Search results

This edited volume has its genesis in a conference entitled New Paradigms in Economics of Welfare and Trade under Globalisation and Regionalisation. Held at the Coogee campus of the Australian School of Taxation (Atax), University of New South Wales (Sydney, Australia) from 8th to 10th August 2006, this conference brought together economic theorists from around the globe to celebrate Murray Kemp's 80th birthday. Conference participants and presenters included a former teacher, colleagues, co-authors, senior academics and many former students of Murray. After a two-year gestation period, the volume has finally been published. Half of the chapters in this book are derived from papers presented at the conference. The remaining half of the book consists of invited papers completed after the conference. All chapters in this volume were subjected to a formal reviewing and revision process.

Constructing a simple dynamic North–South model in which factors of production are internationally immobile and there is no international credit market, it is possible that a persistent and unilateral foreign aid makes both North and South better off. We also show that the Pareto-improving transfer involves local indeterminacy.

Purpose – We ask how far the Kemp–Wan Pareto-improving result can hold without inter-country transfers.

Methodology/approach – Assuming that the standard revenue and expenditure functions exist, we consider tariff adjustments for some group of countries such that they makes member countries better off without affecting non-member countries (a la Kemp–Wan).

Findings – Any group of countries can engage in a Pareto-improving non-discriminatory tariff reform without income transfers, if (i) there are more than two tradable goods and (ii) the initial tariff vectors of the member countries satisfy the non-proportionality condition. We then show that if these two conditions hold then countries can form a Pareto-optimal customs union. Depending on initial conditions, transfers may be necessary for the customs union to be Pareto-improving.

Originality/value of paper – The Pareto-improving result of this chapter is based on tariff reform only.

Based on the Jones (1971) model, we construct two dynamic models of international trade in which the rate of time preference is either constant or time-varying. The main purpose is to study whether and under what conditions the results derived in the Jones model still hold in the dynamic framework. It is shown that the results of dynamic models may be similar or different to those obtained in the static model. For example, it is possible that, in both static and dynamic models, an increase in the commodity price raises this commodity's output and the return to the specific factor in this sector. However, the effects on the wage rate may be different due to the factor accumulation impact in the dynamic framework.

Purpose – The present note shows the interaction between technological differences between countries and the level of trade costs as a determinant of trade patterns.

Methodology/approach – It takes the work of Kikuchi et al.'s (2008) Chamberlinian–Ricardian model as its point of departure, and extends the analysis to include both a continuum of industries, as did Dornbusch et al. (1977), and iceberg transport costs.

Findings – It will be shown that trade liberalization drastically changes the nature of trade patterns, particularly the emergence of intra-industry trade.

Originality/value – This present model extends the Chamberlinian–Ricardian model to include positive trade costs.

Purpose – A free trade agreement (FTA) or a preferential trade agreement (PTA) is almost always negotiated without concessions to the non-member countries. This chapter studies the welfare effects of such an FTA or PTA on the non-member countries.

Methodology/approach – This chapter employs the revealed preference approach (e.g., Ohyama, 1972; Kemp and Wan, 1976; Deardorff, 1980).

Findings – Under such conditions that the initial levels of the tariffs are small, or that the effects on production efficiency dominate the effects on tariff revenue, or that the tax-subsidy scheme proposed by Bhagwati, Ramaswami, and Srinivasan is employed in all the countries, the formation of a PTA without any tariff concessions to the outside countries will harm the welfare of the outside countries.

Practical implications – In order to make a PTA beneficial not only for member countries but for the rest of the world, member countries need to grant some tariff concessions to the imports from the non-member countries.

The importance of foreign aid cannot be overstated.¹ Unprecedented integration of the world economy in recent years has brought the issue of poverty back in the policy debate at the international level. Some of the recent initiatives such as the United Nation's Millennium Development Goals and the report by the Africa Commission (set up by the British Prime Minister Tony Blair) which was discussed at length at G8 meetings, recognize this fact. The analysis of foreign aid is however fraught with controversies and paradoxes. This applies to both the theoretical and the empirical literature. There are two broad strands in the literature. First, in international trade theory, researchers have examined the welfare effects of foreign aid and, in particular, if aid can be donor-enriching and recipient-immiserizing – the so-called Transfer Paradox.² The main mechanism here is via changes in the international terms of trade. The primary benefit (loss) to the recipient (donor) can be offset by a secondary loss (gain) because of deterioration (improvement) in the international terms of trade. More recently, a number of studies have examined the possibility of strictly Pareto improving foreign aid, i.e., situations where both the donor and the recipient are better off as a result of the transfer.