Multilateral Trade and Agricultural Policy Reforms in Sugar Markets, September 2005

We analyze the impact of trade liberalization, removal of production subsidies, and elimination of consumption distortions in world sugar markets using a partial-equilibrium international sugar model calibrated on 2002 market data and current policies. The removal of trade distortions alone induces a 27% price increase while the removal of all trade and production distortions induces a 48% increase by 2011/12 relative to the baseline. Aggregate trade expands moderately, but location of production and trade patterns change substantially. Protectionist OECD countries (the EU, Japan, the US) experience an import expansion or export reduction and significant contraction in production in unfettered markets. Competitive producers in both OECD countries (Australia) and non-OECD countries (Brazil, Cuba), and even some protected producers (Indonesia, Turkey), expand production when all distortions are removed. Consumption distortions have marginal impacts on world markets and location of production. We discuss the significance of these results in the context of mounting pressures to increase market access in highly protected OECD countries and the impact on non-OECD countries.

ClubADSL: When your neighbors are your friends

ADSL is becoming the standard form of residential and small-business broadband Internet access due to, primarily, its low deployment cost. These ADSL residential lines are often deployed with 802.11 Access Points (AP) that providewireless connectivity. Given the density of ADSL deployment, it is often possible for a residential wireless client to be in range of several other APs, belonging to neighbors, with ADSL connectivity. While the ADSL technology has showed evident limits in terms of capacity (with speeds ranging 1-10 Mbps), the short-range wireless communication can guarantee a muchhigher capacity (up to 20 Mbps). Furthermore, the ADSL links in the neighborhood are generally under-utilized, since ADSL subscribers do not connect 100% of the time. Therefore, it is possible for a wireless client to simultaneously connect to several APs in range and effectively aggregate their available ADSL bandwidth.In this paper, we introduce ClubADSL, a wireless client that can simultaneously connect to several APs in range on different frequencies and aggregate both their downlink and uplink capacity. ClubADSL is a software that runs locally on the client-side, and it requires neither modification to the existing Internet infrastructure, nor any hardware/protocol upgradesto the 802.11 local area network. We show the feasibility of ClubADSL in seamlessly transmitting TCP traffic, and validate its implementation both in controlled scenarios and with current applications over real ADSL lines. In particular we show that a ClubADSL client can greatly benefit from the aggregated download bandwidth in the case of server-client applications such as video streaming, but can also take advantage of the increased upload bandwidth greatly reducing download times with incentive-based P2P applications such as BitTorrent.

Material and Construction Optimization for Prevention of Premature Pavement Distress in PCC Pavements, September 2004

The chemistry of today’s concrete mixture designs is complicated by many variables, including multiple sources of aggregate and cements and a plethora of sometimes incompatible mineral and chemical admixtures. Concrete paving has undergone significant changes in recent years as new materials have been introduced into concrete mixtures. Supplementary cementitious materials such as fly ash and ground granulated blast furnace slag are now regularly used. In addition, many new admixtures that were not even available a few years ago now have widespread usage. Adding to the complexity are construction variables such as weather, mix delivery times, finishing practices, and pavement opening schedules. Mixture materials, mix design, and pavement construction are not isolated steps in the concrete paving process. Each affects and is affected by the other in ways that determine overall pavement quality and long-term performance. Equipment and procedures commonly used to test concrete materials and concrete pavements have not changed in decades, leaving serious gaps in our ability to understand and control the factors that determine concrete durability. The concrete paving community needs tests that will adequately characterize the materials, predict interactions, and monitor the properties of the concrete.

How Much “Safety” Is Available under the U.S. Proposal to the WTO?, November 2005

Critics of the U.S. proposal to the World Trade Organization (WTO) made in October 2005 are correct when they argue that adoption of the proposal would significantly reduce available support under the current farm program structure. Using historical prices and yields from 1980 to 2004, we estimate that loan rates would have to drop by 9 percent and target prices would have to drop by 10 percent in order to meet the proposed aggregate Amber Box and Blue Box limits. While this finding should cheer those who think that reform of U.S. farm programs is long overdue, it alarms those who want to maintain a strong safety net for U.S. agriculture. The dilemma of needing to reform farm programs while maintaining a strong safety net could be resolved by redesigning programs so that they target revenue rather than price. Building on a base of 70 percent Green Box income insurance, a program that provides a crop-specific revenue guarantee equal to 98 percent of the product of the current effective target price and expected county yield would fit into the proposed aggregate Amber and Blue Box limits. Payments would be triggered whenever the product of the season-average price and county average yield fell below this 98 percent revenue guarantee. Adding the proposed crop-specific constraints lowers the coverage level to 95 percent. Moving from programs that target price to ones that target revenue would eliminate the rationale for ad hoc disaster payments. Program payments would automatically arrive whenever significant crop losses or economic losses caused by low prices occurred. Also, much of the need for the complicated mechanism (the Standard Reinsurance Agreement) that transfers most risk of the U.S. crop insurance to the federal government would be eliminated because the federal government would directly assume the risk through farm programs. Changing the focus of federal farm programs from price targeting to revenue targeting would not be easy. Farmers have long relied on price supports and the knowledge that crop losses are often adequately covered by heavily subsidized crop insurance or by ad hoc disaster payments. Farmers and their leaders would only be willing to support a change to revenue targeting if they see that the current system is untenable in an era of tight federal budgets and WTO limits.

Evalution of Hot Mix Asphalt Moisture Sensitivity Using the Nottingham Asphalt Test Equipment, July 2005

Moisture sensitivity of Hot Mix Asphalt (HMA) mixtures, generally called stripping, is a major form of distress in asphalt concrete pavement. It is characterized by the loss of adhesive bond between the asphalt binder and the aggregate (a failure of the bonding of the binder to the aggregate) or by a softening of the cohesive bonds within the asphalt binder (a failure within the binder itself), both of which are due to the action of loading under traffic in the presence of moisture. The evaluation of HMA moisture sensitivity has been divided into two categories: visual inspection test and mechanical test. However, most of them have been developed in pre-Superpave mix design. This research was undertaken to develop a protocol for evaluating the moisture sensitivity potential of HMA mixtures using the Nottingham Asphalt Tester (NAT). The mechanisms of HMA moisture sensitivity were reviewed and the test protocols using the NAT were developed. Different types of blends as moisture-sensitive groups and non-moisture-sensitive groups were used to evaluate the potential of the proposed test. The test results were analyzed with three parameters based on performance character: the retained flow number depending on critical permanent deformation failure (RFNP), the retained flow number depending on cohesion failure (RFNC), and energy ratio (ER). Analysis based on energy ratio of elastic strain (EREE ) at flow number of cohesion failure (FNC) has higher potential to evaluate the HMA moisture sensitivity than other parameters. If the measurement error in data-acquisition process is removed, analyses based on RFNP and RFNC would also have high potential to evaluate the HMA moisture sensitivity. The vacuum pressure saturation used in AASHTO T 283 and proposed test has a risk to damage specimen before the load applying.

A sequential model for older workers' labor transitions after a health shock

In this work we study older workers'(50-64) labor force transitions after a health/disability shock. We find that the probability of keeping working decreases with both age and severity of the shock. Moreover, we find strong interactions between age and severity in the 50-64 age range and none in the 30-49 age range. Regarding demographics we find that being female and married reduce the probability of keeping work. On the contrary, being main breadwinner, education and skill levels increase it. Interestingly, the effect of some demographics changes its sign when we look at transitions from inactivity to work. This is the case of being married or having a working spouse. Undoubtedly, leisure complementarities should play a role in the latter case. Since the data we use contains a very detailed information on disabilities, we are able to evaluate the marginal effect of each type of disability either in the probability of keeping working or in returning back to work. Some of these results may have strong policy implications.

Capital, Wages, and Growth: Theory and Evidence

Returns to scale to capital and the strength of capital externalities play a key role for the empirical predictions and policy implications of different growth theories. We show that both can be identified with individual wage data and implement our approach at the city-level using US Census data on individuals in 173 cities for 1970, 1980, and 1990. Estimation takes into account fixed effects, endogeneity of capital accumulation, and measurement error. We find no evidence for human or physical capital externalities and decreasing aggregate returns to capital. Returns to scale to physical and human capital are around 80 percent. We also find strong complementarities between human capital and labor and substantial total employment externalities.

Endogenous Credit Cycles and Financial Dampening in an Adverse Selection Economy

We propose an adverse selection framework in which the financial sector has a dual role. It amplifies or dampens exogenous shocks and also generates endogenous fluctuations. We fully characterize constrained optimal contracts in a setting in which entrepreneurs need to borrow and are privately informed about the quality of their projects. Our characterization is novel in analyzing pooling and separating allocations in a context of multi-dimensional screening: specifically, the amounts of investment undertaken and of entrepreneurial net worth are used to screen projects. We then embed these results in a dynamic competitive economy. First, we show how endogenous regime switches in financial contracts may generate fluctuations in an economy that exhibits no dynamics under full information. Unlike previous models of endogenous cycles, our result does not rely on entrepreneurial net worth being counter-cyclical or inconsequential for determining investment. Secondly, the model shows the different implications of adverse selection as opposed to pure moral hazard. In particular, and contrary to standard results in the macroeconomic literature, the financial system may dampen exogenous shocks in the presence of adverse selection.

Book vs. Fair Value Accounting in Banking, and Intertemporal Smoothing

The aim of this paper is to examine the pros and cons of book and fair value accounting from the perspective of the theory of banking. We consider the implications of the two accounting methods in an overlapping generations environment. As observed by Allen and Gale(1997), in an overlapping generation model, banks have a role as intergenerational connectors as they allow for intertemporal smoothing. Our main result is that when dividends depend on profits, book value ex ante dominates fair value, as it provides better intertemporal smoothing. This is in contrast with the standard view that states that, fair value yields a better allocation as it reflects the real opportunity cost of assets. Banking regulation play an important role by providing the right incentives for banks to smooth intertemporal consumption whereas market discipline improves intratemporal efficiency.