The effect of terms of trade on the welfare of a small open economy is analyzed. It exports a homogeneous good and imports some brands of a differentiated good. It also produces some brands of the differentiated good which are not traded. A terms-of-trade deterioration causes resources to move...

Individuals engaged in rent seeking accumulate sector-specific human capital through learning-by-doing. If agents specialize, small reforms of the trade regime may fail to reduce the level of the rent-seeking activity. The size of the reform necessary to induce movement out of rent seeking is...

The paper investigates why a developing country may adopt a partial reform. A country is considered where the ruling elite (referred to as state capital) prevents the entry of foreign capital, and taxes the private sector before reform. A higher productivity of foreign capital always increases...

The paper shows that income inequality may theoretically lead to higher economic growth if public consumption enters the utility function. Empirically, baseline estimations and a sensitivity analysis show that income inequality is positively, and most of the time significantly, associated with...

This paper examines the behavior of real interest rates at the inception of exchange-rate-based stabilization programs. The analysis is based on an optimizing model of a small open economy facing imperfect world capital markets. A reduction in the devaluation rate is shown to have a positive...

A model is developed to study the implications of the presence of rent-opposing activities for the measurement of deadweight losses and for cost-benefit analysis. The analysis provides an upper bound on the social cost of rent-seeking in the presence of potential rent-opposers. Remarks are...

A model of North-South intraindustry trade in quality differentiated products is proposed to examine the role of country-of-origin reputation in determining the competitive edge of emerging industries. It is shown that if consumers rationally harbor negative expectations about the quality of...

A two-country trade model of foreign aid is developed. The aid-receiving country suffers from Harris-Todaro type unemployment. Aid is either untied, tied to sector-specific capital, or tied to intersectorally mobile capital. These types of aid are compared by examining their terms-of-trade and...

The paper provides a simple comparative analysis of Japanese and U.S. trade with China. In recent years, Japanese exports to China had been growing faster than U.S. exports, but Japanese imports from China had been growing more slowly. A large amount of U.S. and Japanese exports were first...

This paper examines the employment effect of devaluation in a model with a nontraded good and a black market for foreign exchange. The disaggregative approach reveals, in contrast to an earlier one-sector analysis, that overall employment may change even if the exchange control is such that...