Solving exchange rate puzzles with neither sticky prices nor trade costs

We present a simple framework in which both the exchange rate disconnect and forward bias puzzles are simultaneously resolved. The flexible-price two-country monetary model is extended to include a consumption externality with habit persistence. Habitpersistence is modeled using Campbell Cochrane preferences with ‘deep’ habits along the lines of the work of Ravn, Schmitt-Grohe and Uribe. By deep habits, we mean habits defined over goods rather than countries. The model is simulated using the artificial economy methodology. It offers a neo-classical explanation of the Meese–Rogoff puzzle and mimics the failure of fundamentals to explain nominal exchange rates in a linear setting. Finally, the model naturally generates the negative slope in the standard forward market regression.

Motivational trade-offs and potential pain experience in hermit crabs

One criterion of pain experience is that the emotional response to pain may be traded-off against other motivational requirements. This was tested in hermit crabs, housed in either preferred or unpreferred species of shells, by subjecting their abdomens to electric shocks of gradually increasing intensity. The first observable response was not affected by shell species but those in preferred shells evacuated at a higher shock level than those in poor quality shells. Thus, they seem to trade-off the requirement to retain a high quality shell with that of avoidance of the noxious stimulus. Some crabs returned to their shells and those that got back into the preferred species did so with less probing of the aperture before getting in and subsequently thrust their abdomen in and out less often in further investigation, thus confirming their shell species preference. Not all crabs returned to the vicinity of the shell and some attempted to climb the wall of the experimental chamber. Others engaged in shell rapping as if in a fight and grooming of the abdomen was noted. These findings are consistent with the idea of a pain experience rather than a nociceptive reflex. (C) 2009 Elsevier B.V. All rights reserved.

Selection for cuticular melanism reveals immune function and life-history trade-offs in Spodoptera littoralis

Several insect species show an increase in cuticular melanism in response to high densities. In some species, there is evidence that this melanism is correlated with an up-regulation of certain immune system components, particularly phenoloxidase (PO) activity, and with the down-regulation of lysozyme activity, suggesting a trade-off between the two traits. As melanism has a genetic component, we selected both melanic and nonmelanic lines of the phase-polyphenic lepidopteran, Spodoptera littoralis, in order to test for a causative genetic link between melanism, PO activity and lysozyme activity, and to establish if there are any life-history costs associated with the melanic response. We found that, in fact, melanic lines had lower PO activity and higher lysozyme activity than nonmelanic lines, confirming a genetic trade-off between the two immune responses, but also indicating a genetic trade-off between melanism and PO activity. In addition, we found that lines with high PO activity had slower development rates suggesting that investment in PO, rather than in melanism, is costly.

Costs of resistance: genetic correlations and potential trade-offs in an insect immune system

Theory predicts that natural selection will erode additive genetic variation in fitness-related traits. However, numerous studies have found considerable heritable variation in traits related to immune function, which should be closely linked to fitness. This could be due to trade-offs maintaining variation in these traits. We used the Egyptian cotton leafworm, Spodoptera littoralis, as a model system to examine the quantitative genetics of insect immune function. We estimated the heritabilities of several different measures of innate immunity and the genetic correlations between these immune traits and a number of life history traits. Our results provide the first evidence for a potential genetic trade-off within the insect immune system, with antibacterial activity (lysozyme-like) exhibiting a significant negative genetic correlation with haemocyte density, which itself is positively genetically correlated with both haemolymph phenoloxidase activity and cuticular melanization. We speculate on a potential trade-off between defence against parasites and predators, mediated by larval colour, and its role in maintaining genetic variation in traits under natural selection.

Do minimum wages raise employment? Evidence from the US retail-trade sector

This paper examines the impact of minimum wages on earnings and employment in selected branches of the retail-trade sector, 1990-2005, using county-level data on employment and a panel regression framework that allows for county-specific trends in sectoral outcomes. We focus on specific subsectors within retail trade that are identified as particularly low-wage. We find little evidence of disemployment effects once we allow for geographic-specific trends. Indeed, in many sectors the evidence points to modest (but robust) positive employment effects. (C) 2009 Elsevier B.V. All rights reserved.

Macronutrient balance mediates trade-offs between immune function and life history traits

1. Diet and health are intimately linked and recent studies have found that caloric restriction can affect immune function. However, when given a choice between diets that differ in their macronutrient composition, pathogen-infected individuals can select a diet that improves their survival, suggesting that the nutritional composition of the diet, as well as its calorie content, can play a role in defence against disease. Moreover, as individuals change their diet when infected, it suggests that a diet that is optimal for growth is not optimal for immunity, leading to trade-offs.
2. Currently, our knowledge of the effects of diet on immunity is limited because previous experiments have manipulated either single nutrients or the calorie content of the diet without considering their interactive effects. By simultaneously manipulating both the diet composition (quality) and its caloric density (quantity), in both naive and immune-challenged insects, we asked how do diet quality and quantity influence an individual's ability to mount an immune response? And to what extent are allocation trade-offs driven by quantity- versus quality-based constraints?
3. We restricted individuals to 20 diets varying in their protein and carbohydrate content and used 3D response surfaces to visualize dietary effects on larval growth and immune traits. Our results show that both constitutive and induced immune responses are not limited by the total quantity of nutrients consumed, but rather different traits respond differently to variation in the ratios of macronutrients (diet quality), and peak in different regions of macronutrient space. The preferred dietary composition therefore represents a compromise between the nutritional requirements of growth and immune responses. We also show that a non-pathogenic immune challenge does not affect diet choice, rather immune-challenged insects modify their allocation of nutrients to improve their immune response.
4. Our results indicate that immune traits are affected by the macronutrient content of the diet and that no diet can simultaneously optimize all components of the immune system. To date the emphasis has been on the effects of micronutrients in improving immunity, our findings indicate that this must be widened to include the neglected impact of macronutrients on defence against disease.

Customs-Related Transaction Costs, Firm Size and International Trade Intensity

Customs are generally perceived as a time-consuming impediment to international trade. However, few studies have empirically examined the determinants and the impact of this type of government-imposed transaction costs. This paper analyses the role of firm size as a determinant of customs-related transaction costs, as well as the effect of firm size on the relationship between these costs and the international trade intensity of firms. The results of this study indicate that customs-related transaction costs repress international trade activities of firms, even at low levels of these costs. The paper identifies transaction-related economies of scale, simplified customs procedures and advanced information and communication technology as main determinants of customs-related transaction costs. It is shown that when these factors are taken into account, firm size has no effect on customs-related transaction costs. Policy implications are considered for firm strategy and public policy.