Capital mobility and import substitution policies

This paper considers a conventional trade model with intermediate goods and capital mobility. In this framework, raising the barriers to imports tends to carry a country toward high exports. This is a new result and casts serious doubts regarding the proposition that policies of import substitution which characterized much of Latin America in the 1950s are basically inward oriented and tend to carry toward the low import, low export end of the spectrum.     

A public firm in a model of spatial duopoly with price discrimination

We visit the role of privatization in the location decision of firms in an industry where no firm can produce all varieties demanded. We demonstrate that the Nash equilibrium locations are socially optimal, in the presence of a publicly owned firm, notwithstanding the degree of privatization.     

A competitive general equilibrium model of technology transfer,innovation, and obsolescence

A general equilibrium production model is developed where technologies are embodied in capital goods of different vintages indexed in a continuum. A difference in the extent of existing knowledge determines a wage gap between a developed (north) and a developing region (south). With free flow of technology, relatively backward technologies move to the south. With innovation in the north, a technology cycle is created by which some of the technologies are pushed out of the north into the south. This also tends to widen the wage gap between the regions.     

Capital mobility, skill formation and polarization

We bring in hierarchical education and skill formation within a standard Jonesian specific-factor model of production and trade for a developing economy. There are three types of labor, unskilled, medium skilled and high-skilled. The unskilled can only develop into medium-skilled and medium-skilled into high-skilled. As capital becomes internationally mobile, educational capital gets concentrated in particular types of education. In the process the society gets polarized between the highly educated and the absolutely uneducated.     

A portfolio based theory of excessive foreign borrowing and capital control in a small open economy

We develop a simple model of portfolio choice in a mean variance framework to address the issue of international borrowing and financial crisis. Instead of adverse selection or moral hazard of lending and borrowing activities we emphasise the role of exchange rate movement. Syndicated borrowing by way of internalising the aggregate effect tends to restrict excessive borrowing from external source. However, this may undermine the welfare consequences by further aggravating the extent of risk undertaken in the process. There is a built-in externality in the model that leads to over exposure to foreign currency debt and readily calls for intervention by the government. Government intervention by way of a tax on foreign borrowing may help restrain the amount of external debt and implement the first best.     

Noncooperative,cooperative, and delegative R&D

We discuss alternative organizational forms of research and development in a symmetric duopoly framework. Firms play a noncooperative game at the output stage but can collaborate at the R&D stage. In the absence of patent protection, technology licensing that prevents imitative R&D may emerge as an equilibrium outcome. In general, greater probabilities of success in R&D rule out noncooperative arrangement at the R&D stage. Delegative R&D, where firms move sequentially, tends to dominate the cooperative form of R&D.Department of Economics, Monash University     

Harassment, corruption and tax policy: reply

Saha [Eur. J. Polit. Econ. (2003)] has raised some points about our paper [Eur. J. Polit. Econ. 16 (2000) 75]. We herewith reply to these points.