The Extensive Margin of Exporting Products: A Firm-Level Analysis

To quantify trade frictions, we examine multiproduct exporters. We build a flexible general-equilibrium model and estimate market entry costs using Brazilian firm-product-destination data under rich demand and market access cost shocks. Our estimates show that additional products farther from a firm’s core competency come at higher production costs, but there are substantive economies of scope in market access costs. Market access costs differ across destinations, falling more rapidly in scope at nearby regions and at destinations with fewer nontariff barriers. We evaluate a counterfactual scenario that harmonizes market access costs across destinations and find global welfare gains similar to eliminating all current tariffs. (JEL D22, F12, F13, F14, O14, O19)

Welfare and research and development incentive effects of uniform and differential pricing schemes

This paper is about the application of optimization methods to the analysis of three pricing schemes adopted by one manufacturer in a two-country model of production and trade. The analysis focuses on pricing schemes—one uniform pricing scheme, and two differential pricing schemes—for which there is no competition coming from the so-called parallel trade. This term denotes the practice of buying a patented product like a medicine in one market at one price, then re-selling it in a second so-called gray market at a higher price, on a parallel distribution chain where it competes with the official distribution chain. The adoption of pricing schemes under which parallel trade does not arise can prevent the occurrence of its well-documented negative effects. In the work, a comparison of the optimal solutions to the optimization problems modeling the three pricing schemes is performed. More specifically, conditions are found under which the two differential pricing schemes are more desirable from several points of view (e.g., incentive for the manufacturer to do Research and Development, product accessibility, global welfare) than the uniform pricing scheme. In particular, we prove that, compared to the uniform pricing scheme, the two differential pricing schemes increase the incentive for the manufacturer to invest in Research and Development. We also prove that they serve both countries under a larger range of values for the relative market size, making the product more accessible to consumers in the lower price country. Moreover, we provide a sufficient condition under which price discrimination is more efficient from a global welfare perspective than uniform pricing. The analysis applies in particular to the case of the European Single Market for medicines. Compared to other studies, our work takes into account also the possible presence in all the optimization problems of a positive constant marginal cost of production, showing that it can have non-negligible effects on the results of the analysis. As an important contribution, indeed, our analysis clarifies the conditions—which have been overlooked in the literature about the mechanisms adopted to prevent parallel trade occurrence—that allow/do not allow one to neglect the presence of this factor. Such conditions are related, e.g., to the comparison between the positive constant marginal cost of production, the parallel trade cost per-unit, and the maximal price that can be effectively charged to the consumers in the lower price country.

Global Welfare Egalitarianism, Resource Rights, and Decolonization

This paper argues that land and resource rights are often essential in overcoming colonial inequality and devaluation of indigenous populations and cultures. It thereby criticizes global welfare egalitarians that promote the abolition of national sovereignty over resources in the name of increased equality. The paper discusses two ways in which land and resource rights contribute to decolonization and the eradication of the associated inequality. First, it proposes that land and resource rights have acquired a status-conferring function for (formerly) colonized peoples so that possession of full personhood and relational equality is partially expressed through the possession of land and resource rights. Second, it suggests that successful internal decolonization depends on access to and control over land and resources, especially for indigenous peoples.

Nations and Markets

ABSTRACT Economics and security seem increasingly intertwined. Citing national security, states subject foreign investments to new scrutiny, even unwinding mergers. The provision of 5G has become a diplomatic battleground—Huawei at its center. Meanwhile, states invoke national security to excuse trade wars. The USA invoked the General Agreement on Tariffs and Trade national security exception to impose steel and aluminum tariffs, threatening more on automotive parts. Russia invoked that provision to justify its blockade of Ukraine, as did Saudi Arabia and the United Arab Emirates to excuse theirs of Qatar. And with the spread of COVID-19, states are invoking national security to scrutinize supply lines. Multiplying daily, such stories have led some observers to dub the era one of geoeconomics. Nonetheless, these developments remain difficult to judge, and the relationship between economics and national security remains confused and slippery. The essay seeks clarity in the deeper logic of these labels, revealing a fundamental choice between the logics of markets and the logics of state. Whether invoked to ‘secure’ borders, privacy, health, the environment, or jobs, ‘national security’ is a claim about the proper location of policymaking. Appeals to economics, with their emphasis on global welfare and global person-to-person relationships, are such claims as well. Resolving disputes, this essay argues, requires recognizing these root choices.

The Great Lockdown

Voluntary and government-mandated lockdowns in response to COVID-19 have caused causing drastic reductions in economic activity around the world. We present a parsimonious two-country-SIR model with some degree of substitutability between home and foreign goods, and show that trading partners’ asynchronous entries into the global pandemic induce mutual welfare gains from trade. Those gains are realized through exchange rate adjustments that cause a temporary reallocation of production towards the economy with the lowest infection rate at any point in time. We show that international cooperation over containment policies that aim at optimizing global welfare further enhances the ability of countries to exploit trade opportunities to contain the spread of the pandemic. We characterize the Nash game of strategic choices of containment policies as a prisoners’ dilemma.

Revisiting Global Welfare Regime Classifications

This review article revisits the influential work of Gough (2004a, 2004b) on global welfare regimes fifteen years later. The article attempts to explore how far this literature has managed to pave a bridge between comparative social policy and development studies and explores the key contributions it offered in explaining welfare regime classification in Asia, Africa and Latin America. The article then reviews selected publications that have incorporated or applied Gough’s approach and in particular reviews how far scholars developed, complemented and questioned Gough’s approach. The review focuses on the causal properties for capturing the diversity of welfare regime classifications, empirical data, methodologies applied to classify welfare regimes, cases selected, groupings identified and finally how transitions to different welfare regime memberships are explained. In the conclusion, the article discusses findings and implications for global welfare regime classification debates.