Welfare‐reducing Domestic Cost Reduction*

We show that cost reduction by a domestic firm may reduce domestic welfare if it changes a foreign firm’s production strategy from foreign direct investment to export. Domestic cost reduction can be welfare reducing when the domestic market is sufficiently small and domestic firm’s marginal cost of production is higher than the foreign firm’s marginal cost of production under foreign direct investment, which is a usual feature of trade between developed and developing countries. So, developing countries with small domestic markets need competent competition policies when encouraging domestic innovation and also trying to attract foreign direct investment.     

An aggregate import demand function for greece

This study estimates the aggregate import demand function for Greece using annual data for the period 1951–92. There are two methodological novelties in this paper. The authors find that the variables used in the aggregate import demand function are not stationary but are cointegrated. Thus, a long-run equilibrium relationship exists among these variables during the period under study. The price elasticity is found to be close to unity in the long run. The cross-price elasticity is also found to be close to unity. Import demand is found to be highly income elastic in the long run. This implies that with economic growth, ceteris paribus, the trade deficit for Greece is likely to get worse.     

LINKED RECURSIVE PREFERENCES AND OPTIMALITY

We study a class of optimization problems involving linked recursive preferences in a continuous‐time Brownian setting. Such links can arise when preferences depend directly on the level or volatility of wealth, in principal–agent (optimal compensation) problems with moral hazard, and when the impact of social influences on preferences is modeled via utility (and utility diffusion) externalities. We characterize the necessary first‐order conditions, which are also sufficient under additional conditions ensuring concavity. We also examine applications to optimal consumption and portfolio choice, and applications to Pareto optimal allocations.     

Dichotomous Thinking and Ethical Consumerism: Overcoming the Negative Effects of Self-Interest Bias through Third-Person Narrative Persuasion

The authors examine consumer attitudes toward ethically labeled products and demonstrate that consumers who think dichotomously tend to favor their own self-interests over the social good by choosing mainstream noncertified products over products displaying ethical labels such as fair trade and Fair Wear. The authors further suggest that advertisers can use a third-person perspective to attenuate the negative effects of dichotomous thinking, increase purchase intentions, and encourage consumption of ethically certificated products. Findings from five studies on various ethically labeled products (such as food and clothing) with a diverse group of study participants (American consumers from a popular tourist spot, an online panel, and college students) provided convergent evidence supporting the hypotheses. Theoretical contributions and implications for marketers, policymakers, and consumers are addressed.     

Export cartel and consumer welfare

The purpose of this paper is to show that export cartels are not necessarily harmful for consumers in the importing countries. Using a strategic trade policy model, we show that, contrary to the harmful effect, product‐market cooperation benefits consumers by affecting the trade policies. We further show that consumers in the importing countries are affected adversely if cooperation is among the governments of the exporting countries, instead of the exporting firms.     

India’s Services Revolution Amidst Worldwide Structural Change

Journal of Quantitative Economics - In the historical development experience of the world as a whole, there is an obvious kink around 1970s, i.e., the brief period around which the capitalist...