The international trade as the sole engine of growth for an economy

Can international trade act as the sole engine of growth for an economy? If yes, what are the mechanisms through which trade operates in transmitting permanent growth? This paper answers these questions with two simple two-country models, in which only one country enjoys sustained growth in autarky. The models differ in the assumptions on technical change, which is either labour- or capital-augmenting. In both cases, the stagnant economy imports growth by trading. In the first model, growth is transmitted because of permanent increases in the trade volume. In the alternative framework, the stagnant economy imports sustained growth because its terms of trade permanently improve.

Nominal Stability and Financial Globalization

Over the past four decades, advanced economies experienced a large growth in gross external portfolio positions. This phenomenon has been described as Financial Globalization. Over roughly the same time frame, most of these countries also saw a substantial fall in the level and variability of inflation. Many economists have conjectured that financial globalization contributed to the improved performance in the level and predictability of inflation. In this paper, we explore the causal link running in the opposite direction. We show that a monetary policy rule which reduces inflation variability leads to an increase in the size of gross external positions, both in equity and bond portfolios. This appears to be a robust prediction of open economy macro models with endogenous portfolio choice. It holds across different modeling specifications and parameterizations. We also present preliminary empirical evidence which shows a negative relationship between inflation volatility and the size of gross external positions.

How much does a single graduation cohort from further education colleges contribute to an open regional economy?

Econometric analysis has been inconclusive in determining the contribution that increased skills have on macroeconomic performance whilst conventional growth accounting approaches to the same problem rest on restrictive assumptions. We propose an alternative micro-to-macro method which combines elements of growth accounting and numerical general equilibrium modelling. The usefulness of this approach for applied education policy analysis is demonstrated by evaluating the macroeconomic impact on the Scottish economy of a single graduation cohort from further education colleges. We find the macroeconomic impact to be significant. From a policy point of view this supports a revival of interest in the conventional teaching role of education institutions.

The Growth in Inter-connectedness in the Scottish Economy 1998-2007; a disaggregated analysis.

The measurement of inter-connectedness in an economy using input-output tables is not new, however much of the previous literature has not had any explicit dynamic dimension. Studies have tried to estimate the degree of inter-relatedness for an economy at a given point in time using one input-output table, some have compared different economies at a point in time but few have looked at the question of how interconnectedness within an economy changes over time. The publication in 2010 of a consistent series of input-output tables for Scotland offers the researcher the opportunity to track changes in the degree of inter-connectedness over the seven year period 1998 to 2007. The paper is in two parts. A simple measure of inter-connectedness is introduced in the first part of the paper and applied to the Scottish tables. In the second part of the paper an extraction method is applied to sector by sector to the tables in order to estimate how interconnectedness has changed over time for each industrial sector.

The Political Economy of Resource Rent Distribution

I model the link between political regime and level of diversification following a windfall of natural resource revenues. The explanatory variables I make use of are the political support functions embedded within each type of regime and the disparate levels of discretion, openness, transparency, and accountability of government. I show that a democratic government seeks to maximize the long-term consumption path of the representative consumer, in order to maximize its chances of re-election, while an authoritarian government, in the absence of any electoral mechanism of accountability, seeks to buy off and entrench a group of special interests loyal to the government and potent enough to ensure its short-term survival. Essentially the contrast in the approaches towards resource rent distribution comes down to a variation in political weights on aggregate welfare and rentierist special interests endogenized by distinct political support functions.

The Commons and anti-commons problems in the tourism economy

Countries specialised in tourism tend to face two problems with contradictory effects: the commons and the anti-commons, which lead to tourism over- and under-production, respectively. This paper develops a two-period model to analyse the joint effects of both problems on a small and remote tourism economy. Congestion and the complementariness between foreign transport and local tourism services are key features in this type of markets. As a result, direct selling and the presence of foreign tour-operators emerge as possible market arrangements with different implications in terms of welfare and public intervention. Four main results are obtained. First, in the direct selling situation the optimal policy depends on the relative importance of the problems. Second, the existence of tour-operators always leads to tourism over-production. Third, the presence of a single tour-operator does not solve the congestion problem. Lastly, the switch from several tour-operators to a single one is welfare reducing.

Venezuelan economic laboratory. The Case of the altruistic economy of Felipe Pérez Martí

Felipe Pérez Martí, who was the Venezuelan Minister of Planning and Development in the government of Hugo Chávez, proposes an economic model that he calls the altruistic economy or fourth way, which leads cooperative game theory to its logical extremes postulating a pure communism. Here we sustain that, first, it is impossible in the model of Pérez Martí to marginally allocate non-primary goods to those most in need or who most value them, facing a problem of defective economic calculation, and second, in order to achieve equality, he would have to replace his atomic local planners by a central planner, who would be unable to overcome the problem of imperfect and and incomplete information.

Rethinking economy-wide rebound measures: an unbiased proposal

In spite of having been first introduced in the last half of the ninetieth century, the debate about the possible rebound effects from energy efficiency improvements is still an open question in the economic literature. This paper contributes to the existing research on this issue proposing an unbiased measure for economy-wide rebound effects. The novelty of this economy-wide rebound measure stems from the fact that not only actual energy savings but also potential energy savings are quantified under general equilibrium conditions. Our findings indicate that the use of engineering savings instead of general equilibrium potential savings downward biases economy-wide rebound effects and upward-biases backfire effects. The discrepancies between the traditional indicator and our proposed measure are analysed in the context of the Spanish economy.

The size of the underground economy in Germany: A correction of the record and new evidence from the Modified-Cash-deposit-Ratio approach

Based on the Ahumada et al. (2007, Review of Income and Wealth) critique we revise existing estimates of the size of the German underground economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German underground economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio (MCDR) approach, which is not subject to the recent critique and apply it to Germany for the period 1960 to 2008. JEL: O17, Q41, C22, Keywords: underground economy, shadow economy, cash-depositratio, currency demand approach, MIMIC approach

A New open economy macroeconomic model with endogenous portfolio diversification and firms entry

This paper provides a new benchmark for the analysis of the international diversi…cation puzzle in a tractable new open economy macroeconomic model. Building on Cole and Obstfeld (1991) and Heathcote and Perri (2009), this model speci…es an equilibrium model of perfect risk sharing in incomplete markets, with endogenous portfolios and number of varieties. Equity home bias may not be a puzzle but a perfectly optimal allocation for hedging risk. In contrast to previous work, the model shows that: (i) optimal international portfolio diversi…cation is driven by home bias in capital goods, independently of home bias in consumption, and by the share of income accruing to labour. The model explains reasonably well the recent patterns of portfolio allocations in developed economies; and (ii) optimal portfolio shares are independent of market dynamics.

Differences in whole-body fat oxidation kinetics between cycling and running.

This study aimed to quantitatively describe and compare whole-body fat oxidation kinetics in cycling and running using a sinusoidal mathematical model (SIN). Thirteen moderately trained individuals (7 men and 6 women) performed two graded exercise tests, with 3-min stages and 1 km h(-1) (or 20 W) increment, on a treadmill and on a cycle ergometer. Fat oxidation rates were determined using indirect calorimetry and plotted as a function of exercise intensity. The SIN model, which includes three independent variables (dilatation, symmetry and translation) that account for main quantitative characteristics of kinetics, provided a mathematical description of fat oxidation kinetics and allowed for determination of the intensity (Fat(max)) that elicits maximal fat oxidation (MFO). While the mean fat oxidation kinetics in cycling formed a symmetric parabolic curve, the mean kinetics during running was characterized by a greater dilatation (i.e., widening of the curve, P < 0.001) and a rightward asymmetry (i.e., shift of the peak of the curve to higher intensities, P = 0.01). Fat(max) was significantly higher in running compared with cycling (P < 0.001), whereas MFO was not significantly different between modes of exercise (P = 0.36). This study showed that the whole-body fat oxidation kinetics during running was characterized by a greater dilatation and a rightward asymmetry compared with cycling. The greater dilatation may be mainly related to the larger muscle mass involved in running while the rightward asymmetry may be induced by the specific type of muscle contraction.

Alteration in neuromuscular function after a 5 km running time trial.

The aim of this study was to characterize the effect of a 5 km running time trial on the neuromuscular properties of the plantar flexors. Eleven well-trained triathletes performed a series of neuromuscular tests before and immediately after the run on a 200 m indoor track. Muscle activation (twitch interpolation) and normalized EMG activity were assessed during maximal voluntary contraction (MVC) of plantar flexors. Maximal soleus H-reflexes and M-waves were evoked at rest (i.e. H (MAX) and M (MAX), respectively) and during MVC (i.e. H (SUP) and M (SUP), respectively). MVC significantly declined (-27%; P < 0.001) after the run, due to decrease in muscle activation (-8%; P < 0.05) and M (MAX)-normalized EMG activity (-13%; P < 0.05). Significant reductions in M-wave amplitudes (M (MAX): -13% and M (SUP): -16%; P < 0.05) as well as H (MAX)/M (MAX) (-37%; P < 0.01) and H (SUP)/M (SUP) (-25%; P < 0.05) ratios occurred with fatigue. Following exercise, the single twitch was characterized by lower peak torque (-16%; P < 0.001) as well as shorter contraction (-19%; P < 0.001) and half-relaxation (-24%; P < 0.001) times. In conclusion, the reduction in plantar flexors strength induced by a 5 km running time trial is caused by peripheral adjustments, which are attributable to a failure of the neuromuscular transmission and excitation-contraction coupling. Fatigue also decreased the magnitude of efferent motor outflow from spinal motor neurons to the plantar flexors and part of this suboptimal neural drive is the result of an inhibition of soleus motoneuron pool reflex excitability.