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Gravity With Gravitas (guest)

The article presented in this post is titled "Gravity With Gravitas", published by Anderson and Van Wincoop in the American Economic Review, there is a reference in research on determinants of international trade (GDP, distance, border). It is summarized by François Beauchamp and Clement Dupêcher.
F. C

------------

Being part of the 6 "puzzle" highlighted by Obstfeld and Rogoff, border effects
were initially demonstrated by McCallum in 1995. Empirically, it has used trade data on bilateral trade in 1988 between Canadian provinces and U.S. states, two countries with similarities. His empirical study included data from 10 Canadian provinces and 30 U.S. states and a simple way (by linear regression) he wanted to determine whether border effects existed between the two countries. With this formula,

McCallum came to the conclusion that at equal distance and GDP with similar provinces traded 22 times more with another province with a state. Mathematically, this means that the dummy "border" is equal to 3.09, which exp (3.09) = 22. The figure 22 demonstrates that despite a complete disappearance of borders between Canada and the United States, there is a marked preference for intra-provincial.

Anderson and van Wincoop are for their party's postulate: there seems to be indeed a real border effect. But it happens to a similar result if one starts with the theoretical bases? First, we need to know quickly that they are limits to the model of McCallum (1) that its findings are based on an empirical model (no theoretical basis) and (2) by its lack of static comparisons ( robustness test). In other words, the omission of variables does not allow him to have accurate results and prevents its equation of reasoning in a general equilibrium framework. Moreover, the equation of McCallum does not take into account the multilateral resistance variable which is to take into consideration the fact that a country on a bilateral exchange with a main partner but also with several other countries. Thus, it is clear that the results of McCallum are overstated. Finally, Anderson and Van Wincoop take into account in their model the effect of "great nation" that helps explain the independence of a small country with its main partner when protectionist barriers are slowing the flow of trade.

Model developed by Anderson in 1979, which is based on theories of CES function (Arrow, Solow et al, 1961) on preferences will be the starting point in building their general equilibrium model. The CES function is, in consumer theory, a constant elasticity of substitution, that is to say that for every pair of baskets of goods, a decrease of 1% of the quantity of good A can be compensated by the c% increase in the quantity of good B, where c is a constant independent of the pair of baskets. In addition, the model is also based on regional specialization and finally, the internal distances measured by the proxy WEI (1996) which evaluates as a quarter of the distance between the regional capital and the nearest border.

They then develop a method that estimates a theoretical gravity equation and then they use the gravity model in general equilibrium to generate static comparisons from which we can directly calculate and compare the effects borders. Consider the equation they developed:

With:

• Yw is world GDP,
• Yi and Yj, GDP of country i and j
• Tij corresponding to the cost of transport to go from i to j,
• Pi and Pj are the indices of consumer prices of i and j,
• Sigma is the elasticity Alternative

The results obtained with this new equation are different from those obtained by McCallum: Anderson and van Wincoop find a border effect equal to 10.5. This difference with the factor of 22 from McCallum is that they use data from 1993 instead of 1988. Only by the entry into force of NAFTA (North American Free Trade Agreement, 1989) and the decrease barriers to trade, the coefficient based on McCallum's equation reduces to 16.4 for Canadian provinces and with existing data for U.S. states, they arrive at a factor of 1.5.
For best results, they also looked at McCallum's equation with the addition of the variable Remotness "appeared after the paper McCallum to see if this variable friction can play a significant role.
Equation:

Calculation of "Remotness"

It can see that the new equation takes into account this variable, but it gives mixed results and especially with no connection with reality. The results remain substantially the same as the results of McCallum (1993).

To incorporate a variable taking into account multilateral resistance (plays the same role as the variable Remotness) just explain trade with other countries of the lead partner. The authors focused on the effect that great country we know can play a role in trade flows.
It follows three implications:

• reduce barriers higher level of trade between large countries and between small countries
• barriers further increase the internal trade of small countries that trade within large countries,
• barriers increase over the ratio of internal trade of the country 1 that trade between country 1 and country 2 (1 with the country which is a small country and country 2 which is a large country)

Therefore, the border effect is lower in the U.S. and Canada because it is a great country. Indeed, trade between U.S. states is large and specialized, which allows them to better withstand a rate hike or a border effect.

After showing the effect of "great country", the authors model the transport cost Tij. They will adopt the hypothesis developed by other economists that Tij is the product of the distance Dij (distance between region i and region j) and Bij variable taking the value 1 if regions i and j are in the same country and the value 1 plus a tariff at the border if the regions i and j are in different countries. The authors do not want to add new variables to stay as close as possible to McCallum's equation and to focus on the multilateral resistance indexes, missing the analysis of McCallum. Now they can compare the theoretical gravity equation with that estimated in empirical studies.

For further analysis, the authors decided to make 2 different models: a model with 2 countries (U.S., Canada) and a model with several countries (USA, Canada and other developed countries, called for ROW ROW).

The barrier between the U.S. and Canada is lower between 20 countries around the world. The only barrier higher than the others is that between Canada and countries around the world. This approach, although with limitations is really robust, error terms are very close to 0, with the exception of bilateral trade between Canada and the United States. Border effects are greater in the case of trade between two major countries: trade decreases more between the U.S. and the world between Canada and the rest of the world by the fact that Canada is a small country.
The border effect for Canada is due to the combination of its small economic size, the omission of certain variables and endogeneity property (The dummy takes the value 0 for the intra-provincial trade and 1 for state-province while the multilateral resistance is correlated with the distance and the dummy). The model shows that multi-country borders have a greater effect on trade between Canadian provinces than on interstate commerce. Trade between Canadian provinces is 10 times greater between states and provinces. The impact is less for the states. Finally, they believe that borders reduce bilateral trade between the U.S. and Canada by 44%, 29% of trade between the countries of the world.
This paper shows that the gravity equations had no theoretical basis. Anderson and Van Wincoop then estimated a gravity equation based on a CES of 1979 by Anderson himself.
Three results emerge from the study:

• McCallum omitted variables lead to overestimation of the border effect,
• Intra-national replaces heavily on international trade,
• The border effect is greater for smaller countries than larger countries.

But their model has some limitations, however. They assume that each region specializes in the production of a single well. But in reality, there is certainly an international specialization, but it is not nearly as advanced (these are Haveman and Hummels which showed that the imported goods do not generally come as some exporting countries, two countries for majority of imported goods). Barriers to trade can also affect the structure of production (intermediate goods), which has not been considered by Anderson and McCallum. Finally, a parameter plays heavily on the border effect, according to Helliwell: the results of border effects are very sensitive to the distance in-country. However, Anderson and van Wincoop have chosen an arbitrary measure of internal distance.
Many extensions have been made. For example, Hillberry and Hummels discuss border effect on the location of intermediate goods producers (Kei-Mu theory Yi analyzing the effect of tariffs on trade in the case of vertical specialization). Such integration would change the results of the border effect, which is an interesting extension.
we said, despite its limitations, this paper represents a major advance in economic analysis and for considering the border effect as a stylized fact. The puzzle is Obstfeld and Rogoff (partly) solved by finding a theoretical basis for the purely empirical equation McCallum and adding the multilateral resistance variables.


François Beauchamp

Clement Dupêcher

Sims 2 Pregnancy Contractions

General Description

A village house in
Chantemerle the Grignan
In Drôme Provençale

is a house with terraces, it opens onto two streets and wife elevation of the village. A small garden about 40 sqm with terraces can grow tomatoes and herbs.

The living area is approximately 200 m2.

The main entrance faces the street at the top, it opens with a mezzanine and terrace enjoying beautiful views.

the lower level living rooms are bright (former artist's studio): a spacious lounge with fireplace insert , open kitchen and the dining area (wooden floors solid).
The kitchen opens onto a terrace approximately 50 m2, with a corner wood deck, a fence and a wrought iron pergola and a small garden which is planted an olive tree, barbecue (oak beam and hood metal). Any opposite.

Half a lower level, toilet and laundry area.

At -1, the sleeping child with two adjoining rooms , the first receiving a large fitted wardrobe. Sol Gerflex on slab.

The sleeping parent is a large room to be finished with possible direct access from the lounge by a hidden staircase behind the library. Access to a small garden. At half
lower level is a bathroom.

Then you proceed to street level from the bottom, with pieces "stored in its own juice": an old kitchen with stone fireplace and a Provencal style kitchen, ceiling vaults . There are also two other rooms with a separate entrance and offices that are currently delivered (manger and trough of stone). An alley vaulted

belongs to the house and distributes a small shed and a cellar. The mayor here has an easement for access to a communal source.

Oil central heating, boiler Chappée 2004.

No Prior Installation Of Rome Total War Patch

income per capita and trade (guest blogger)

Summary of "Per Capita Income Putting Back Into Trade Theory," Markusen (2010).

(Lavoix by Roman Régnacq Charles, Bastianini Bruno)

Markusen (2010) takes Linder assumptions to improve the understanding and estimation of trade. Linder (1961), Swedish economist, stressed the important role of per capita income in the international economy. He believes that countries with similar income levels are more likely to trade together. Thus, differences in preferences among nations represent an obstacle to bilateral trade. In this case, the size of the market impacts the production specialization of a country. A country will export goods for which it holds a large domestic market.

His theory was less analyzed by researchers in International Economic models offer. The framework allows standard neoclassical models simpler and more flexible. The classical model Hecksler-Ohlin he considers the distribution of preferences to be identical and homothetic. In his paper, Markusen takes up the Linder hypothesis, it highlights areas of inconsistency in the literature and construct alternative explanations.

By adding non-homothetic preferences in a traditional model (HO 2 X 2 X 2), Markusen was able to explain several phenomena such as:

1. away increasing wages
2. the mystery of "missing trade"
3. through domestic consumption
4. the role of income distribution within a country (all this by looking only aspect of the application).

Furthermore, adding imperfect competition (Cournot oligopoly) can explain the levels of margins and higher prices in a country with high per capita income. The paper concludes with some suggestions of calibration, estimates and equations of gravity.

The model of the article raised six hypotheses (the X is relatively capital-intensive, well there in labor, the host nation is relatively better endowed with capital, the country f in work, production of X is increasing returns, labor supply is equal to the number of households, the country ha improved productivity and income elasticity of X is greater than 1). These assumptions are not really original except that the good X is considered a higher good. The author draws on literature (Bergstrand 1990, Hunter 1991 and Nishioka et al. 2009) and considering the capital intensive good as well as "luxury."

To model the non-homothetic preferences, uses a function Markusen Stone-Geary. This script allows to formalize a consumption threshold, that threshold before the agent consumes only Y and from this level it starts to consume the property X. Indeed, when income increases the budget share allocated to X increases relative to, Y. To study the impact of income per capita, the author Marshallian aggregate demand.

paper first result: a growing economy may have different implications depending on the economy that growth is the result of a productivity growth or the result of an accumulation of factors. productivity growth by increasing income per capita and consumption of X increases more than proportionately to income (income elasticity assumption of X greater than 1) . While a growth factor accumulation keeps constant income per capita and therefore does not alter the basket per capita.

Second result: the author gives an intuitive explanation of wage differentials. If movements of capital and labor are free, workers move in h f (f and capital moves in h). So in this case, h becomes more abundant in capital (increased production of X) at the same time increasing revenues in h. This increase in revenues implies that consumers are more likely to buy the property X. The differences in relative wages are growing.

Third result: the more a country is specialized, the greater the difference between the observed and estimated trade ("missing trade") is important. From the production side, specialization can not grow indefinitely while specialization in consumption can. Thus, homothetic preferences induce missing trade, taking into account the non-dilatation can correct the discrepancy between the observed and estimated trade .

Fourth result: the role of income distribution. If all consumers in one country have an income sufficient to consume X, the distribution of income does not affect aggregate demand. The problem arises if some have no minimum wage in the country and can buy only good Y By observing countries with similar income per capita, aggregate demand for luxury good may be greater in countries with greater inequality, because the demand for the X is increasing faster than income (the author cites the example of Mercedes in Africa).

In imperfect competition (economies of scale, industry X is Cournot competition, free entry free exit of firms ..), when incomes rise in h increases the demand for X giving greater scope for firms localized pm With the assumption of free entry that margin is offset by a larger number of firms. The margin remains constant while h has the tendency to reduce f. Thus, the relative margin increases in capital-intensive countries.

In its final part, the author identifies several paths to follow on sizing, estimating and gravity equations to take into account the non-homothetic preferences and income per capita rehabilitation as an important source of international trade.

Conventional procedures of general equilibrium analysis assumes homothetic preferences. In this method, used by economists (often) a Cobb Douglas standard to express the utility of consumers. They then observe the distribution of spending in the official statistics to calibrate the parameters of the function. In his article, the author guide us to calibrate the model to take into account the non-homothetic preferences. To calibrate z (a good rival and non excludable), he advocates using the sharing of consumption observed in the statistics with a traditional econometric estimation of β. This calibration allows us to distinguish the movements of the Engel curve (graph attached) between AC and AB. The author shows that standard models tend to neglect these effects and to misunderstand the effects of productivity growth.

To estimate the trade, economists resume a pattern HO Classic summarizing the exports to the difference between production and consumption (E = X - C). By integrating the factor content of trade, [A] = E [A] X - [A] C = V - sV (with V - sV trade "expected" or estimated), the results are the most common overestimation of trade ("missing trade"). The author points out that many efforts have been made adjustment of the production side. The vector "consumption" by cons may qualify for a better fit. Assuming non-homothetic preferences, the author rewrites the consumption vector. Under these assumptions, the consignment in which a country is relatively specialized is also a property where that country is specialized in consumption. In doing so, the high consumption of the property on the market reduces the level of exports (down "missing trade", the same reasoning applies to imports and limit the "missing trade").

Finally, the author notes that the equations of gravity tend to play down the impact of distributions of income per capita. If we consider as homothetic preferences, such an approach is not wrong. But when one considers preferences as non-homothetic, the per capita income explain a significant share of trade between two countries. This is especially true if the traded goods are differentiated and have a high income elasticity.

This text puts into perspective the new framework of research. For what we are interested, its contribution to regional and international economy is very important. It allows for extensions on the number of paper relating to the prediction of trade and face the recurring cases of "missing trade".

Lavoix Roman Régnacq Charles Bruno Bastianini

Bond Angle At The Central Atom Of Clf2−

1 year already

Next week we celebrate our first year with Elisa from Blog @ GECO! Writing on this blog and share among ourselves and with you our views was particularly pleasing and we hope that this pleasure will last much longer. To preserve it, we offer a month's holiday, leaving room for our master students of international economics. Our First Guest Blogger-called Bruno Bastianini, Romain Lavoix and Charles REGNACQ. We will post a few days their very good summary of an important article by Markusen (2010) entitled "Per-Capita Income Putting Back Into Trade Theory ". We expect on you to reserve a warm welcome! In the meantime, we stecklings on new readings of history enriches our knowledge for you to share new research themes.

F. and E.

Pokemon Emerald Infinite Item

Evaluation National Council of Universities

Nice effort on the list " For Quality Research 'in Section 05 of the National University Council which sets out the evaluation criteria used during recruitment campaigns lecturers (the "qualifying") and promotion of lecturers and professors.
Note that the list " Pluralism Quality and "also offers (and since a lease) bcp info on competitions.

QQ remarks on the evaluation of research.

• With a Little Help From My Friends

From what I understand (but I could be wrong, do not hesitate to post a comment if I digress), a single article published an article with several co-authors have the Similarly for the researcher is evaluated. There is an incentive to share knowledge and to divide tasks is totally commendable. But the treatment is unfair to those who are working alone (especially since the inclusion of the H-index values already those who work more )....
To overcome this problem, some jury aggregation have established a preferential system: the number of points reported by an article is placed at the root of many authors. I remember the cries of outrage that some had pushed when this measure was also published and incentives that had led to the style "leaves to publish more, it is better to publish in major journals. This kind of incentive is beneficial for the profession, it strengthens the fellowship necessary to achieve excellence and avoid the bias to publish go-go and more research of low quality (diffusion of responsibility , stowaway ... yuck!)

• results!

Give info about the criteria is a good thing, but give information on the results would be even better. In any box, employees have individual meetings where they discuss the evolution of their careers in college nada. To find out whether you will get qualification without problem, or if it is time for you to request a promo EAD, you should check the info for yourself, compare the resumes of your cohort, those of past generations ... short, it is very imperfect and a priori it should remain so. For example with the mode of computation, one can recalculate its research note, but what about note of the other candidates and quid other scores in terms of teaching and administration.
Now that the criteria are defined, the statistical distribution of the notes (at least the average, min and max) of those who obtain the qualification and promotions would be useful to the community so that choices can be done in a proper information framework.


FC

Why Do Women Get Dry Prior To Their Period

Institutions and Economic Performance-Last Act around the obvious Contemporary

Helpman closing his book with a selection of skillfully combining theory and empirical testing economic policy around the development. In this section, Helpman does not seem to give an absolute answer as to the relationship between democracy and economic growth since the last three chapters offer the reader with very different visions. It is not that call into question
the need for a democracy to begin the development of states, but without the right institutions and incentives, no long-term improvement is possible, no more so than in an autocratic regime. In addition, choosing the study of Persson and Tabellini as closing chapter, Helpman emphasizes the importance of assumptions of theoretical models and methods of selected estimates that largely determine the outcome of each study.

To understand better, let's look at Besley and Kudamatsu ("Making autocracy works" 2008)
we give a more mixed than usual autocratic systems. Indeed, by emphasizing the fact that the systemic functioning of an autocracy has always been neglected in the literature, the authors start from the observation that democracy does not always guarantee the growth and autocratic sometimes associated with better performance . China is often given as a recent example of economic success without pre-requisite of democracy, and going back in time reveals that the British Industrial Revolution began long before being put in place broad and democratic elections (It should be noted here that Besley and evaluate Kudamatsu democracy only through the nature of elections). By observing the stylized facts, it quickly revealed that the dictatorships have the particularity to go from one extreme to the other in terms of economic performance, that is to say that the growth rate will be much stronger than for democracies ("outperforming") are much lower. The authors are therefore of major interest to understand the mechanisms of autocratic decision. The article is based on the idea that performance depend on the degree of economic responsibility of the leader who, whatever the regime, has a dominant role in decision-making.

Indeed, if in a democracy, the electoral process that makes the leader accountable (for reelection), dictators rely for keeping them on a group of key people put in power. This group will derive the benefits of political leader as a citizen, will exert a greater or lesser pressure on the leader, in order for it to implement policies conducive to their own well-being depends on the interest General. It includes so why occasionally autocratic regime can bear fruit in terms of general interest, if the group holding the keys of power in hand trying to take advantage of the implemented policies, then economic growth may begin.
It is obvious that major requirement is the ability of the political group to threaten the autocratic leader, otherwise it would have all the cards to run without taking responsibility, leading the country to the lowest.

Let their example: China. The 20 officers of the Chinese Communist Party refers to the pressure group around the leader. Thus in 2002, Jiang Zemin, despite his attempt to convince members of the Party, Hu Jintao replaced because party members had felt that the widening inequality that occurred under Jiang would eventually undermine the overall economic success of China. A reason, therefore, the leader is replaced, in favor of an unprecedented economic growth for the country.

Jiang Zemin and his successor

A key element in the "success" of such schemes is the "turnover" of the leader, which favors the development of policies for development, precisely because the leader supports greater pressure pushing for more responsibility. It
e st clear that the purpose of Besley and Kudamatsu is not to praise autocratic regimes, quite the contrary. This is to highlight some institutional mechanisms prompting the head of the government to act to improve the country's economic situation. democracy, the authors argue, is not a sufficient condition for economic development without an effective incentive system. It is clear that dictatorships can lead a country to the worst situations and a state of emergency, unless the interests of politicians are meddling in the public interest.

Aghion, Alesina and Trebbi adopt a different argument to express the fragile relationship between democracy and economic growth. Indeed, starting from the same stylized facts, the authors are led to believe that the institutions of a democratic regime will impact the different economic sectors. It ends up in this dualistic view where the democratic process is a positive sum game in which sectors are winners and others losers, which depends according to the authors, the technological content of each sector. By developing a theoretical model to help them assess the impact of democratic institutions on the entry of new firms in a sector. Aghion, Alesina and Trebbi assume that firms already present in a market will have to provide more effort and jars of wine to prevent the entry of new competitors, the level of democracy rises. Thus, more democratic institutions encourage innovation of new firms and thus impacting most sectors with high technological content. Thus, the authors tested the relationship between democracy and growth, first without controlling the i- NTERACTION between institutions sectors innovations, while not finding any significant relationship. Once these interactions between democracy and technological level are integrated, they are not only a positive effect of institutions on innovative sectors, but also impact positively on overall economic growth.

The last chapter of the book is devoted to Helpman work of Persson and Tabellini who wanted to re-evaluate the relationship between democracy and development by adopting a different method of estimation. Indeed, by studying the relationship through a nonparametric estimation, the authors conclude that the impact of democracy on growth has often been underestimated. By relaxing this linearity assumption imposed on the relationship, Persson and Tabellini show that the impact of a change of political regime can be considerable. Thus, if a country loses its democratic institutions after the establishment of a dictatorship, it can know a recession of nearly 45%.

This study has the benefit of educating the reader about the importance of the assumptions underlying models that are exposed throughout the reading. Indeed, the work of both theoretical and the empirical relationship between institutions and economic performance are still subject to assumptions and estimation techniques that are their own and need not to forget them, since they may have serious results.

Emt Accelerated Course Sf

fee to the export and food crisis (answer the quiz) Quiz

Here is the answer to the quiz of school taxes on exports. This
trade policy is unknown to the general public, it is nevertheless widely used and not regulated by the WTO. To give you some examples of China's steel export taxes, Argentina's grain Indonesia and Malaysia exports palm oil. But
devil, why do they do such a thing? Of course, to raise tax revenues, but this is not the only reason, once taxed exports are less competitive, some producers instead of exporting to reorient the local market which is not taxed. This behavior leads to more competition and hence lower domestic prices. This price drop is beneficial to the industries of intermediate and final consumers. In China these taxes on steel allow industries that process / use this metal to be more competitive, Indonesia and Malaysia taxes on the oil palm industry can develop a bio-fuel and such taxes in Argentina on cereals benefit consumers. Such measures have therefore appear to be beneficial, especially in times of food crisis. But the air is not the song, the importing countries (especially small countries) are being hit hard by rising world prices due to taxes on exports. Gains for some worth the pain of others?
According to this interesting study this Thurs is harmful and calls for international regulation.

Postscript: Dear Anonymous 5, who are you? I dream that you are a student of 1st year! The case of Argentina that you mention is actually interesting. It's a long tradition of taxing Argentina Argentine export grain, if the measure was suspended while the farmers exported their massive soy prod ; and domestic prices rose, the urban electorate has suffered, resulting in a change in policy. The fees were reintroduced and resume your expression "the coach was re-elected." This poor Mrs. Kirchner but to face the wrath of farmers in 2008 and his party took a drubbing sacred in the 2009 elections.

Does Provisional Counter Part Look Like

Google

A particular country, call the A, decides to tax exporters. Do you think this country

1. is imaginary, a government tax imports to protect its producers and not the reverse
2. is in crisis
3. food is a big country
4. is headed by Domenech.

I pick next week! There may be many answers ...

Chrome Complete Upper Dentures

of school and public opinion

How is public opinion? Find broader issue of the fragments in the aggregation response keywords that you type on your search engines. D'Amuri and Marcuci (2009) had thus improved estimates of U.S. unemployment rate using the keywords typed into Google
.* The Gaphique 1, extracted from their study illustrates the use ; the search engine as a crisis.

Figure 1: The research via Google

unemployment before and during the crisis 2007

Today it is a study on the relationship between environmental awareness and economic crisis that makes us blogging.
is a subject that we were already interested in our post on the discount rate environment. At the time we wrote:

" The awareness of citizens about the environment and global warming was it fleeting? The craze for" green "[...] it seems to be faltering n 'There is little enough to be optimistic with regard to climate change, the tragedy of the commons applies ... strategic interactions between countries lead to a prisoner's dilemma, the situation where everyone is polluting a Nash equilibrium (Copenhagen). The difficulty in coordinating, tie their hands as Odysseus facing the sirens seem insurmountable as the time preference is high and low risk aversion in our future societies. "

The study Kahn and Kotchen (2010) goes in the same direction. The authors examine the use of keywords" climate change "and" unemployment "in the American States since the beginning of the economic crisis. Unsurprisingly they observe a high rate of unemployment reduces the research on climate change. To use a vocabulary a little bit micro-economic, the authors consider that the environment is a luxury good, that is to say that the application of this property is greatly reduced when income decreases slightly.

can only regret that a test of this hypothesis was not realized (what kind of test would you do?).

Conclusion (and yeah now, it's back holiday ...**)

What is now sixty-eighters? what have they done with their ideals ? The objective of zero growth of the 70, means nothing to a majority of them. The years of crisis, mass unemployment swept the sustainable development initiatives. Today, like yesterday, because the economic risk of primer on environmental grounds.
Indeed, because the economy of the environment is an economy of market failures - in the sense that each individual maximizing its own interests may affect the well being of its neighbors or their children - ; the state intervention is necessary. But in a democracy where men auscultate political public opinion overnight, and since public opinion is not stable on the environmental issue, I predict (again and alas) great years of inaction.

F.
Footnotes posts

* Hal Varian was the first to put forward this type of research as chief economist of Google (for an interview with the big boss of the microphone is here).
** speaking of holidays, some bloggers have written posts for this pretty sweet time, thank you and bravo to them. See Optimum for a nice point of macroeconomics, Arthur Charpentier to real questions about the jogging and random Rationality and limited dominacale reflection on the epistemology .

References

• Kahn, ME and MJ Kotchen (2010), "Environmental Concern and the Business Cycle: The Chilling Effect of Recession," NBER Working Paper 16241.

Nitrous Oxide Effects

Preferences trade and development aid

Abstract ... and maybe more

Paper Detailed below is a paper that I co-authored with Antoine Bouet, David Laborde and Kimberly Elliott, which analyzes the costs and potential benefits involved with policies of trade preferences granted to the poorest countries.
Using the CGE model MIRAGE, one can study the impact of full liberalization of the borders of rich and emerging countries to estimate the potential benefits in terms of improved trade performance of countries poor, but also costs that implies in terms of contraction in the sector donor countries. MIRAGE model simulations also allow to study the various phenomena of erosion of preferences if preferences were extended to other developing countries. Indeed, the classifications of the poorest countries meet your criteria that vary across institutions: thus the United Nations defines the 50 poorest countries "Least-Developed-Countries", while the World Bank uses a classification called Low-Income Countries, ". It seems important to note the different effects of preferences when the list of eligible countries is changing. On the other hand, produce scenarios that simulate partial or total liberalization (97% or 100% of the products liberalized) can highlight the need to fight against the tariff exceptions that override any commercial benefit for countries whose specializations are extremely strong.

The main objective of the paper is to highlight the role or responsibility of developed countries but also emerging countries in development assistance, through exports, while highlighting how to optimize the gains and reduce costs, whether for countries recipient or donor countries, subject to the need for political feasibility.

The findings emphasize several points:
- Firstly, it is clear that the tariff peaks that characterize the trade policies of developed countries correspond exactly to the specialties of highly concentrated poor countries. Demonstrates, the total inefficiency of scenarios to 97% of the products liberalized. And full coverage can only bring benefits.
- Expand the preferred program to other poor countries does not systematically preference erosion, including Asian countries poor seem not to prejudice (Bangladesh does not suffer from the stand of Pakistan and Viet Nam, for example) . Cons by some African countries suffer from eligibility for preferences of certain Latin American countries, due to severe erosion of preferences from the European Union, which has already liberalized its borders to LDCs.
- Countries Emerging broad role to play in improving business performance.
- Finally, it is important to conclude on the idea that this type of preferential program is compatible with a certain political feasibility in the sense that sectoral contractions in rich countries are quite small . Evidenced by the key sectors of sugar, meat, rice or textiles and clothing. This is explained quite simply by the large differences of scale in production value (the Bengal Textile certainly represents 12% of the volume of U.S. production of textiles, but only 2.5% of its value).

Introduction It is widely accepted that trade integration is a vector of economic growth for the so-called "developing". It is certain that in the absence of a domestic market large enough to inspire mass consumption, sources of income, source of economic growth comes mainly from exports. However, we find that the poorest countries in the world, namely the Least Developed Countries as defined by the United Nations (LDCs) are poorly integrated into the global trading system. Evidenced by the share of exports in global flows, which fell by nearly two-thirds since 1970. This deterioration of business performance can not be explained by a proportional decline in GDP (which has fallen by one third over the same period), two elements can be put forward to explain this phenomenon:
- insufficient supply constraints, ie ineffective policies, lack of infrastructure and transparent institutions, an underserved population cared and / or poorly educated, unskilled in fact, the very limited production capacity.
- access to developed markets and emerging limited, namely a rate of protection supported much too strong for products from LDCs are competitive in developed markets. We focus on this second point, which , admittedly, involves the responsibility of developed countries and would be resolvable in the medium term on condition of political will.
Why would one say that the LDCs suffer from limited access to developed markets, even though they enjoy, especially since the agreements of the millennium (2000) preferential agreements increasingly numerous. The 'Everything But Arms (EBA) of Europe or the "African Growth and Opportunity Act (AGOA) of USA are examples. This is to remove all tariffs and quotas imposed ("Duty-Free Quota-Free" or DFQF) on products from LDCs to promote exports. And other developed countries such as Japan, Canada, Australia and New Zealand have introduced "Duty-free quota-free market access" or DFQF. There are also increasing efforts in emerging countries such as India, China, Brazil or Turkey, which have gradually increased the total liberalization on a growing share of products.
However, the latter made the transition to the relative failure of these preferential agreements, which to date have failed to LDCs to derive profit. Why? Simply because all such agreements contain exceptions to DFQF, that is to say that a list of products is excluded from liberalization. Indeed, excluding the European initiative that grants DFQF total (except arms), all These agreements contain at least 3% of products exempt from lower rates to maintain a degree of protection. However, it is well known that a primary characteristic of very poor countries is the very high proportion of their production equipment that allows them to export some products. Exceptions and tariff agreements correspond exactly to the specializations of LDC, making any move unnecessary and inefficient. In addition, although exceptions are squeezed, such as Europe has done, it is nevertheless binding rules (rules of origin, sanitary standards and pesticides) are imposed on those countries that lack the financial and human resources to meet them, making it impossible for exports to developed markets.
Although awareness of a shared responsibility of developed and emerging countries is undeniable, the fact remains that efforts are still needed to help the extremely poor countries to generate revenue from their exports. To do this, it is important to assess the "good terms" to make effective these preferential agreements and measure their impact on both the performance of the LDCs but also on production countries giving preference to highlight a political feasibility.

Four questions can be asked:
1 - What are the earnings of LDCs if the preferences granted by OECD concern 100% (97%) of tariff lines?
2 - What is the impact of extending preferences to other poor and vulnerable economies on the earnings of LDCs? (Erosion of preferences)
3 - What role can emerging countries such as India, China, Brazil or Turkey?
4 - What are the consequences of DFQF on donor preferences?

The methodology adopted is a
MIRAGE computable general equilibrium model adapted to the analysis of trade policies (Decreux Y and H Valin, 2007), which can be studied in great depth, rate shock on all components of the economy in a multinational, dynamic and multi sectoral.
Based on comprehensive data of GTAP (Narayanan and Walmsley, 2008) and the base version7 MAcMapHS6 version 2 for data tariff (Boumellassa, Laborde, and Mitaritonna, 2009), updates are necessary in order for the model to precisely account all the efforts in terms of preferential agreements today. MAcMap and tariff data were updated by the integration of DFQF from 2004 until 2008.
While the data we have are more detailed about 230 countries and sectors concerned HS6 disaggregated level, the MIRAGE model can simulate scenarios of liberalization on a slightly more aggregated. And choices necessary to demonstrate the aggregation of data must be made: 36 countries or regions, 28 sectors. Some LDCs are necessarily encompassed in a wider region, for lack of reliable data. The choice of sectors is still done in order to target key specializations poor countries (textiles and clothing, sugar, milk, vegetable oil ...)

Ten scenarios (or ten shocks to the baseline) are simulated in order assess the various impacts and to identify the modalities for liberalization most suitable.
A. Liberalization to 97% of tariff lines for LDCs from OECD countries
B. Liberalization 97% for LDCs and the poorest countries as defined by the World Bank, only those for which the GDP \u0026lt;50milliards (Sri Lanka, Paraguay, Bolivia ...)
C. Liberalization 97% for LDCs granted by OECD countries as well as emerging countries (Brazil, China, India) D. Liberalization
to 97% for all countries defined by B by all countries defined in C
E. Liberalization 100% of tariff lines provided to LDCs OECD Countries
F. Liberalization 100% for LDCs and the poorest countries as defined by the World Bank, only those for which the GDP \u0026lt;50milliards (Sri Lanka Paraguay, Bolivia ...)
G. Liberalization 100% for LDCs granted by OECD countries as well as emerging countries (Brazil, China, India)
H. 100% liberalization for all countries defined in B by all countries defined in C
Finally, two scenarios More:
I. liberalization to 100% for LDCs and the Low Income Countries (LIC) whose population is less than 75millions
J. We extend the program to LIC larger, thus including Viet Nam and Pakistan

(1) The impact of full liberalization for LDCs (100% DFQF)

Analysis of scenarios A, B, C and D demonstrates the ineffectiveness of partial liberalization, excluding 3% of revenue. It thus shows that the price spikes of the country OECD correspond to specializations of LDC (highly convex shape), this whatever the extent of program eligibility and donor countries. Given this inefficiency, we will focus on scenarios that simulate a full liberalization of products.
The results are shown in the following table:

Table1: Impact of DFQF 100% granted to LDCs by the OECD countries,% change

What are the LDCs which record the benefits of such a preferential policy?

Malawi, Cambodia, Laos, Ethiopia, Bangladesh, Mozambique and Senegal. Where are the potential benefits, ie what are the key sectors previously excluded from preferential schemes?
Mainly, unmanufactured tobacco in Malawi (which represents almost 70% of Malawi's exports, hitherto taxed at 350% by the U.S.), textiles and clothing for Cambodia and Bangladesh
What countries that suffer an erosion of their preferences? Except for a slight degradation of the Malagasy case, LDCs seem all benefit from such a program
Other developing countries, they suffer erosion of their preference? Mauritius, South Africa or Central America who, instead of seeing their situation deteriorate under competition from LDCs, are experiencing an increase in their exports and their well-being. As for other developing countries, the losses are substantial (-0.05%)
It should be noted that rules of origin have an essential role. Indeed, earnings estimates for such a program do not include the presence of some very restrictive rules that inhibit the benefits potential. Profits are "underestimated" because a deletion of these rules could boost business performance improvements.

(2) The impact of extending the eligibility of the program to other vulnerable economies.

results su MIRAGE model in terms of changes in export volumes in the scenarios involving different ways of extending eligibility for preferences are reproduced in the following table:

Table 2: Impact of extending the eligibility of preferences to other poor countries , % change

First, when the DFQF 100% is granted to Low -Income-Countries, LDCs do not suffer significant damage (and sci SCJ). This observation is especially true for Asian LDCs: Bangladesh, Cambodia, Laos, which could suffer heavily from the opening preferences in Vietnam and Pakistan are in the same way, specialized in textile and clothing ( SCJ). These results show that the phenomenon preference erosion is minimal when the preferences are extended to poor countries. This issue is important because the classifications of poor countries meet the criteria set by different institutions and it seems important not to focus solely on the classification of the United Nations.

Given the scenario that involves J Pakistan and Vietnam, their earnings are substantial.
When preferences are extended to certain Low-Middle-Income Countries-(F sc), earnings of LDCs are greatly reduced by cons. On the other hand, the new beneficiary countries namely Bolivia, Paraguay and Sri Lanka are the big winners of the preferred program. The African LDCs hardest hit, because of competitive agricultural products, from countries in Latin America.

(3) The role of emerging markets

The results show the important role that emerging markets play in improving conditions of access for LDCs. This is especially true for African LDCs, namely Ethiopia, Senegal and Mozambique. The example of Senegal is very compelling. Indeed, while the benefits accruing when preferences came from the OECD countries were relatively small, the fact that India opened its borders to Senegal allows to significantly increase its exports to the Indian market. All LDCs have seen their profits improved by the introduction of emerging countries in the program. The following table illustrates this clearly:

Table 3: the role of emerging countries in improving business performance,% change

(4) the impact of DFQF on OECD countries

Fairly obviously, the model results highlight Mirage ds granting preferences to the poorest countries in the world does not contractions Sectoral importantes.Au gaze following table, we find that these scenarios are compatible with a certain political feasibility in the sense that no contraction sectoral unemployment rates are unlikely to move.

Table 4: Impact on production levels of donor countries' national preferences, % change

There is such as textiles and clothing (textile and wearing apparel) U.S. knows that a decrease of 0.13%. In other words, if Bangladesh has an explosion of its exports of textiles and clothing, not to the detriment of U.S. domestic production. This can be explained fairly simply by a considerable difference of scales of production. Indeed, if the textile Bengal accounts for 12% of the volume of U.S. textile production, it represents value as 2.5%. Whatever the industry and the countries concerned and it is quite clear that the poorest countries lack the capacity to export massively to reach threaten domestic production developed countries. Indeed, because of supply constraints in developing countries, it is unfortunate to continue to protect our borders goods are produced on a small scale by countries that are already struggling to fulfill the norms and standarts that are imposed by developed countries.

Reference:
The Costs and Benefits of Duty-Free Quota-Free Market Access for Poor Countries: Who and What Matters. Bouet, Laborde-Debucquet, and Elliott Dienesch
http://ideas.repec.org/p/tac/wpaper/11.html

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Institutions and Economic Performance, E. Helpman: Civil Wars and Development

J. Fearon on the fact that for 60 years, civil wars are always formed under the same circumstances, for almost 40% of countries in more than half a million people, killing at least one thousand people. It is the largest source of forced migrations of the 20th century. It is obvious that the damage caused by such conflicts are significant economies.
Therefore, the economic literature has increasingly examined the effects of civil wars on the economy and reverse the relationship between initial level of development, insurrections and civil wars.

Most civil wars have the same architecture, namely that it is for most guerrilla forces opposing the government, leading a counterinsurgency against the guerrillas, whose strength of attack is always a minority and illegal. Rebel forces act at night in rural areas, through targeted operations, while the army acts day in urban areas. In other words, there is no physical confrontation between two camps, but only a game designed to spread terror among opponents and to generate more membership and financial support of the population and local businesses. Indeed, the taxes collected by the rebels and the government are the only valid sources of funding and an effective way to undermine the other side via a reduction of the tax base available. This is the pattern that was observed in Vietnam, Guatemala, El Salvador, Colombia, Algeria, Philippines, Turkey, Peru, Northern India, Thailand, Kashmir, Nepal, Indonesia, Mozambique, Sudan ... In these examples, the reader finds self-correlation between income per head relatively small country and the likelihood of occurrence of such conflicts. Fearon even shows the relative per capita income in explaining how civil wars, demonstrating that once controlled the initial earnings, the degree of democracy, religious diversity, ethnic groups or the degree of inequality n have virtually no explanatory power. Fearon seeks to answer two questions:
- How to explain the historical persistence of this type of internal conflict, very characteristic since 1945? The underlying question is: what that would prevent negotiations between government and rebel forces, causing collateral damage considerable economic and human?
- What explains the strong relationship between low per capita income and high risk of war?



Fearon seeks to resolve these issues by adapting game theory to this context, both players are the government and the rebel leader. It will demonstrate the relative ineffectiveness of previous models seen in the economics literature (Grossman 1991, 2002, Hirshleifer 1995, Skaperdas 1992). Indeed, unlike his predecessors, James Fearon included a component of violence in his model that integrates the fact that as part of a guerrilla war (which we shall call between the armed forces unbalanced), the risk to the guerrillas triggering the fighting is important: it implies a probability of detection and capture much larger, which eventually end up down the rebellion by capturing all the fighters. On the other hand, the imbalance between military and rebels is inevitable as more rebels enlisting men, the greater the risk of infiltration is high: Fearon talks about diminishing returns of the rebel forces in a successful insurgency.

models literature applied to civil wars.
is considered a game, both players are the government (G) and rebel leader (R) that interact in society in which income per head is there, each with a positive return (y> 0). Potential tax revenue for which they are written ty with y is income per capita and t the tax rate set. The game begins with the recruitment of men in proportion α ε [0,1] by the rebel leader and as a proportion β ε [0,1] by the army chief, the choice of α and β are being simultaneously, the marginal cost and cR cG. Under these models, the function that determines the success of the insurgency (measured in terms of share of tax revenues controlled by the rebels) is written p (α, mβ) for a fixed level of military forces employed and m a positive parameter of efficiency-led insurgency against government forces.
The utility functions of both players are written:
UR (α, β) = p (α, mβ). ty. (1 - α-β) - α cR
UG (α, β) = (1 - p (α, mβ)). ty. (1 - α-β) - cG β
The basic assumption in combating both utility functions we consider is that having more than enlisted soldiers or rebels, the number of opponents is constant gives allows for greater tax revenues ( dp / dα> 0), through a descending rate of return (d ² p / dα \u0026lt;0).

analysis of these utilities is needed to understand how variation in per capita income (Approximated here by y) will affect the equilibrium level of civil conflict, themselves determined by maximizing utility functions of G and R. Here Fearon will show the ineffectiveness of these models, which arrive at a conclusion irrelevant in terms of stylized facts. Indeed, if y is income increases, the marginal returns of each of rebellion or insurrection-cons will increase by raising the tax base. Now if α and β are the equilibrium levels before rising incomes, while increasing company when, because of diminishing returns the number of male combatants to capture new tax revenues, while the share of men fighting in the respective Ramées rebels and the government will be more important. Which is very unrealistic as it is tantamount to saying that when a country becomes richer, it is more advantageous for him to engage in civil war, involving a share of the larger population. In a second plane, another limitation is housed in the specification of marginal costs of recruitment and military rebels. Indeed, when income y increases, the costs and cR cG remain constant, which amounts to asserting that house and feed launder soldiers would have the same cost regardless living standards.

In this perspective, an alternative specification was proposed: rather than assuming that the requisition is being hired for a salary that players R and G to perform. The wage then encourages men to engage in civil war, partly displacing the risk of dying by a financial non-negligible since the wage w is equal to or greater than the infinitesimal per capita income y As a result, revenues are varied within the population with yi following a cumulative distribution function, denoted by F. If the shape of the function is not impacted by a variation of the average per capita income, while the living still not affect the marginal costs and hence the equilibrium levels of the attacking forces of the two adversaries. This assumption allows any event to include in the model that income inequality is a source of encouragement in the level of equilibrium. But the specification of the model in its reduced form does not get results with accommodating the reality of the guerrillas in poor countries. Moreover, Fearon said that the chances of civil war are not empirically higher in unequal countries. These models literature do not really explain the relationship between such conflicts and income per head.



Mafia, Guerrillas what difference?
As a transition from literature to its own model, Fearon analyzes the differences between criminals and mafia group of rebels. Indeed, it seems obvious that the criminals in their most common sense seeking to exercise their crimes and crime in anonymity to avoid legal responsibility and punishment. In fact, criminals never repeat the same crime on the same individuals and / or in the same places to prevent their destruction. Mafias in contrast, are criminal organizations who are not acting in secret. Indeed, in order to capture rents and taxes on the backs of taxpayers, they do know the population and therefore likely termination. What allows them to persist over time? On the one hand, the very hierarchical organization, which allows the exercise of control over each member and other threats of retaliation and the exercise of terror on the topics to limit the risk of termination with the authorities. It is the same for an organization rebels, who finance themselves through taxes "revolutionary" punctured the peasants mainly in rural areas and exposed to the risk of being known and denounced the government. The fundamental difference between mafia and rebellion is that crime does not have the same goal. A civil war is primarily carried out for a radical change of system politique.En addition, an insurgency is most often reduced in number and armed forces compared to government forces, so it is necessary to stay in the underground to survive. Indeed, Fearon's model based on the assumption following the addition of rebels recruited increases the risk of capture and jeopardizing any armed group, for a given size of government.

A model of insurgency

Fearon again considers a game between the head of government (the size of the army β ε [0,1]) and rebels ( size of the insurgency α ε [0,1]), each puncturing taxes on private income, a rate fixed t ε [0,1]. The total tax revenue amounted to ty (1-α-β) with y the per capita income (times the population not enrolled in combat).
The model predicts that a fraction p (α, mβ) rebel was captured or killed by the military government, with the parameter m> 0, the parameter of efficiency of government in the insurgency-cons. So that the size of the rebel group is written α (1-p (α, mβ), which collects its revolutionary taxes on the part of the population not involved in the conflict.
Total revenue for the rebel s written now tyα (1 - p (α, mβ)). The government collects its taxes on farmers' income not "controlled" by the rebels, that workers who do not support the insurgency.

Fearon's model differs from the literature by the introduction of p (α, mβ), reflecting the risk of capture by the rebels, increasing function of its two arguments, namely the size of the armed group (growing risk of termination ) and the effectiveness of government in the conflict. The proportion of captured rebels is equal to α. p (α, mβ) = k (α, mβ)

Both utility functions are written in this
UR (α, β) = tymin {(1 - α-β, α-k (α-mβ)} - α cR
Where rebel leader sets a tax rate, minimizing the risk of capture of his troops
UG (α, β) = {tymax (0.1 - α-β-α-k (α-mβ)} - β cG
And the head of the government sets its tax rate, maximizing its tax base and capture of rebels.

This graphic illustrates the functions of reactions from both players, so α (β) is the optimal size of the rebel force to a level of insurgency against government-given and vice versa β (α) is the optimal size of government forces since the level of insurgency. Note that the Nash equilibrium is the intersection of two curves (α *, β *). In other words, the model analysis should be made through the best responses of players given the jeopardizes the opponent.
- If the rebels are too few, α αmin below, then the government has no incentive to employ armed forces against the insurgency. The best answer is β = 0.
- Once the size of the guerrilla exceeds the threshold α αmin above, the government has a major interest to engage in the insurgency-cons, because the rebels capture a significant share of the tax base
- Considering the best response of the rebels, two contradictory forces interact: first, the willingness to fund and generate financial support for a greater share of the population, and also stress the risk of termination .

Once the model is explained, a fundamental question remains? What is the relationship with per capita income and level of development of a country? Indeed, the question is starting to question the balance of civil conflict in poor countries. Fearon two arguments:
- Revenues did not make any difference in the model because of course, a larger tax base represents a positive incentive for governments to combat insurgents, but this involves costs e running much higher (hires, Stewardship ...)
- Political aspects, developing countries are most affected by gaps in political systems, pushing the rebellion of a portion of the population. Finally


Fearon says that one can not theoretically prove the relationship between poor countries and civil wars without assuming that the populations and combatants would be more risk averse in rich countries, suffering an opportunity cost to engage in the fight much harder because of their initial standard of living. According
Fearon, model parameters representing the efficiency of the government to conduct an insurgency-cons and the share of national income that can be taken by the guerrillas, used to announce the first answers. In fact, according to the stylized facts, these parameters would have a much higher probability of being strong in poor countries. Thus, the equilibrium "violent" (α *, β *) highlighted by Fearon has a higher probability of being reached within a poorly developed countries.

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Globalization destroys it our culture?

The negative influence of globalization on cultural diversity and the level of satisfaction of individuals is often emphasized to justify protectionism in this sector. Already in 1994 during the round of negotiations of the WTO (Uruguay Round), France insisted that audio-visual obtain a place of excellence not subject to the opening. More recently, also on behalf of the cultural exception, she asked to include in the European Constitution the right to protect and subsidize this sector (Disdier et al. (2008)).


What economists say ? On the one hand authors such as Cowen (2002) considers that the opening allows a mixed culture and the creation of new cultural identities (creative destruction), while others worry that these new crops are impoverished because based on the lowest common denominator. But surprisingly, the evils of globalization, however, have been further studied (Francois van Ypersele (2002), Rauch and Trindate (2009), Maystre et al. (2010)) that the benefits of cultural openness.

Until we propose a model in which cultural exchange is mutually beneficial, I wish you all a happy feast of music! References


Cowen T. (2002) Creative Destruction: How Globalization IS shaping the world's cultures. Princeton. NJ: Princeton University Press.

Disdier AC., Head K., T. Mayer (2010) Exposure to foreign media and changes in cultural traits: Evidence from naming patterns in France. Journal of International Economics.

Francois, Patrick and van Ypersele, Tanguy. 2002. "On the Protection of Cultural Goods." Journal of International Economics 56(2): 359-369.

Maystre N., Olivier J., Thoenig M., Verdier T., Product-Based Cultural Change: Is the Village Global?

Rauch J. and V. Trindade (2009), "Neckties in the Tropics: a Model of Trade and Cultural Diversity", Canadian Journal of Economics.

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Greece and European crisis

Débordé par notre quotidien, we have not responded to the crisis in the European Union. Much has been written, so we offer here a brief overview.

A country in crisis should come out of monetary union?

Felstein recalls the conditions for a successful monetary union (workers' mobility, fiscal and political union with the ability to make transfers from one region to another).
In a situation of excessive debt, a small country with its own currency would depreciate its currency and should pay a higher interest rate to pay its expenses, but within the EU the cost is more, the country in question is trying to play the stowaway by making excessive deficits.
While some countries including Spain and Ireland have not played this game (before the crisis the budgets of these statements were balanced), Greece has undoubtedly been a free rider behavior. To pull the country out of crisis, some authors have questioned whether an output of the euro would not be beneficial.

As noted, among other Bernal , Leaving the euro and return to a national currency would have dramatic economic consequences. A country that would choose such a policy would benefit certainly a devaluation of its currency allowing it to restore its competitiveness. This adjustment would be faster than the decline in wages is at work today in Greece. But insofar as one can hardly imagine a country repay its debt denominated in euro with a devalued currency, it's a safe bet that this output of the union would be accompanied by a default (or restructuring debt). But a default, creates distrust of investors over a long period. To stem capital flight, only a higher interest rate to pay the risk premium is possible. It would limit the devaluation and thus gains in exports but also pummel her investment and ultimately the country's growth. So economically speaking out of the euro seems unthinkable, politically it is much less cons, because we can imagine quite easily populist surfing the recession, came to power with slogans of anti-European. Barry Eichengreen does not share this view, for him out of the euro is just hard to imagine politically.

analysis Stiglitz is probably one of the most original, the author follows Keynes in saying that this is not the balance of trade deficits that pose problems but surpluses. Within the European Union is therefore Germany, which exerts a negative externality, leaving the monetary union would lead to a devaluation of the euro that would restore the competitiveness of European countries in deficit . The author proposes alternatives obviously consensual. True to his beliefs, he considers that the austerity through lower wages is frivolous, and believes that if Europe can not reform its institutions and provide adequate tax structure so as to drop the euro rather than to impose on people a long agony.

Originally evil

De Grauwe recommends the establishment of a centralized budget that would allow an automatic transfer to countries in difficulty. This solidarity mechanism (insurance) would limit the use of the market. The author notes that, apart from Greece, a large part of European governments have eu des déficits limités et une croissance de la dette relativement lente en comparaison avec l’endettement privé. La crise des États, n’est que la conséquence de la crise immobilière et bancaire née en aout 2007 :



“Those who say that it is government profligacy that is the source of the debt crisis are mistaken. They also fail to see the inevitable connection between private and public debt. This connection is particularly strong in countries like Spain and Ireland that have been hit badly by the debt crisis. [...] Spain and Ireland were spectacularly successful in reducing their government debt to GDP ratios prior to the financial crisis, i.e. Spain from 60% to 40% and Ireland from 43% to 23%. These were the two countries, which followed the rules of the Stability and Growth Pact better than any other country – certainly better than Germany that allowed its government debt ratio to increase before 2007. Yet the two countries, which followed the fire code regulations most scrupulously, were hit by the fire, because they failed to contain domestic private debt.”



Tyler Cowen revient sur la corruption en Grèce, il souligne que dans les classements internationaux ce pays est proche de l'Égypte ou de Éthiopie. L’économie souterraine représenterait 20% du PIB, l’évasion fiscale semble être a national sport representing a loss of 30 billion euros of tax revenue . This difficulty in collecting the tax is worrisome for prompt repayment of debt.


Reinhart and Reinhart we queue blues by reminding us of the unsuccessful efforts of Argentina which ended in a default of 132 billion euro in 2001 and a GDP contraction of 15%. The authors further note that countries that have pursued austerity plans and it came out (in 1995 Mexico, South Korea in 1998, Turkey in 2001, Brazil in 2002) had a debt in terms of lower GDP Greece.

Solutions?

Laurence Boone talks about the issues of anti-crisis plan, this plan allows the ECB to buy back sovereign debt and grants to the European Commission borrowing capacity of 110 billion euros. Finally, a bottom 440 billion would lead to lower cost countries in difficulty.

Burda and Gerlach proposes the establishment of a committee of independent experts who follow the evolution of Member States' budgets. The new pact of stability it offers, is gradual and very demanding, with an assessment by the experts when the deficit exceeds 1% and an adjustment procedure from 2%.

Wyplosz back on the 750 billion euro provided by Member States and the IMF (which provides 250 billion), he is particularly concerned about the risk of recession-related austerity plans that would undermine tax revenues and weigh down deficit and therefore the debt.

Aglietta also considered that the austerity plan has a high probability of failure from his point of view the crisis is not a liquidity crisis but a crisis of credit against which the only solution is a debt restructuring:

"A cardinal mistake has been made, that the financing plan of 110 billion euros over three years allocated to Greece can not dissipate. The same error as that committed in 1982 by the club of sovereign creditors of Mexico was repeated. It denies that there is a solvency problem and pretends to believe that there is a transient problem of liquidity. This error in the time claimed the lost decade in Latin America as a whole. The countries were exhausted by the austerity plans imposed by sterile International Monetary Fund (IMF) to preserve the creditor banks. Only at the end of the decade with the Brady initiative that the debts were restructured, the banks have got rid of their debts with discounts and economies have been able to find the path of growth. [...] A restructuring plan reduces the cost of a default if it occurs. A study by the Bank of England showed that a country that fails without agreement with its creditors suffered production losses three times higher than countries whose debt has been restructured . "

This analysis is similar to that proposed by Mayer and Big considers that" a liquidity problem postponed Is A problem solved, to a solvency problem postponed Is A Made intractable problem. "

If want more information, see the work of De Grauwe on monetary unions (it is a classic, easy to read and exciting), the journal of literature and Betsma Giuliodori (2009) and finally Baldwin has conducted a review of published posts on vox-eu.

References

Betsma and Giuliodori (2009), The Macroeconomic Costs and Benefits of the EMU and Other Monetary Unions: An Overview of Recent Research, Journal of Economic Literature.

De Grauwe, P (2009), The Economics of Monetary Union, 8th Edition, Oxford University Press.

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Institutions and Economic Performance-Theory of bicameralism (1) John Bates Clark Medal

After flying over the historic part of this work, covering the first five chapters, it is time to focus on four major theoretical chapters qu'Helpman selected. Dealing with very important institutional phenomena, such as choice of a bicameral parliamentary system, the relationship between civil wars and economic development, organization and incentives in the heart political parties to implement economic policies, or finally the ratchet effect of fiscal policies in a dynamic and multi-stakeholder, each chapter will be a ticket.

The choice of bicameralism: Introduction

Chapter 6 is devoted to paper and Kenneth A. Abhinay Muthoo Shepsle analyzing the interactions between the chambers parliamentary elections as often performed over time. Is defined as a bicameral political system that seeks to distinguish in a parliamentary two chambers, room "high" most often elected by indirect suffrage and a room "low", meeting traditionally elected by direct suffrage. The aim is clearly to moderate the action against the executive, the direct representatives of the people submit their decisions to the members of the Upper House, which generally represent different regions, provinces or states within a nation. Bicameralism is particularly justified in the context of a federal state, with a chamber representative of the people directly elected assembly and a representative of the various states. For example, Congress is an illustration of what constitutes political bicameralism, since it brings together two assemblies: the Senate or "upper room" consisting of two representatives from each state and the House of Representatives or "lower house" consisting of 435 representatives the U.S. population. The Senate elections are staggered in time (partial renewal every two years) while the House of Representatives re-elected simultaneously. The goal of bicameralism here is relatively clear, since the Upper House can rebalance the powers in order not to disadvantage the "small states" in the development of U.S. laws.

The interest of this analysis, both empirical and theoretical paper is to highlight the incentive effects of institutions, in a dynamic time, emphasizing balance dependent part in terms of parliamentary elections. It is obvious that the institutional structure of a State has undeniable effects on the behavior of political agents, through different degrees incentives, which are subject to problems of collective choice (see Theory of Mancur Olson). For example, a presidential or parliamentary, unicameral or bicameral, under a proportional electoral system and determines the level and composition of public spending, debt, and especially growth rates and levels of development of nations . It is an empirical point of view, an analysis that stands, although other factors obviously come into account in the analysis of economic performance is what makes all the variety of the work of 'Helpman.

The theoretical analysis and Shepsle Muthoo is an analysis of micro institutional differences, around a cake sharing between the two parliamentary chambers, taking into account the different modalities of elections (simultaneous or staggered in both bedrooms, one simultaneous, staged in the other). These differences are obviously justified by the stylized facts (U.S. Congress, Swiss Confederation, Senate and National Assembly in France).

Model theoretical assumptions

The first step is the definition of the basic model "Baseline" to analyze the effects of changing legal frameworks and economic environment. The authors therefore assume that initially two rooms are the legislature and the other, they hypothesize that for each period, the economy shows a surplus fixed and exogenous, known as the cake will be allocated among the various entities represented on the assemblies. For simplicity, the authors introduce no tax policy and taxation, nor any arbitration between private and public allocation of the cake.

The temporal structure of the model is composed of periods t = 0, 1,2,3 ... during which each chamber is composed of two legislators, each having been elected by an electoral body separate or "electoral district".
The authors pose the following hypothesis: it defines the probability that a legislator or member П is reelected, according to a principle of retrospective voting, which implies that this probability depends positively П or at least not negatively share of the pie received by the electoral district in the previous period. This probability of reelection is introduced in the model is designed by the authors in its reduced form, exogenously. The voting rules and voter behavior are not modeled in the model. Another fundamental assumption of this model is the informational imperfection in a temporal sequence. Each voter has a partial and incomplete information on what happened during past periods by former legislators. In other words, voters have limited memory on allowances previously distributed the cake and not re-elect their representatives in accordance with the allocations received recently.

Ѳ The authors pose the likelihood that a legislator is recognized and influential enough so that it can provide a breakdown of the cake which has the whole House. If his proposal is accepted, then the electoral district receives the appropriate share of the cake, if the offer is refused by the assembly in question, then any gain is lost. It also requires that if the Legislature is indifferent between acceptance or rejection of a proposed distribution, so he accepts; It is quite clear that the legislature chooses to propose an allocation that maximizes the pie allocated to its own districts.

At time t =- 1, that is to say when the development of constitutional system, it is assumed that all the conditions for elections, training meetings and decision making are commonly decided by the Founding Fathers with a view to optimizing their interests joints.

Each parliamentary chamber is in charge of the distribution of half the cake, and will Muthoo and Shepsle analyze sequentially the various electoral arrangements simultaneous or staggered. For each institutional review, the political balance achieved is a Markov equilibrium, namely that once the institutional choices made (eg choice of bicameralism) in period -1, the political strategies driven by a logic of historical independence decisions. The balance mechanism can not account for any intertemporal choice or cooperative.

What are the main results obtained?

By imposing a constraint in which the starting monocameral is chosen by the founders, the authors show that it is sometimes preferable to establish procedures for elections staggered rather than simultaneous. Indeed, from the point where elections are concurrent, ie the assembly is totally unique challenge to each election date, the probability that the elections completely renew the membership of the assembly is strongly positive, which implies little political experience in the room Parliamentary and thus a relative inefficiency of the decisions taken. As part of a phased and partial replacement, this type of scenario is impossible. In addition, the existence of a single chamber increases the risk that the legislature denied a proposal for the distribution of the cake and the electoral district does finally perceive no contribution. This last element is at the heart of the analysis the degree of risk aversion of agents.

Recall now that the basic model is a bicameral structure, which divides the cake in half. Three cases must be examined in turn: both chambers are simultaneously renewed, or both are partially re-elected, or one of two known staggered elections and not the other.

- In the first case, the model shows that a bicameral legislature with a single electoral event is a Pareto-superior if there is a single room. Bicameralism will be chosen ex ante, tending to confirm the choice of the base case, also reflecting the risk aversion of agents. Indeed, this scenario can provide a greater probability of receiving a share.
- Just as when both meetings have staggered election terms, the model shows superiority as the Pareto criterion in relation to unicameral, always on the basis of a risk aversion of agents, who prefer to maximize the likelihood of receiving a share of the cake, as form of allocation, rather than risk getting nothing.
- The third case of asymmetry of electoral conditions of the two chambers is not directly measurable through the model specification. Indeed, the optimality of either procedure depends on the value of certain parameters such that the probability of reelection of legislators (which we recall depends allocations received in previous period by each entity election) but also the likelihood of legislators to be sufficiently influential to offer themselves a division of the pie, a parameter that depends on him even elections (plus the approaching elections for some lawmakers, their means of more actions will be important).
Nevertheless, the authors argue that when the parameters are such that the power to impose an agenda for legislators is the same in the context of elections partial or total, then, agents will be indifferent to the three possible structures of bicameralism.

Conclusions

In choosing to highlight this study, Helpman seeks to emphasize the importance of institutional organization, but also incentives for policy makers. If the analysis focuses on the ex-ante choice of institutional structure, that does not link these findings to the main stylized facts that highlight the differences in economic performance related to the functioning of institutions. The cons-powers are necessary and more economic agents are risk averse, the greater the presence of two constituent rooms will be required. Muthoo and Shepsle have thus shown that under certain conditions; bicameralism is a more appropriate choice as the unicameral. Indeed, the balance achieved through a program of maximizing share of the pie is Pareto superior to equilibria reached under which a single parliamentary chamber is established. It is however important to remember that this model depends heavily on assumptions advanced by the authors and especially the value of the main parameters of the theoretical model. This recall that there is no single institutional structure which is optimal without it depends on the size and characteristics of each nation .