mutation has effects on performance and traits of fed cattle and milk production in dairy cows. Using data from a teaching-research herd, we find that it is also associated with calf weaning weights and cow productive life. A bio-economic stochastic simulation demonstrates that the mutation has statistically positive impacts on profits, suggesting that producers can profitably make use of this information.