Trade Liberalization and Self-Control Problems

This paper analyzes the welfare effects of trade liberalization when some individuals suffer from self-control problems and hence consume too much of goods which generate immediate benefits but entail future costs. Within a classic Ricardian model of trade, the welfare efects depend crucially on the direction of trade. In the importing country, individuals who are suciently price-sensitive and have a sufficiently strong self-control problem lose from trade. In the exporting country, all individuals unambiguously gain from trade. These ndings are however not robust to changes in the assumptions on production technology and market structure. Within a new trade model with increasing returns to scale and monopolistic competition, individuals with self-control problems can lose in both countries. In contrast to the Ricardian setting, even individuals without self-control problems can lose if the average self-control problem is stronger in their country than in the country they start trading with.Globalization, welfare gains from trade, self-control problems, timeinconsistency

Taxes, Status Goods, and Piracy

This paper studies the design of indirect redistributive taxation and of corrective taxation, as well as the formation of equilibrium indirect tax policies via a political process, in the presence of status goods, allowing for the possibility that illegal copies of those goods may be purchased on black markets (the phenomenon of "piracy"). Heavy taxation of status goods, despite the fact these are typically overconsumed, is not particularly favoured in a social welfare maximisation context, because the tax rate is highly distortionary, due to the presence of piracy. Corrective taxation, aimed at remedying the inefficiencies associated with the consumption externalities generated by the status goods, is made ineffective by piracy. In contrast with the normative results, the median voter model predicts an inefficiently large tax rate on status goods when piracy is widespread.social status, indirect taxes, corrective taxes, median voter, piracy

Dysfunction of resource allocation by market mechanism and State intervention in corrections

Reference system to which it is discussed involvement in the economy market with perfect competition, perfect competition system, characterized by absolute lack of opportunities to influence the price for participating business entities. Neoclassical economics has shown that market with perfect competition ensures optimum identity - efficiency - balance. In reality, the functioning of free market competition on a mecamism imperfect present, to varying degrees, "defective", "gaps" or "failures" complete which result in the removal of optimum-efficiency economy-balance identity and justifying the existence of a compensatory mechanism (correction) of public action. To summarize, in terms of objectives, involvement of the state presupposes that the following roles: allocation role, subordinate goal of efficiency, distributive role, subordinate to the objective of social equity and subordinated to the objective of regulating the role of general equilibrium.market failure, merit goods, public goods, externalities, state failure

Economic growth and patterns of sustainability

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The economics of global environmental risk

This chapter focusses on global environmental risks such as climate change, an issue that must be confronted as we move into the future. It proposes sound principles of risk management that make sense in today's society generally, going beyond their role of averting and hedging climate risks. This chapter is about these and related questions. In attempting to answer them, it deals with different aspects of the theory of risk-bearing. I explain current responses to global change, focusing on the new challenges: human-induced or endogenous risks, including potentially catastrophic risks, which are not adequately treated by traditional economic analysis. In summary, we are dealing with risks that have two major new characteristics: they are endogenous and potentially catastrophic. In addition, climate risks have three more conventional features: they are poorly understood, correlated and irreversible. In all cases, this chapter proposes ways to advance our understanding of the problems. This chapter proposes ways to evaluate decisions under endogenous and potentially catastrophic risks, and incorporates often neglected features of correlated, poorly understood and irreversible risks. The analysis proposed here opens new ways of thinking and at the same time poses new challenges. At the end I indicate new areas of research.risk; global environment; climate change; endogenous risk; catastrophic risk; risk management; mathematical modeling; endogenous uncertainty; policy

Development of the Theory of Capitalist Crises: Political Economy Traditions and Modernity

The article discusses the development history of the theory of economic crises under capitalism conditions. The author believes that economic science is being developed in two directions. The first direction is represented by science schools that deny any objective grounds for crises of overproduction in the market economy and develop new models of crisis-free growth. The opposite direction is supported by science schools acknowledging the existence of objective causes of crises, which is of practical significance for development of effective anti-crisis measures. The study is summarized by the conclusion about actualization of the political economy approach to analysis of the recent global crisis and its consequences. Its implementation anticipates special attention to different versions of overaccumulation of capital which played a key role in the origin of crisis processes in the world economy

Global imbalances and developing countries.

The main distinguishing features of present-day global imbalances go beyond their sheer amount and generalisation. First, the world economy is characterised by an increased and dynamic presence of many developing countries that simultaneously have turned from deficit into surplus economies. Second, imbalances happen in a context of variable exchange rates and under an accelerated process of financial globalisation. Third, the international reserve currency is basically the currency of just one advanced country in the world. Both the variability of exchange rates –in principle freeing countries of the need to defend their parities–and the easy availability of private foreign finance –liberating them from the limits imposed either by the amount of foreign exchange reserves or the conditional access to IMF resources– go to a great extent to explain the increase and generalisation of current account deficits. But, additionally, the capacity of the United States to run deficits financed by the fact of their issuing the international reserve currency, has decisively contributed to the explosion in the magnitude of the imbalances. Of course, the ability to finance deficits by resorting to foreign inflows is dominated by its variability and by the accumulation of debt frequently ending up in severe crises. Thus, financial stability is endangered. On the surpluses side, quite a few major advanced countries persist in generating them instead of promoting fast rates of growth and improving the lot of their own citizens. Thus, the old-time deflationary bias that places limits on deficit countries while leaving the major surplus countries to unfettered run restrictive policies playing beggar-thy-neighbour on the rest of the world still rules the present-day non-system. Surely, many fast growing developing countries, having on the contrary become the dynamic force in the world economy, play a completely different role based on their having overcome the restrictions that deficits used to place on their performance. Redressing global imbalances to avoid financial instability, therefore, would, at the international level, require regulating “speculative” private international capital flows, on the one hand, and devising a new international monetary system that would run on the basis of a multilateral reserve currency. Additionally, a less restrictive mechanism than the conditionality-run IMF should be established for clearing temporary imbalances with similar obligations for surplus and deficit countries, although growth rates and the stage of development would have to be taken into account. Redressing global imbalances, however, should not be made at the expense of growth in the world economy that as mentioned before has come to increasingly depend on the developing countries’ economies. Room, therefore, would have to be built for the surpluses of the developing countries following successful export-led strategies to be accommodated within such a system. This way, developing countries will keep being able to pursue expansionary policies, reduce inequality and continue to represent a dynamic force in global terms.

AN ECONOMIC MODELLING APPROACH FOR VULNERABILITY ASSESMENT IN IRRIGATION FARMS IN SPAIN

Farm Management,

The Welfare State, Redistribution and the Economy, Reciprocal Altruism, Consumer Rivalry and Second Best

Democratic countries with substantial inequality and where people believe that success depends on connections and luck induce political support for high tax rates and generous welfare states. Traditional wisdom is that such policies harm the economy, but there is not much evidence that countries with a large welfare state and substantial redistribution have worse economic performance and welfare. One important reason is that governments have been careful to invoke the principles of reciprocity and mutual obligations in the design of the welfare state. Unemployment benefits conditioned on work experience, no misconduct and search effort harm the economy less. Indeed, conditional benefits may even boost employment in an economy with efficiency wages. A second reason is that people care about relative incomes and become unhappy if others earn and consume much more than they do. This explains why people do not seem to get happier, even though societies grow richer and richer. With such consumer rivalry the government wishes to correct for the rat race, even if there is no need for redistribution, by taxing labour. A third reason is that in modern economies many distortions are present and removing one at a time may worsen economic performance. Conversely, increasing tax progression in economies with non-competitive labour markets induces wage moderation and boosts employment. A final reason is that countries with large welfare states typically introduce various progrowth policies as well.mutual obligations, altruism, relative incomes, happiness, redistributive taxation, demand management, second best, design of welfare state