Exports to Smuggle and Smuggling Technologies*

Our analysis is motivated by cases of cigarette smuggling in Canada and in the UK. In the 1990s, domestic cigarettes were legally exported to be subsequently illegally imported. At first, smuggling was done by individual consumers who bought cigarettes abroad and brought them back through policed points of entry. This Mom and Pop smuggling was a mechanism to implement a second‐degree price discrimination scheme by cigarette manufacturers. Regrets from committing tax evasion and labels on exported cigarettes packs permit vertical differentiation of illegal and legal cigarettes. Paradoxically, labeling measures can make illegal sales more resilient to tax reductions, and stricter border enforcement encourages a switch to a less benign smuggling technology exclusive to criminal organizations. High export taxes terminated export‐to‐smuggle schemes, but brought about a surge of counterfeit cigarettes. Because of a second‐degree price discrimination scheme, the elimination of taxes need not suffice to eradicate smuggling.     

Engagement with the Mainstream in the Future of Post Keynesian Economics

This paper examines the reasons for the difficulties Post Keynesian economics has had in supplanting mainstream neoclassical theory and for its resulting marginalization. Three explanations are given: intellectual, sociological and political, where the latter two are largely responsible for the current relationship of Post Keynesian economics to the mainstream. The paper also reviews various strategies for improving the future of Post Keynesian economics, including a focus on methodological issues by maintaining an ‘open systems’ approach; a strategy of ‘embattled survival’; the development of a positive alternative to mainstream economics; a strategy of ‘constructive engagement’ with the mainstream; and a dialogue with policymakers. While the global financial crisis has increased the potential for constructive engagement with the mainstream, significant barriers remain to the effectiveness of this approach. The crisis has, however, enhanced the possibility of engaging directly with policymakers and gaining a greater role in management education.     

Kaldor and Robinson on money and growth

Post-Keynesian theory was developed as an alternative to mainstream neoclassical economics. However, post-Keynesians have not succeeded in getting their message through, partly because of the difficult and controversial economic issues upon which they embarked, partly because they emphasized, both in their monetary and growth analysis, theories that do not radically depart from the mainstream of economics. This paper therefore argues that post-Keynesian economics got off on the wrong foot. Rather than having emphasized the works of Minsky and (the early) Kaldor in money, post-Keynesians should have considered the contributions of Robinson and Kahn. Also, rather than having emphasized the work of Robinson and Harrod on growth, they ought to have given greater emphasis to Kaldor's demand-oriented growth theory. Hence, as a simplification, post-Keynesians should have considered Robinson on money, not Kaldor; and Kaldor on growth, not Robinson.     

On the Number and Heterogeneity of Bidders in Livestock Auctions

We show in the context of livestock auctions that a seller's revenue may increase or decrease as the number of buyers increases, whether the additional bidder wins or not an object. Additional bidders who fill part of their demand from an outside source may have an even more adverse effect on prices. We use data from the Quebec daily hog auction to measure the effect of new bidders on auction prices. Variations in the number of bidders come from the entry and exit of Quebec packers and sporadic invitations extended to Ontario packers. We find that entry by Quebec packers had a significant positive impact on hog auction prices but that sporadic participation by Ontario packers did not have a significant impact on hog prices.     

The ‘trendiness’ of sleep: an empirical investigation into the cyclical nature of sleep time

Using Canadian time use data, we exploit variation in local unemployment rates to investigate the cyclical nature of sleep time and show that for both men and women, sleep time decreases when the economy is doing relatively better. Our results suggest that in a recession Canadians sleep an average of 3 h more per week, or 26?min more per day. Given the importance of even small changes in sleep time on measures of cognitive functioning such as reaction time and concentration, our findings may help explain the countercyclical nature of mortality. Further, as we find that sleep is affected by the same economic variables (notably the unemployment rate) that affect market work time, our results also contribute to the limited literature that shows that sleep time should not be treated as exogenously determined, but, like any other resource, determined by its relative cost.     

Traceability, Liability, and Incentives for Food Safety and Quality

Recent food scares such as the discoveries of Bovine Spongiform Encephalopathy and E. coli -contaminated spinach have heightened interest in food traceability. Here, we show how exogenous increases in food traceability create incentives for farms and marketing firms to supply safer food by increasing liability costs. We model a stylized marketing chain composed of farms, marketers, and consumers. Unsafe food for consumers can be caused by either marketers or farms. We show that food safety declines with the number of farms and marketers and imperfect traceability from consumers to marketers dampens liability incentives to supply safer food by farms.     

Price equivalent tariffs and quotas under a domestic monopoly

Price-equivalent import tariffs and quotas are compared when domestic production is controlled by a monopolist, say an agricultural marketing board with the power to restrict domestic supply, under endogenous terms of trade. Welfare comparisons boil down to sourcing costs comparisons. Quotas tend to dominate at high domestic prices, ad valorem tariffs at intermediate prices and specific tariffs at low domestic prices. Welfare maxima are achieved with more restrictive policies than under perfect competition. These results rationalize separate negotiations for sensitive products in the Doha Round and the setting of tariff-rate quotas that mimic import quotas for these products. Finally, in ascertaining the robustness of our policy ranking to the choice of variable anchoring the comparisons, we found that specific tariffs unambiguously dominate ad valorem tariffs and quotas when government revenue or imports anchor the comparisons. However, some quota revenues and import levels cannot be achieved with tariffs.     

Cambridge's Contribution to Endogenous Money: Robinson and Kahn on credit and money

It is often claimed by American Post Keynesians that the theories of endogenous money originated in the mid-1950s as a result of articles published by Nicholas Kaldor and Hyman Minsky. This paper offers another possibility. It argues that, in the mid-1950s, both Joan Robinson and Richard Kahn offered insights into the workings of a credit economy that have been largely ignored by Post Keynesians and that are consistent with Post Keynesian monetary theory.     

Detecting the presence of insider trading via structural break tests

The occurrence of abnormal returns before the unscheduled announcement of price sensitive information is a potential indicator of insider trading. We identify insider trading with a structural change in the intercept of an extended capital asset pricing model. To detect such a change we introduce a consistent timing structural break test (CTSB) based upon a U-statistic type process. Unlike the traditional CUSUM test, the CTSB test provides a consistent estimator of the timing of a break in the intercept that occurs across the whole evaluation period. We apply our test to a rich data set covering 370 price sensitive announcements relating to FTSE 350 companies. Our test is able to detect potential insider trading far more reliably than the standard CUSUM test. We also show that the majority of suspected insider trading takes place in the 25 days prior to the release of market sensitive information.