Subsidizing Firm Entry in Open Economies

Entrepreneurs who decide to enter an industry are faced with different levels of effective entry costs in different countries. These costs are heavily influenced by economic policy. What is not well understood is how international trade affects the government incentive to impact on entry costs, and how entry subsidies can be used strategically in open economies. We present a general equilibrium model of monopolistic competition with two (potentially) asymmetric countries and heterogeneous firms where government subsidizes entry of domestic entrepreneurs. Under autarky the entry subsidy indirectly corrects for the monopoly pricing distortion. In the autarky equilibrium these subsidies trigger entry, but they eventually do not lead to more but to better firms in the market. In the open economy there is another, strategic motive for entry subsidies as the tightening of domestic market selection also affects exporting decisions for domestic and foreign firms. Our analysis shows that entry subsidies in the Nash-equilibrium are first increasing, then decreasing in the level of trade openness. This implies a U-shaped relationship between openness and effective entry costs. Merging cross-country data on entry costs with international trade openness indices we empirically confirm this theoretical prediction.firm entry, subsidies, heterogeneous firms, international trade, monopolistic competition, entry regulation, strategic trade policy

Relational Contracts and the Economic Well-Being of Nations

Informal long-term relationships and mutual confidence play a crucial role in modern economies in at least two dimensions. First, the performance of firms is strongly affected by their capacity to solve organizational questions effectively and this capacity is apparently strongly related to their ability to maintain informal long-term relationships. Second, countries that are better at maintaining unwritten agreements and where interactions are more strongly guided by a sense of trust fare better in terms of economic welfare than others. This paper provides a simple general equilibrium model which reconciles these two findings: we offer a micro-founded explanation of how the trust that prevails in an economy gets transmitted into higher economic well-being and we thereby highlight the role of managers with low time preference. Our analysis builds on the model of Antràs and Helpman (2004) and a formalization of the notion of relational contracting developed in Baker, Gibbons and Murphy (2002).relational contracting, theory of the firm, aggregate welfare, firm heterogeneity

Trade and Industrial Policies with Heterogeneous Firms: The Role of Country Asymmetries

This paper explores the role of country asymmetries for trade and industrial policies with heterogeneous firms. Our analysis delivers a number of novel results. First, trade policies, infrastructure policies and industrial policies which improve the business conditions in one country have negative productivity and welfare effects on the trading partner. Second, symmetric trade liberalization is immiserizing for a trading partner whose business conditions are inferior. Third, there are gains from trade even for a country whose monopolistically competitive sector with heterogeneous firms is wiped out by the switch from autarky to trade.firm heterogeneity, welfare, trade policies, industrial policies, business conditions

Heterogeneous Firms, Trade, and Economic Policy: Insights from a Simple Two-Sector Model

The robust empirical finding that exporting firms are systematically different from firms that merely serve domestic consumers has inspired the development of a new brand of trade theory, the theory of heterogeneous firms and trade. The establishment of a canonical model due to Melitz (2003) has induced a recent wave of research which explores various policy issues and policy instruments. This paper uses a simple tractable two-sector model of monopolistic competition as unifying framework to bring out key lessons of this recent research. We address the gains from trade, country asymmetries involving technology potentials, market sizes, trade openness and various business conditions as well as the international repercussions that emerge when countries non-cooperatively choose entry subsidies and their levels of basic research. We also reinvestigate the process of market exit.firm heterogeneity, monopolistic competition, economic policies and welfare

Trade and Location with Land as a Productive Factor

This paper is motivated by the fact that, contrary to its importance in practice, the role of land for production has received no attention in the new trade theory and the new economic geography. We set up a simple monopolistic competition model and we show that, due to the factor proportions effect which emerges when land is used as a productive factor besides labor, a number of tenets of the new trade and geography literature no longer hold. We also show that in order to explain the stylized facts, notably that wages are higher in larger locations, land-use for production and housing has to be taken into account. Our analysis furthermore implies that market-size based agglomeration forces are too weak to overcome the very strong congestion force associated with competition for land, unless the consumers' desire of variety (as expressed by a low elasticity of substitution) is very strong. This suggests that further agglomeration forces have to be invoked to explain the agglomeration of economic activity observed in the real world.trade and location, land for production, agglomeration, relative wage, home market effect

Labor Market Effects of Trade and FDI: Recent Advances and Research Gaps

This paper pursues three aims. First, we provide a review of current theoretical advances which pertain to the relationship between trade, FDI and labor markets. We do so under the following (not mutually exclusive) headings: (1) slicing-up the value added chain and the turn to a task-based approach, (2) firm heterogeneity and labor markets, (3) complex offshoring (integration) and sourcing strategies and (4) location of firms and labor markets. Second, we overview existing empirical work covering the labor market effects of trade and FDI. Finally, we identify and summarize the existing research gaps and thereby we highlight promising avenues for future research.offshoring, outsourcing, FDI, trade, labor markets, agglomeration

Assessing Optical and Electrical Properties of Highly Active IrO_x Catalysts for the Electrochemical Oxygen Evolution Reaction via Spectroscopic Ellipsometry

Efficient water electrolysis requires highly active electrodes. The activity of corresponding catalytic coatings strongly depends on material properties such as film thickness, crystallinity, electrical conductivity, and chemical surface speciation. Measuring these properties with high accuracy in vacuum-free and non-destructive methods facilitates the elucidation of structure–activity relationships in realistic environments. Here, we report a novel approach to analyze the optical and electrical properties of highly active oxygen evolution reaction (OER) catalysts via spectroscopic ellipsometry (SE). Using a series of differently calcined, mesoporous, templated iridium oxide films as an example, we assess the film thickness, porosity, electrical resistivity, electron concentration, electron mobility, and interband and intraband transition energies by modeling of the optical spectra. Independently performed analyses using scanning electron microscopy, energy-dispersive X-ray spectroscopy, ellipsometric porosimetry, X-ray reflectometry, and absorption spectroscopy indicate a high accuracy of the deduced material properties. A comparison of the derived analytical data from SE, resonant photoemission spectroscopy, X-ray absorption spectroscopy, and X-ray photoelectron spectroscopy with activity measurements of the OER suggests that the intrinsic activity of iridium oxides scales with a shift of the Ir 5d t2g sub-level and an increase of p–d interband transition energies caused by a transition of μ1-OH to μ3-O species

First Observation of Self-Amplified Spontaneous Emission in a Free-Electron Laser at 109 nm Wavelength

We present the first observation of Self-Amplified Spontaneous Emission (SASE) in a free-electron laser (FEL) in the Vacuum Ultraviolet regime at 109 nm wavelength (11 eV). The observed free-electron laser gain (approx. 3000) and the radiation characteristics, such as dependency on bunch charge, angular distribution, spectral width and intensity fluctuations all corroborate the existing models for SASE FELs.Comment: 6 pages including 6 figures; e-mail: [email protected]

Policy Issues in NEG Models: Established Results and Open Questions

This paper provides a non-technical overview of NEG models dealing with policy issues. Considered policy measures include alternative categories of public expenditure, international tax competition, unilateral actions of protection/liberalisation, and trade agreements. The implications of public intervention in two-region NEG models are discussed by unfolding the impact of policy measures on agglomeration/dispersion forces. Results are described in contrast with those obtained in standard non-NEG theoretical models. The high degree of abstraction limits the applicability of NEG models to real world policy issues. We discuss in some detail two extensions of NEG models to reduce this applicability gap: the cases of multi-regional frameworks and firm heterogeneity