How did Targeted Government Trade Policies Impact the Productivity of Manufacturing Firms in Eastern Europe and Central Asia between 1995 and 2009? ACES Working Papers, 28 August 2012

This study investigates whether trade-related, targeted, government policies had an impact on the total factor productivity (TFP) of manufacturing firms in Eastern Europe and Central Asia (ECA region) between 1995 and 2009. It does so by looking at how different types of primarily industry-specific trade policies (or their combinations) impacted firm productivity. The dependent variable is firm total factor productivity (TFP), calculated using the Levinsohn-Petrin approach. As an alternative measure of firm productivity, this study uses labor productivity. This study finds that, in most instances (10 out of 14 times), targeted policies do not show a significant impact on manufacturing firms’ TFP. Based on the analysis of 588 manufacturing firms in the ECA region, this study finds that, contrary to proponents of targeted policies, targeted trade-related government policies have a limited impact on the total factor productivity (TFP) in developing countries.

Defining an Institutional Framework for the Labour Market. Factor Markets Working Paper No. 24, February 2012

This paper describes a conceptual framework for the empirical analysis of farmers’ labour allocation decisions. The paper presents a brief overview of previous farm household labour allocation studies. Following this, the agricultural household model, developed by Singh, Squire and Strauss (1986), which has been frequently applied to the study of labour allocation, is described in more depth. The agricultural household model, the theoretical model to be used in this analysis, is based on the premise that farmers behave to maximise utility, which is a function of consumption and leisure. It follows that consumption is bound by a budget constraint and leisure by a time constraint. The theoretical model can then be used to explain how farmers decide to allocate their time between leisure, farm work and off-farm work within the constraints of a finite time endowment and a budget constraint. Work, both farm and off-farm, provides a return to labour which in turn relaxes the budget constraint allowing the farm household to consume more. The theoretical model can also be used to explore the impact on government policies on labour allocation. It follows that subsidies that decrease commodity prices, such as reductions in intervention prices, mean that farmers have to work more (either on or off the farm) to maintain income and consumption levels. On the other hand, income support subsidies that are not linked to output or labour, such as decoupled subsidies, are a source of non-labour income and as such allow farmers to work less while maintaining consumption levels, known as the wealth effect.

Comparison of PRC and Vietnam's Responses to the Elimination of U.S. Textile and Apparel Quotas: Economic and Cultural Perspectives. ACES Working Paper No. 1, 2007

International trade in textiles and apparel has, as of January 1, 2005, been set free from the very intricate Multi-Fiber textile and apparel quota Arrangement (MFA). This event has raised many uncertainties about the new international trade climate and has placed enormous pressure on China as the expected clear cut beneficiary of this liberalization.' Other countries considered to be major contenders include Vietnam which also has a large population employed in the textile and apparel (T&A) sector. Since the old quota system had provided a certain degree of market certainty to competing T&A producers, will the new free trade environment lead to a shake out where mass producers with large economies of scale dominate the new reality? The removal of T&A quotas will create opportunities for Vietnam and China along with other developing countries, but it will also expose them to additional competition from each other. The outcome of this competition will depend on the demand in the US, the ability of the exporting countries to differentiate their exports and on their ability to transfer additional resources to expand domestic output in the direction of the new 'free market signals' and away from rent seeking objectives. Obviously, exporting countries that adjust to this new environment quickly will improve their competitiveness, and will be the new beneficiaries of a quota free international trade in textiles and apparel. This paper attempts to shed some light on the differences and similarities in the responses of Chinese and Vietnamese T&A sectors to this new environment. It first focuses on the demand side attempting to determine whether or not Chinese and Vietnamese T&A items, formally under quota control, are substitutes or compliments. On the supply side, the paper focuses on institutional differences between each country's T&A sectors, the different domestic government policies that have contributed to their growth and the unique cultural differences which will determine the future progress in each country's T&A sectors.

THE KYOTO PROTOCOL AND THE WTO: INSTITUTIONAL EVOLUTION AND ADAPTATION. CEPS Policy Brief No. 28/December

Overview. Questions about the interface between the multilateral climate regime embodied in the Kyoto Protocol and the multilateral trade regime embodied in the World Trade Organisation (WTO) have become especially timely since the fall of 2001. At that time, ministerial-level meetings in Marrakech and Doha agreed to advance the agendas, respectively, for the implementation of the Kyoto Protocol and for negotiations on further agreements at the WTO. There have been concerns that each of these multilateral arrangements could constrain the effectiveness of the other, and these concerns will become more salient with the entry into force of the Kyoto Protocol. There are questions about whether and how the rights and obligations of the members of the WTO and the parties to the Protocol may conflict. Of particular concern is whether provisions in the Protocol, as well as government policies and business activities undertaken in keeping with those provisions, may conflict with the WTO non-discrimination principles of national treatment and most-favoured nation treatment. The WTO agreements that are potentially relevant to climate change issues include many of the individual Uruguay Round agreements and subsequent agreements as well. The principal elements of the Kyoto Protocol that are particularly relevant are its provisions concerning emissions trading, the Clean Development Mechanism, Joint Implementation, enforcement, and parties’ policies and measures. In combination, therefore, there are numerous potential points of intersection between the elements of the Kyoto Protocol and the WTO agreements. Previous studies have clarified many issues, as they have focused on particular aspects of the regimes’ relationships. Yet, some analyses suggest that the two regimes are largely compatible and even mutually reinforcing, while others suggest that there are significant conflicts between them. Those and other studies are referenced in the ‘suggestions for further reading’ section at the end of the paper.1 The present paper seeks to expand on those studies by providing additional breadth and depth to understanding of the issues. The analysis gives special attention to key issues on the agenda – i.e. issues that are particularly problematic because of the likelihood of occurrence of specific conflicts and the significance of their economic and/or political consequences. The paper adopts a modified ‘triage’ approach, which classifies points of intersection as (a) highly problematic and clearly in need of further attention, (b) perhaps problematic but less urgent, and (c) apparently not problematic, at least at this point in time. The principal conclusions are that: · The missions and objectives of the two regimes are largely compatible, and their operations are potentially mutually reinforcing in several respects. · Some provisions of the multilateral agreements that may superficially seem at odds are not likely to become particularly problematic in practice. · ‘Domestic policies and measures’ that governments may undertake in the context of the Protocol could pose difficult issues in the context of WTO dispute cases. · Recent WTO agreements and dispute cases acknowledge the legitimacy of the ‘precautionary principle’ and are thus consistent with the environmental protection objectives of the Protocol. · The relative newness of the climate regime creates opportunities for institutional adaptation, as compared with the constraints of tradition in the trade-investment regime. · The prospect of largely independent evolutionary paths for the two regimes poses a series of issues about future international regime design and management, which may require new institutional arrangements. In sum, the present paper thus finds that although there are some areas of interaction that are problematic, the two regimes may nevertheless co-exist in relative harmony in other respects –more like ‘neighbours’ than either ‘friends’ or ‘foes’, as Krist (2001) has suggested.

The Valuation of Agricultural Land and the Influence of Government Payments. Factor Markets Working Paper No. 10, December 2011

This study gives an overview of the theoretical foundations, empirical procedures and derived results of the literature identifying determinants of land prices. Special attention is given to the effects of different government support policies on land prices. Since almost all empirical studies on the determination of land prices refer either to the net present value method or the hedonic pricing approach as a theoretical basis, a short review of these models is provided. While the two approaches have different theoretical bases, their empirical implementation converges. Empirical studies use a broad range of variables to explain land values and we systematise those into six categories. In order to investigate the influence of different measures of government support on land prices, a meta-regression analysis is carried out. Our results reveal a significantly higher rate of capitalisation for decoupled direct payments and a significantly lower rate of capitalisation for agri-environmental payments, as compared to the rest of government support. Furthermore, the results show that taking theoretically consistent land rents (returns to land) and including non-agricultural variables like urban pressure in the regression implies lower elasticities of capitalisation. In addition, we find a significant influence of the land type, the data type and estimation techniques on the capitalisation rate.

The History and Challenges of Cohesion Policies. Jean Monnet/Robert Schuman Paper Series Vol. 14 No. 2, February 2014

From Introduction. Regional economic disequilibria was viewed as both an obstacle to and result of integration (European Commission 1965; European Commission 1962; European Commission 1969). Even within the Treaty of Rome, the Community tried to establish mechanisms to alleviate regional inequality. However, it was not until 1975 that the main mechanism of regional policy was established as a result of British and Irish enlargement: the European Regional Development Fund (ERDF). Since then, cohesion policy has become a significant EU expenditure accounting for €347bn, or 35.7% of the total EU budget for 2007-13(European Commission Regional Policy-Info Regio 2012). It has also become a key policy linked to enlargement. The underlying principle of cohesion policy assumes that the market alone cannot solve development problems and therefore government intervention is needed. This notion is in direct contrast to the underlying principle of EU competition policy, which asserts that the free market can solve economic development problems (Meadows, interview by author, 2003). The logic underlying cohesion policy is not only counter to EU competition policy, but also regulatory policies. Unlike other EU policies, cohesion policy is not a sectoral policy, but rather territorial in nature (Leonardi, 2006). Thus at times EU regulatory policy has also unintentionally worked counter to the goals of regional policy, sometimes disadvantaging poorer regions (Dudek, 2005). As the Community has sought to ameliorate regional disparities, it meant that all levels of government: local, regional, national and supranational would need to be involved, however, member states have different territorial governance and European regional development programs have to varying degrees impacted the relationship and policy responsibility of different levels of government (Leonardi, 2006; Bachtler and Michie 1993; Marks, 1993). The very nature of regional development policy has provoked a re-examination of subsidiarity, or which level of government is the lowest and most appropriate level. The discussion of policy formulation and implementation at the lowest level possible also addresses the issue of the democratic deficit. Some argue that the closer government is to the people the more responsive and representative it is. Democracy, however, also implies that public funds are used in a transparent way and for public rather than private good. Yet, as we examine the history and current situation of EU regional funds we find that corruption and misuse still abound. Thus, to understand the history of regional policy it is imperative to look at the major transformations of the policy, how regional policy has impacted subsidiarity and the quality of democracy, become an important instrument of enlargement and contradicted or conflicted with other EU policies.