Showing papers in "Canadian Journal of Economics in 2010"

Trade openness reduces growth volatility when countries are well diversified

Abstract: This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export diversification indicators, it presents strong evidence pointing to an important role for export diversification in reducing the effect of trade openness on growth volatility. The authors also identify positive thresholds for product diversification at which the effect of openness on volatility changes sign. The effect is shown to be positive only for a minority of countries with highly concentrated export baskets. This result is shown to be robust to both explicit accounting for endogeneity as well as the inclusion of a host of additional controls.

Viewpoint: Measuring and understanding subjective well-being

Abstract: Increasing attention is being paid in academic, policy, and public arenas to subjective measures of well-being. This promising trend represents a shift towards mea- suring positive outcomes in psychology and greater realism in the study of economic behaviour. We describe the main measures of subjective well-being (SWB) and provide ex- amples of policy-relevant research findings, including new accountings of the differences in individual-level SWB assessments around the world and across Canada. These suggest a consistent pattern of life circumstances linked to SWB and highlight the importance of social factors whose role has otherwise been hard to quantify in income-equivalent terms.

Structural gravity equations with intensive and extensive margins

Abstract: Recent trade models with heterogenous firms have changed the interpretation of gravity equations. Chaney (2008) shows that the effect of distance on the number of exporters and average exports depend on key parameters characterizing the elements of market structure. We use firm-level export data to estimate the structural parameters of Chaney's model. Controlling for the fixed costs of exporting, our estimated parameters match, for 28 out of 34 industries, the model's theoretical predictions. Our industry parameters allow us to evaluate separately the effect of transport costs and tariffs on trade, without having to resort to detailed data on trade frictions.

The trade creation effect of immigrants: evidence from the remarkable case of Spain

Abstract: This paper investigates the immigration-trade link using data on individual exporting transactions and immigrants in Spanish provinces between 1995 and 2008. We quantify the impact of new immigrants on the extensive margin (number of transactions) and intensive margin (average value per transaction) of exports. We find that immigrants significantly increase exports and that the effect is almost entirely due to an increase in the extensive margin. Consistent with the idea that immigrants reduce the fixed cost of exporting, we find stronger effects for differentiated goods and for countries that are culturally distant from Spain. Ce texte etudie le lien immigration-commerce international a l’aide de donnees sur les transactions individuelles d’exportation et sur les immigrants dans les provinces espagnoles entre 1995 et 2008. On quantifie l’impact des nouveaux immigrants a la marge extensive (nombre de transactions d’exportation) et a la marge intensive (valeur moyenne des transactions d’exportation) . On decouvre que les immigrants declenchent une augmentation significative des exportations, et que cet effet est presqu’entierement attribuable a un accroissement a la marge extensive. En ligne avec l’idee que les immigrants reduisent les couts fixes de l’exportation, on decouvre des effets plus forts pour les produits differencies et pour des pays qui sont distants culturellement de l’Espagne.

Deconstructing gravity: trade costs and extensive and intensive margins

Abstract: One of the most robust empirical results in international economics is the existence of a negative relationship between trade flows and distance. More recent research on exporting activity at the firm level has established an apparently equally robust result— few firms export, and exporting firms do not sell in all possible markets. This paper uses data on US exports across 156 countries to decompose exports to each market into the number of firms exporting (the extensive margin) and average export sales per firm (the intensive margin). We show how the effects of distance and a range of other proxies for trade costs have different impacts on the two margins. We find that distance has a negative effect on both margins, but the magnitude of the coefficient is considerably larger and more significant for the extensive margin. Most of the variables capturing language, internal geography, infrastructure and import cost barriers work solely through the extensive margin. We show that these results are consistent with the predictions of a Melitz-style model of trade with heterogeneous firm productivity and fixed costs.

Measuring the gains from trade under monopolistic competition: Measuring the gains from trade under monopolistic competition

Abstract: Three sources of gains from trade under monopolistic competition are (i) new import varieties available to consumers; (ii) enhanced efficiency as more productive firms begin exporting and less productive firms exit; (iii) reduced markups charged by firms due to import competition. The first source of gains can be measured as new goods in a CES utility function for consumers. We argue that the second source is formally analogous to the producer gain from new goods, with a constant-elasticity transformation curve for the economy. We suggest that the third source of gain can be measured using a translog expenditure function for consumers, which, in contrast to the CES case, allows for finite reservation prices for new goods and endogenous markups. On identifie trois sources de gains en provenance du commerce international dans un regime de concurrence monopolistique: (1) nouvelles varietes d'importations disponibles pour les consommateurs; (2) efficacite accrue a proportion que les entreprises plus productives commencent a exporter et que les moins productives disparaissent; (3) reduction des marges beneficiaires dans les prix des entreprises a cause de la concurrence des importations. La premiere source de gains peut etre mesuree comme nouveaux produits dans une fonction d'utilite des consommateurs de type CES (i.e. ou l'elasticite de substitution est constante). On suggere que la seconde source est analogue aux gains des producteurs en provenance des nouveaux biens avec une courbe de transformation de l'economie aelasticite constante. Quant a la troisieme source, on suggere que les gains peuvent etre mesures en utilisant une fonction translog des depenses des consommateurs, laquelle, contrairement au cas de la CES, permet de prendre en compte les prix minima qu'on est pret a payer pour les nouveaux biens et les marges beneficiaires dans les prix endogenes.

Catching up to the technology frontier: the dichotomy between innovation and imitation

Abstract: Using data for 55 developing and developed countries, this research examines the roles of technology transfer, research intensity, educational attainment and the ability to absorb foreign technology in explaining cross-country differences in productivity growth. The results show that innovation is an important factor for growth in OECD countries whereas growth in developing countries is driven by imitation. Furthermore the interaction between educational attainment and the distance to the frontier is a significant determinant of growth in the overall sample.

Does FDI in manufacturing cause FDI in business services? Evidence from French firm‐level data

Abstract: This paper uses a large French firm-level data set to evaluate the determinants of location choices in services. In a first step, estimates for four broad services sectors are compared with the estimates for the manufacturing sector. Using a discrete choice model, we find that this framework does fairly well in explaining location choices in services and that the parameter estimates for services are close to the ones for manufacturing. We then investigate whether the similarity in estimated parameters is due to a complementarity between location choices in manufacturing and in services, in the sense that manufacturing location choices may cause the location of services. A particularly appropriate services sector, for this purpose is the business services sector, for which input-output linkages with the manufacturing sector are particularly strong. It is found that the downstream demand of French manufacturing firms has a positive effect on the location choice probabilities of French business services firms. This effect is robust. JEL classification: F 13, F 15, L80

Do Trade Missions Increase Trade

Abstract: In an effort to stimulate trade, Canada has conducted regular trade missions starting in 1994, often led by the Prime Minister. According to the Canadian government, these missions generated tens of billions of dollars in new business deals. This paper uses bilateral trade data to assess this claim. We find that Canada exports and imports above-normal amounts to the countries to which it sent trade missions. However, the missions do not seem to have caused an increase in trade. In the preferred specification, incorporating country-pair fixed effects, trade missions have small, negative, and mainly insignificant effects. Dans un effort pour stimuler le commerce international, le Canada a mene des missions commerciales depuis 1994, souvent sous la direction du Premier Ministre. Selon le gouvernement canadien, ces missions ont engendre des dizaines de millions de dollars en relations d’affaires. Ce texte utilise des donnees sur le commerce bilateral pour evaluer cette proposition. On decouvre que le Canada exporte et importe des quantites au dessus de la normale vers et en provenance des pays ou il a mene des missions commerciales. Cependant, les missions ne semblent pas avoir cause un accroissement du commerce. Dans la specification preferee, incorporant les effets fixes des paires de pays, les missions commerciales ont des effets faibles, negatifs, et en gros insignifiants.

Are sunk costs in exporting country specific

Abstract: Previous studies have shown that there are significant sunk entry costs in exporting. However, the empirical literature has not addressed whether these costs are global or country specific. In this paper, I show that both are present and estimate that country-specific costs are about three times the magnitude of global costs. Furthermore, I show that international standards harmonization has strong positive effects on imported variety in small and remote markets. Calibration of a modified Chaney (2008) model indicates that these markets will gain access to 3–4% more imported varieties when global costs increase by 10%, holding total entry costs constant. Des travaux anterieurs ont montre qu'il y a des couts irrecuperables importants pour se lancer dans l'exportation. Cependant ils n'ont pas etudie si c'etaient des couts globaux communs a tous les marches d'exportation ou s'ils etaient specifiques a des pays particuliers. Dans ce texte, on montre que les deux types de couts sont presents, et on estime que les couts specifiques aux pays sont trois fois plus grands que les couts communs. De plus, on montre que l'harmonisation des standards internationaux a des effets positifs importants sur la variete importee dans les marches petits et eloignes. La calibration d'un modele modifie de Chaney (2008) indique que ces marches vont avoir acces a 3–4% de plus de varietes importees quand les couts globaux communs s'accroissent de 10%– gardant les couts d'entree totaux constants.

Subjective mortality expectations and consumption and saving behaviours among the elderly

Abstract: Life expectancy is an important factor that individuals have to take into account for saving and consumption choices. The life-cycle model of consumption and saving behaviour predicts that consumption growth should decrease with higher mortality rates. The aim of this study is to test this hypothesis based on data about subjective longevity expectations from the Health and Retirement Study merged with detailed consumption data from two waves of the Consumption and Activities Mail Survey. This study finds that an increase in subjective mortality by 1% corresponds to an annual decrease in consumption of non-durable goods of around 1.8%. L’esperance de vie est un facteur important dont les personnes doivent tenir compte dans leurs choix de consommation et d’epargne. Le modele de comportement de consommation et d’epargne au cours du cycle de vie predit que la croissance de la consommation devrait decroitre a mesure que le taux de mortalite augmente. Cette etude met au test cette hypothese a l’aide de donnees sur l’esperance de vie subjective tirees des resultats d’une etude sur la sante et la retraite arrimes aux resultats de deux vagues d’enquetes postales sur la consommation et les activites qui ont produit des donnees detaillees sur la consommation. Cette etude montre qu’un accroissement de un pour cent dans l’anticipation subjective de mortalite correspond a un declin d’a peu pres 1.8% dans la consommation annuelle de biens non durables.

Foreign acquisition, plant survival, and employment growth

Abstract: This paper analyses the effect of foreign acquisition on survival probability and employment growth of target plant using data on Swedish manufacturing plants during the period 1993-2002. An improvement over previous studies is that we take into account firm level heterogeneity by separating the targeted plants into those within Swedish MNEs, Swedish exporting non-MNEs, and purely domestic firms before foreign takeover. The results, controlling for possible endogeneity of the acquisition dummy using an IV and propensity score matching approach suggest that acquisition by foreign owners increases the lifetime of the acquired plants only if the plant was an exporter. The effect differs depending on whether the acquisition is horizontal or vertical. We also find robust positive employment growth effects only for exporters, and only if the takeover is vertical, not horizontal.

Measuring the gains from trade under monopolistic competition

Abstract: Three sources of gains from trade under monopolistic competition are (i) new import varieties available to consumers; (ii) enhanced efficiency as more productive firms begin exporting and less productive firms exit; (iii) reduced markups charged by firms due to import competition. The first source of gains can be measured as new goods in a CES utility function for consumers. We argue that the second source is formally analogous to the producer gain from new goods, with a constant-elasticity transformation curve for the economy. We suggest that the third source of gain can be measured using a translog expenditure function for consumers, which, in contrast to the CES case, allows for finite reservation prices for new goods and endogenous markups.

Agglomeration, backward and forward linkages: evidence from South Korean investment in China

Abstract: With a firm-level data set, we study the location decision of South Korean multinationals across China's regions. Our conditional logit estimates confirm agglomeration effects along industry and along national lines. We add an upstream and downstream (backward and forward) linkage effect. We find that the presence of upstream and downstream South Korean affiliates significantly increases the likelihood that a South Korean multinational invests in a particular region. However, linkages that do not differentiate by nationality do not seem to matter much. As such, our analysis of investors' location choice brings together two perspectives: linkages and agglomeration along national lines.

The visible minority earnings gap across generations of Canadians

Abstract: To what extent the earnings gaps facing Canada’s visible minorities reflect discrimination is a question of tremendous policy interest. This paper argues that failing to account for the limited Canadian ancestry of visible minorities overestimates discrimination if immigrant assimilation is an intergenerational process. Using the 2001 and 2006 Canadian Censuses, weekly earnings, conditional on a rich set of worker and job characteristics, are compared with child immigrant, second-, and third-and-higher-generation Canadian men. The results reveal a tendency for earnings to increase across subsequent generations of visible minority, but not white, men. Though the pattern is strongest between the first and second generation, for black men it is also evident between the Canadian born with and without a Canadian-born parent. Despite this progress, for most visible minority groups earnings gaps are identified even among third-and-higher-generation Canadians.

FDI and productivity growth: the role of inter-industry linkages

Abstract: There is a large literature on the effects of foreign direct investment (FDI) on productivity through inter-industry economic linkages. This paper contributes to the liter- ature by focusing on the developed economy of Canada. It finds that FDI generates strong effects on total factor productivity (TFP) growth through both forward and backward inter-industry linkages, and increase in an industry's absorptive capacity raises the effects of FDI on TFP growth through forward inter-industry linkages. For R&D intensive in- dustries, the effects of FDI on TFP growth through inter-industry linkages are small, but

Sorting, peers, and achievement of Aboriginal students in British Columbia

Abstract: We examine the contribution of differences in school environments to the gap in education outcomes between Aboriginal and non-Aboriginal students. We find both substantial school-level segregation of Aboriginal and non-Aboriginal students and a substantial gap in test scores. Conventional achievement gap decompositions attribute roughly half of the grade 7 test score gap to between-school differences and half to within- school differences. The segregation of Aboriginal students suggests that peer effects might explain some of these between-school achievement differences. However, we find that peer effects associated with a greater proportion of Aboriginal peers, if anything, improve value-added exam outcomes of Aboriginal students. JEL classification: 121

Does the version of the Penn World Tables matter? An analysis of the relationship between growth and volatility

Abstract: The Penn World Tables (PWT) are an important data source for cross-country comparisons in economics. The PWT have undergone several revisions over time. This paper documents how countries' output growth rates change across four publicly available versions of the PWT. We show that for some countries the magnitude of the differences is significant and/or the sign of the growth rates changes across versions. Using as an example Ramey and Ramey (1995), who found growth volatility has a significant negative effect on growth, we demonstrate that conclusions based on one version of the PWT may not hold under another version. Les tableaux mondiaux de Penn (Penn World Tables ou PWT) sont une source importante de donnees comparatives entre pays dans le monde economique. Les PWT ont subi plusieurs revisions dans le temps. Ce memoire montre d'abord comment les taux de croissance du produit des pays changent selon les quatre versions des PWT disponibles au public. On montre que pour certains pays la taille des differences est significative et que meme le signe de ces taux change d'une version a l'autre. Utilisant comme exemple Ramey et Ramey (1995) qui ont montre que la volatilite de la croissance a un effet negatif sur la croissance, les auteurs montrent que les conclusions fondees sur une version des PWT peuvent ne pas etre fondees dans une autre version.

Import competition and firm refocusing

Abstract: Recent theoretical work predicts a new margin of firm adjustment to trade liberalization; that is, multi-product firms alter their product mix to focus on their core competencies in response to trade liberalization. Using detailed product data from U.S. public firms, I find strong empirical support for this prediction. Specifically, import competition leads multi-product firms to drop peripheral products to refocus on core production. The weaker the linkages that a peripheral product shares with the core (as measured by the extent of joint sales, joint procurement, joint production, and joint sectorship), the more likely the peripheral product is to be divested in response to import competition. Certains travaux theoriques recents predisent une nouvelle marge d’ajustement de la firme a la liberalisation du commerce : les firmes multi-produits changent leur mix de produits pour se concentrer sur leurs competences de base en reponse a la liberalisation du commerce. A partir de donnees detaillees sur les produits de firmes americaines, on decouvre que cette prediction a un fort support empirique. Specifiquement, la concurrence de l’importation amene la firme multi-produits a laisser tomber des produits peripheriques pour recentrer sa production sur son noyau dur de competences. Plus faibles sont les liens que partage un produit peripherique avec le noyau dur (mesure par l’etendue des ventes communes, des approvisionnements conjoints, de la production liee, de la participation au meme secteur) plus est grande la probabilite qu’on va desinvestir dans ce produit en reponse a la concurrence de l’importation.

The evolution of male-female earnings differentials in Canadian universities,1970–2001

Abstract: The evolution of academic salaries and the gender earnings gap in Canadian universities is analysed using a unique Statistics Canada data set containing detailed information on all full-time teachers at Canadian universities over the period 1970 through 2001. Male salaries declined across cohorts, while female salaries remained stable; consequently, male-female earnings differentials have narrowed. Recent years have also seen increasing variation in academic salaries for both men and women. A gender earnings gap remains, the bulk of which can be explained by differences in men's and women's rank and field. The unexplained earnings gap has decreased over time. On analyse l'evolution des salaires et l'ecart entre hommes et femmes dans les universites canadiennes entre 1970 et 2001 a l'aide d'une base de donnees unique de Statistiques Canada qui contient des renseignements detailles sur tous les professeurs a temps plein des universites canadiennes. Les salaires des hommes ont decline au fil des cohortes pendant que ceux des femmes demeuraient stables, ce qui fait que les differentiels de salaires se sont amenuises. Au cours des annees recentes, on a observe une variabilite croissante des salaires academiques tant pour les hommes que les femmes.Un ecart entre hommes et femmes persiste qui est attribuable aux differences dans les rangs et dans les champs d'activites des hommes et des femmes. L'ecart qui demeure inexplique a diminue dans le temps.

The dependence structure between the Canadian stock market and the USD/CAD exchange rate: a copula approach

Abstract: This paper investigates the dependence structure between the real Canadian stock returns and the real USD/CAD exchange rate returns, using the Symmetrized Joe-Clayton (SJC) copula function. We estimate the SJC copula with monthly data over the period 1995:1 to 2006:12. Our results show significant asymmetric static and dynamic tail dependence between the real stock returns and the real exchange rate returns, such that the two returns are more dependent in the left than in the right tail of their joint distribution. We explain this asymmetric dependence in terms of an asymmetric interest rate policy by Canadian monetary authorities in response to changes in the real exchange rate during sub-periods of falling and rising commodity prices. Le texte analyse la structure de dependance entre les rendements reels sur les actions canadiennes en bourse et les taux de rendements reels sur le taux de change entre le Canada et les Etats-Unis en utilisant la fonction a copule Symetrisee Joe-Clayton (SJC). On calibre cette fonction a l’aide de donnees mensuelles pour la periode allant de 1995 :1 a 2006 :12. Les resultats montrent une dependance asymetrique statique et dynamique significative entre les rendements reels sur les actions et les taux de rendements reels sur le taux de change, telle que les deux rendements reels sont davantage dependants l’un de l’autre a l’extremite gauche qu’a l’extremite droite de leur distribution conjointe. On explique cette dependance asymetrique en termes d’une politique asymetrique du taux d’interet par les autorites canadiennes en reponse aux changements dans le taux de change reel durant les sous-periodes de prix croissants et decroissants des denrees.

U.S. trade remedy law and agriculture: trade diversion and investigation effects

Abstract: We study U.S. agricultural antidumping and countervailing duty cases from 1980 to 2005, and gauge the effectiveness of trade remedy law as a form of protection. The purpose is to measure the resulting investigation and trade diversion effects. Previous research on trade in manufactured products has shown that the domestic protection offered by AD and CV duties is largely offset by trade diversion. In contrast, we find that for agriculture, trade diversion is relatively unimportant. So AD and CVD cases are very effective forms of protection for U.S. agriculture. Les auteurs etudient les cas de tarifs antidumping et de tarifs compensatoires dans l'agriculture aux Etats-Unis entre 1980 et 2005, et evaluent l'efficience de cette forme de protection. L'objectif est de mesurer les effets resultant des enquetes et de la diversion de commerce. Des etudes anterieures sur le commerce de produits manufacturiers ont montre que la protection offerte par ces mesures antidumping et compensatoires etait largement contrebalancee par la diversion de commerce. A contrario, il appert qu'en agriculture la diversion de commerce est relativement peu importante. Voila qui fait que les mesures antidumping et compensatoires sont des formes de protection efficientes pour l'agriculture americaine.

The role of child health and economic status in educational, health, and labour market outcomes in young adulthood

Abstract: The Ontario Child Health Study provides the first opportunity in Canada to assess directly the relationship between socio-economic and health status in childhood and levels of completed schooling, health status, and labour market success in young adult- hood. We find that childhood health problems are negatively associated with educational attainment, especially the probability of a university degree, and the health status of young adults. Our results also imply that childhood health problems influence adult labour force outcomes, especially for males, mainly through adult levels of schooling and health. JEL classification : 110

Trade diversion from tomato suspension agreements

Abstract: Trade barriers can cause output to be diverted to other countries and into other products. We study the effect of a voluntary price restraint (VPR) on Mexican tomatoes entering the United States. The diversion caused by the VPR is statistically and economically significant – representing over four-fifths of the direct effects of the trade barrier. When the VPR was binding, Mexico exported more tomatoes to Canada, the United States cut back on exports while Canada increased their exports to the United States. The VPR also diverted fresh tomatoes in Mexico into paste production, which was then exported to the United States. Des barrieres commerciales peuvent entrainer la diversion de l'output vers d'autres pays ou d'autres productions. On etudie la diversion causee par les accords de restriction volontaire des prix (ARVP) des tomates mexicaines entrant sur le marche americain. La diversion causee par les ARVP a ete statistiquement et economiquement significative – representant plus des quatre cinquiemes des effets directs de la barriere tarifaire. Quand les ARVP ont ete contraignants, le Mexique a exporte plus de tomates au Canada, les Etats-Unis ont reduit leurs exportations alors que le Canada augmentait ses exportations vers les Etats-Unis. Les ARVP ont aussi entraine une diversion des tomates fraiches au Mexique vers la production de puree de tomate, un produit qui a alors ete exporte vers les Etats-Unis.

Price-level versus inflation targeting with financial market imperfections

Abstract: This paper compares price-level-path targeting (PT) with inflation targeting (IT) in a sticky-price, dynamic, general equilibrium model augmented with imperfections in both the debt and equity markets.

Tax incentives in fiscal federalism: an integrated perspective

Abstract: Models of fiscal federalism rarely account for the efficiency implications of intergovernmental fiscal ties for federal tax policy. This paper shows that fiscal institutions such that federal tax deductibility, vertical revenue-sharing, and fiscal equalization (being common features of existing federations) encourage local taxation, but may discourage federal taxation. Furthermore, the structure of public spending is skewed towards local spending. We also show that, when considering Leviathan governments, fiscal institutions reduce confiscatory taxation by the federal government. The result is contrary to the Cartelization Hypothesis (Brennan and Buchanan 1980). Finally, we characterize the efficient design of intergovernmental fiscal ties. JEL classification: H7, Hl, H20

A bioeconomic view of the Neolithic transition to agriculture

Abstract: Adoption of agriculture at the expense of hunting and gathering was the dramatic precondition for all modern civilization. Recent data suggest that, because of this transition, humans initially were more disease prone, smaller, less nourished, and shorter-lived. To explain why individuals chose agriculture over hunting and gathering, this paper develops a simple model of the evolution of preferences over the quality and quantity of children, as would have been generated by our long history as a species. These preferences would have induced the choice of agriculture, but also would have led to these otherwise puzzling health effects. L'adoption de l'agriculture en remplacement de la chasse et de la cueillette a ete une condition prealable dramatique pour toutes les civilisations modernes. Des donnees recentes suggerent cependant que, en consequence de cette transition, les humains sont devenus, dans les premiers temps apres la transition, davantage vulnerables a la maladie, ont vu leur esperance de vie diminuer, ont ete moins bien nourris, et sont devenus plus petits. Pourquoi alors est-ce que des individus qui avaient le choix entre deux systemes economiques ont choisi l'agriculture? Pour expliquer ce choix, ce memoire developpe un modele simple de l'evolution des preferences quant a la qualite et la quantite des enfants. Celles-ci auraient ete engendrees par notre longue histoire en tant qu'espece. Ces preferences auraient engendre le choix de l'agriculture, mais auraient aussi entraine d'autre part ces effets deconcertants sur la sante.

The implications of heterogeneous resource intensities on technical change and growth

Abstract: We analyze the long-term dynamics of an economy in which sectors are hetero- geneous with respect to the intensity of natural resource use. It is shown that heterogeneity induces technical change to be biased towards resource-intensive sectors. Along the bal- anced growth path, the sectoral structure of the economy is constant as the higher resource dependency in resource-intensive sectors is compensated by enhanced research activities. Resource taxes have no impact on dynamics except when the tax rate varies over time. Re- search subsidies and the sectoral provision of productivity-enhancing public goods raise growth and provide an effective tool for structural policy. JEL classification: O4, O41, Q01, Q3

Investment opportunities in the source country and temporary migration

Abstract: This paper examines how attractive investment opportunities available to temporary migrants in their country of origin aect their saving behavior and the optimal duration of stay abroad. The model predicts an inverse U-shaped relationship between migration duration and the expected rate of return on repatriated savings. A higher rate provides an incentive to go back earlier and consume less abroad, while it can also trigger emigration aimed at generating the savings required for investment after return. At a more general level, the paper illustrates how the behavior of temporary migrants re‡ects the interaction between their preferences and the opportunities available in the labor and capital markets of both countries.

Competing for a duopoly: international trade and tax competition

Abstract: We analyse the tax/subsidy competition between two potential host governments to attract the plants of …rms in a duopolistic industry. Competition between identical countries for a monopoly …rm's plant is known to result in subsidy in‡ation which leaves the winning country indierent towards hosting the …rm. In sharp contrast, we show that, with two …rms, both are taxed in equilibrium and the host countries appropriate the entire social surplus generated within the industry-despite the explicit non- cooperation between governments. We extend our baseline model to allow for dierences in country size. We investigate when this size asymmetry becomes su¢ ciently large to change the nature of the equilibrium, inducing concentration of production in the larger country.