Preferences,Country Bias,and International Trade

The paper analyzes international trade in a Ricardian world where consumer preferences exhibit country bias. In particular, consumers differentiate between identical physical goods by country of manufacture. In contrast to the classical Ricardian model, the pattern of international specialization in production depends on the preference structure. Possible equilibrium configurations include ones where both countries specialize incompletely and trade in both commodities, as well as situations where the pattern of specialization and trade is the reverse of that in the classical Ricardian world. Both interindustry and intraindustry trade can occur simultaneously, though there are no market imperfections or scale economies.     

The demise of commodity price agreements: the role of exchange rates and special interests

We derive the equilibrium joint distribution of exchange rate and commodity price in a two-country rational expectations model. The correlation between commodity price and exchange rate appears crucial for the stability of commodity markets. This result arises from the common practice to quote commodity prices in consuming countries' currency, which subjects producing countries to the currency risk. Welfare results of commodity price stabilization are obtained and facilitate the interpretation of the position taken by industrialized countries long opposed to international commodity agreements. We apply our model to the Philippines and investigate the potential effects of the International Sugar Agreement (ISA) on the various conditional volatilities of the model. We conclude on the relative ineffectiveness of these agreements in limiting fluctuations of sugar prices.     

Social Desirability of Earnings Tests

Abstract. In many countries, pension systems involve some form of earnings test; i.e. an individual's benefits are reduced if he has labor income. This paper examines whether or not such earnings tests emerge when pension system and income tax are optimally designed. We use a simple model with individuals differing both in productivity and in their health status. The working life of an individual has two 'endings': an official retirement age at which he starts drawing pension benefits (while possibly supplementing them with some labor income) and an effective age of retirement at which professional activity is completely given up. Weekly work time is endogenous, but constant in the period before official retirement and again constant (but possibly at a different level), after official retirement. Earnings tests mean that earnings are subject to a higher tax after official retirement than before. We show under which conditions earnings tests emerge both under a linear and under a non-linear tax scheme. In particular, we show that earnings tests will occur if heterogeneities in health or productivity are more significant after official retirement than before.     

Developing competitive technical intelligence in Indonesia

In Indonesia, political concern promotes the development of autonomy in provinces and in certain academic institutions. This paper relates that with the commencing of AFTA in 2003, there is a strong need for competitive intelligence (CI) and technology watch (TW) in Indonesian industries. The model developed takes its roots within Indonesian constraints and leads to a general guideline to introduce CI in industries and institutions in most developing countries.     

Global manufacturing SO2 emissions: does trade matter?

A growth-decomposition (scale, technique and composition effect) covering 62 countries and seven manufacturing sectors over the 1990–2000 period shows that trade, through reallocations of activities across countries, has contributed to a 2–3% decrease in world SO₂ emissions. However, when compared to a constructed counterfactual no-trade benchmark, depending on the base year, trade would have contributed to a 3–10% increase in emissions. Finally adding emissions coming from trade-related transport activities, global emissions are increased through trade by 16% in 1990 and 13% in 2000, the decline being largely attributable to a shift of dirty activities towards cleaner countries.     

Public education under capital mobility

The paper considers a two-country model of overlapping generations economies with intergenerational transfers motivated by altruism and investment in human capital. We examine in a non-stationary competitive equilibrium the optimal provision of education with and without capital market integration. First, we explore how regimes of education provision—public, private or mixed—arise and how they affect the dynamics of autarkic economies. Second, we study the effects of capital market integration, in equilibrium, on the optimal provision of education. Third, we show that capital market integration enhances government intervention in the provision of public education (to improve the welfare of its constituents) and consider various solutions to such a competition.     

NIMBY and mechanism design under different constitutional constraints

This paper analyzes, in a simple two-region model, the undertaking of noxious facilities when the central government has limited prerogatives. The central government decides whether to construct a noxious facility in one of the regions, and how to finance it. We study this problem under both full and asymmetric information on the damage caused by the noxious facility in the host region. We particularly emphasize the role of the central government prerogatives on the optimal allocations. We finally discuss our results with respect to the previous literature on NIMBY and argue that taking into account these limited prerogatives is indeed important.     

Exact inference and optimal invariant estimation for the stability parameter of symmetric α-stable distributions

Hill estimation (Hill, 1975), the most widespread method for estimating tail thickness of heavy-tailed financial data, suffers from two drawbacks. One is that the optimal number of tail observations to use in the estimation is a function of the unknown tail index being estimated, which diminishes the empirical relevance of the Hill estimation. The other is that the hypothesis test of the underlying data lying in the domain of attraction of an α-stable law (α < 2) or of a normal law (α ≥ 2) for finite samples, is performed on the basis of the asymptotic distribution, which can be different from those for finite samples. In this paper, using the Monte Carlo technique, we propose an exact test method for the stability parameter of α-stable distributions which is based on the Hill estimator, yet is able to provide exact confidence intervals for finite samples. Our exact test method automatically includes an estimation procedure which does not need the assumption of a known number of observations on the distributional tail. Empirical applications demonstrate the advantages of our new method in comparison with the Hill estimation.