What drives stock market integration? An analysis using agribusiness stocks

This article explores the drivers of regional stock market integration with a focus on the agribusiness sector across relevant regional trade blocs around the world. We implement panel cointegration models to analyze the stock indices of agribusiness firms in the Southern Common Market (MERCOSUR), European Union (EU), Asia‐Pacific Economic Cooperation (APEC), and North American Free Trade Agreement (NAFTA). Based on the literature on market integration and stock return pricing, we identify nine possible determinants of stock market integration, which we separate into three categories: individual market performance, macroeconomic conditions, and agricultural trade. In our analysis, we account for agriculture‐specific factors to control for possible structural shifts in financial markets regimes by including the two main commodity price bubbles during last 20 years. Our results show that most of the variables included in our categories have been important factors in promoting regional stock market integration. Moreover, integration among regional stock markets was strengthened by the implementation of trade agreements. This effect is stronger in trade blocs with fewer members, such as NAFTA and MERCOSUR, compared with larger and more heterogeneous blocs, such as the EU and APEC.     

Regional Economic Disparity,Financial Disparity,and National Economic Growth: Evidence from China

The dynamic relations among national economic growth, economic disparity, and financial disparity in China are examined. Specifically, the focus is on whether economic disparity or financial disparity affects national economic growth. As measures of economic and financial disparity across regions and provinces, the Williamson coefficient of disparity is employed using both regional data (eastern, central, and western) and provincial data (from 31 provinces). Overall, it is found that both provincial financial disparity and, to a lesser degree, economic disparity have a negative effect on national economic growth. In addition, financial disparity appears to be exogenous, suggesting that financial disparity is not influenced by either economic disparity or national economic growth.     

PRICE DYNAMICS,FOREIGN EXCHANGE AND ANTICIPATED SHOCKS IN A TOURISM ECONOMY

Using a dynamic model of an open monetary economy, this paper examines the effects of tourism‐related anticipated shocks on goods prices and foreign exchange reserves. Foreign tourists consume mainly non‐traded goods in holiday destinations, converting them into exportable goods. This gives rise to a tourism terms‐of‐trade effect that affects the accumulation of foreign exchange. Announcements of anticipated events bring tourist visits forward, resulting in an initial under‐adjustment or an over‐adjustment in the prices of the non‐traded goods when the tourism terms‐of‐trade effect is positive or negative. This leads to an increase or a decrease in foreign reserves in the long run.     

Implementations of the Nash solution based on its Walrasian characterization

Summary. The present paper provides three different support results for the Nash bargaining solution of -person bargaining games. First, for any bargaining game there is defined a non-cooperative game in strategic form, whose unique Nash equilibrium induces a payoff vector that coincides with the Nash solution of the bargaining game. Next this game is modified in such a way that the unique Nash equilibrium that supports the Nash solution is even in dominant strategies. After that an -stage game in extensive form is presented whose unique subgame perfect equilibrium supports the Nash solution of the bargaining game. Finally, the support results are shown to induce implementation results in the sense of mechanism theory. Received: October 3, 1999; revised version: October 26, 1999     

Entry restrictions and the determination of quality

Entry restrictions are a common form of regulation in markets and occupations, either as a means of limiting the size of a market or affecting the quality of products or services provided by it. This paper analyzes demand, cost and informational characteristics that affect the impact of this type of policies on the quality mix of products provided by an industry and the welfare of its consumers. Selective increases in the costs of entry such as licensing requirements and direct restrictions with competitive bidding for entry rights are considered. We analyze the effects of these policies on entry decisions and also the additional selection effects that are obtained when exit is allowed for and the rights to participate in an industry can be freely traded.     

Tax Havens,Growth, and Welfare

This paper develops an endogenous growth model featuring tax havens, and uses it to examine how the existence of tax havens affects the economic growth rate and social welfare in high‐tax countries. We show that the presence of tax havens generates two conflicting channels in determining the growth effect. First, the public investment effect states that tax havens may erode tax revenues and in turn decrease the government's infrastructure expenditure, thereby reducing growth. Second, the tax planning effect of tax havens reduces marginal cost of capital and hence encourages capital accumulation so as to spur economic growth. The overall growth effect is ambiguous and is determined by the extent of these two effects. The welfare analysis shows that tax havens are more likely to be welfare‐enhancing if the government expenditure share in production is low, or the initial income tax rate is high. Moreover, the welfare‐maximizing income tax rate is lower than the growth‐maximizing income tax rate if tax havens are present.     

Recent and Future Developments Related to “Gdp and Beyond”

Progress of societies? Well‐being of citizens? Trans‐generational impact of policies? To answer such fundamental questions and much more, the European Commission published, in August 2009, its Communication on “GDP and Beyond: Measuring Progress in a Changing World.” Through a co‐operative project, co‐chaired by Eurostat and INSEE (France), the ESS acted decisively and established an action plan to be carried out by 2020 in the context of the European Statistical Programme. This plan which also builds on Eurostat's work on Sustainable Development Indicators. For most of these actions, work has either been accomplished or is in good progress. Further challenges lie ahead, including reconciling macro‐ and micro‐data sources on household economic resources and completing the indicators set on Quality‐of‐Life. The work will also contribute to the global efforts on the Sustainable Development Goals/post‐2015 development agenda.     

Can Agents Be Better Off with Pay Caps?

A popular way to discipline the managers of companies or banks that got into trouble during the recent financial crisis has been to impose caps on managers' pay. Using a small extension of the standard principal–agent model, we argue that pay caps might serve the opposite purpose, because the agent might be better off with a pay cap. Specifically, we show that, given a fixed effort level to be implemented, the agent's expected utility can be decreasing in an upper bound for the agent's reward. The effect of pay caps on the general structure of optimal incentive contracts is also characterized. While an improvement of contracting information always helps the principal, it might increase or decrease the marginal cost of imposing pay caps.     

An Experimental Study on Dividing Gains through Politics

This article offers experimental evidence to examine an important case in politics where a monopolistic proposer seeks a majority's consent from competitive responders to split the gain. The unique subgame perfect equilibrium prediction is that the side of trade with a monopoly will exploit the side of trade with competition to reap almost all of the gain. Our experimental evidence reveals that while responders do compete with each other to race to the bottom (consistent with the prediction), the monopolistic proposer settles down to offer a ‘fair’ share of the pie to those from whom he or she seeks majority support (contrary to the prediction).     

Nesting Horizontal and Vertical Differentiation with Location Choices

This study solves a location‐then‐price game in which horizontal and vertical differentiation are combined using an asymmetric distribution of consumers’ taste. Boundary locations are robust when the taste disparity of the population is not large and out‐of‐market locations are not allowed. Firms may have incentives to move either inside or outside the market in other situations, so the equilibrium prices are never differentiated. The restrictions of vertical differentiation under this framework are further examined. A model with the entrance of a vertically differentiated product is also discussed.