Market power in distribution and pass‐through for consumers and producers

We examine the differential pass‐through of import prices into consumer and producer prices. We develop a framework with distribution costs and distribution market power. We then examine pass‐through from import prices to consumer and producer prices in the euro area using the U.S. import price as instrument. We find that pass‐through rates to producer prices are more sensitive to changes in distribution margins than pass‐through to consumer prices. Furthermore, only a portion of import price changes translate into domestic price changes limiting potential consumer benefits from tariff liberalization, with market power in distribution services being one important factor reducing pass‐through.     

Bilateral Exchange Rates and Jobs

We study the labor market effects of realignment in fixed bilateral exchange rates, such as China's peg to the US dollar. We employ the open economy model by de Melo and Robinson to identify the core parameters of the real, trade side of the economy driving the unemployment effects of bilateral exchange rate realignment. A small open economy version of the model is explored analytically and a large multicountry version numerically. Analytics in the small open economy model show that unemployment effects of adjusting of a bilateral peg hinge on the fraction exported to and imported from the trading partner. A larger fraction exported to and a smaller fraction imported from the trading partner make it more likely that revaluation of a trading partner's currency has beneficial effects. Numerics in the large economy model show that Chinese revaluation can generate both positive and negative unemployment effects depending upon underlying parameter values. Adverse unemployment effects can go along with an improving trade balance.     

From Hot Cakes to Cold Feet: A Contingent Perspective on the Relationship between Market Uncertainty and Status Homophily in the Formation of Alliances

In this study, we reconsider the classical positive association between the level of market uncertainty and an organization's propensity to form ties with organizations of similar status. Although prior research argues that the greater the uncertainty, the higher the level of status homophily, we suggest that this relationship is contingent upon framing that affects positive or negative valence towards uncertainty. In an up market, organizations tend to frame uncertainty as upside risk, and thus will subsequently favour explorative uncertainty‐mitigation devices; whereas, in a down market, organizations primarily frame uncertainty as downward risk, and thus will rely on more conservative uncertainty‐mitigation mechanisms. We therefore predict that a greater number of status‐heterophilous ties will be formed in an up market than in a down market. We discuss the implications of our results for status theory and more broadly for research on strategic decision making under uncertainty.     

Poverty in South Africa: Statistical inference for decomposable poverty measures

The measurement of poverty involves two problems: identifying the poor and constructing an index to measure the intensity of poverty. The headcount ratio is one of the widely used indices for the measurement of poverty. This article considers some of the other decomposable (i.e. additively separable) poverty measures. The importance of this property (decomposability) and of subgroup consistency for a poverty measure is highlighted. Since most of these poverty measures are estimated on the basis of sample surveys, the statistical significance of the observed differences is tested using the distribution-free approach proposed by Kakwani (1993, Review of Economics and Statistics , 75: 632-40). The Income and Expenditure Survey conducted in 1995 by Statistics South Africa, then called Central Statistical Service, is used in the study.     

Market Segmentation Research: Beyond Within and Across Group Differences

Market segmentation research is currently focused too narrowly on the task of segment identification as opposed to its strategic relevance within a firm. In this paper we distinguish an ex ante approach to market segmentation research, which begins with studying the motivating conditions that lead people to the tasks and interests in their lives, from an ex post approach which begins with an individual's reaction to marketplace offerings. We argue that the marketing task of guiding managements to make what people will want to buy will be more successful in light of a deep understanding of behavior in the context of everyday life and work, rather than a detailed understanding of preferences in the marketplace. Directions for future research are discussed.     

Trade Policy Transparency and Investor Confidence: Some Implications for an Effective Trade Policy Review Mechanism

This paper is concerned with the value of the WTO's Trade Policy Review Mechanism, particularly its transparency role and its potential role in policy stability, for investor confidence in developing countries. The implications of reduced risk and uncertainty regarding trade policy for investor confidence, and ultimately for the capital stock and the long-run structure of production, are examined in an analytical model. Certainty equivalence is employed to assess the general equilibrium effects of risk and uncertainty. Their reduction can boost risk-adjusted returns, leading to an increase in long-run levels of capital.     

Market Structure and Market Access

We explore an issue at the nexus of domestic competition policy and international trade, the interaction between goods trade and market power in domestic trade and distribution sectors. We examine the effect of variations in conditions of domestic competition in services on trade volumes in goods in the cases of both linear and nonlinear import demand, including standard form CES‐based gravity models of bilateral trade flows. Theory suggests a set of linkages between service‐sector pricing and goods trade supported by econometrics involving imports of 22 OECD countries vis‐a‐vis 69 exporters. Competition in distribution services affects the volume of trade in goods. Additionally, because of interaction between tariffs and pricing, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Indeed, depending on the degree of competition, market access concessions on tariffs may be effectively undone in some cases by changes in margins. For exporters, we find that service competition in destination markets matters most for exporters from smaller, poorer countries. Our results also suggest that while negotiated agreements leading to cross‐border services liberalisation may boost goods trade as well, they may also lead to a fall in goods trade when such liberalisation involves FDI leading to increased service sector concentration.