Switzerland.s Rise to a Wealthy Nation: Competition and Contestability as Key Success Factors

This paper argues that economic competition and political contestability are two key determinants of the successful development of the Swiss economy in the nineteenth and twentieth century. We describe how Switzerland evolved from a relatively poor country with no natural resources and net emigration in 1800 to one of the richest countries of the world two hundred years later. Based on quantitative and qualitative evidence, we argue that early internationalization, open and flexible markets as well as a high degree of competition were crucial for the development of the Swiss economy. In addition, the Swiss political system with its direct democratic elements and the implemented principle of subsidiarity created political contestability that maintained government efficiency and led to political stability throughout history. The combination of these elements seems to explain the Swiss success, but also to make it difficult for otherSwitzerland, development, growth, competition, contestability

To Wait or Not to Wait: Swiss EU-Membership as an Investment under Uncertainty

Why do some countries join the EU earlier than others, why do others wait? In order to answer this question we apply the theory of investment under uncertainty (Dixit and Pindyck, 1994) to the decision on EU-membership. We develop a simplified model of two periods to study how the value of waiting depends among other things on the degree of uncertainty. The results give rise to a country’s position to deliberately postpone a membership in order to keep the option to join later if this is desirable. After interpreting the results we apply the findings to the EU. We argue that the approach provides interesting insights regarding EU-membership, in general, and the Swiss position, in particular.European integration, investment under uncertainty, EU-membership

Comparative home-market advantage: An empirical analysis of British and American exports

This paper derives and tests the hypothesis that a country exports relatively more of those goods for which it has a relatively larger home market, i.e., a comparative home-market advantage. This prediction is based on a two-country, many-good intraindustry trade model with economies of scale, international transaction costs and differences in expenditure shares and country size. The data from 1970 to 1987 of 26 industries of the manufacturing sector in the United States and the United Kingdom supports this hypothesis. It is also shown that the relationship between home-market size and export structure becomes significantly stronger for industries with high fixed costs. JEL no. F12, F14, F1

Shark Hunting: International Trade and the Imminent Extinction of Heterogeneous Species

This paper examines the unprecedented decimation of sharks. We develop a Ricardian Gordon-Schaefer model with a continuum of heterogeneous species which are subject to combined harvesting and perfect substitutability in consumption. The model implies that slow-growing species, surviving in autarky, will be driven to extinction in an open trade regime. In the empirical analysis, we show that the model is in line with observations of shark biology and the international shark market. In particular, the likelihood of extinction turns out to be significantly greater for shark species which are part of trade in shark fins and exhibit low intrinsic growth

Inequality as a Barrier to Economic Integration? An Experiment

International economic theory suggests that people should embrace economic integration because it promises large gains. But policy reversals such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment of how size and cross-country distribution of gains from integration influence individuals’ inclination to cooperate to reap its intended benefits and to embrace or reject integration. The design considers an indefinitely repeated helping game with multiple equilibria and strategic uncertainty. The data reveal that inequality of potential gains neither affected behavior nor reduced support for economic integration. However, integration may lead to disappointing, unequally distributed welfare gains, undermining support for the policy. This suggests that to better assess integration policies, we should account for the spillover effects of integration on behavior. Miscalculating this behavioral aspect may undermine the intended development goals and motivate calls for dramatic policy-reversals

Breaking Up: Experimental Insights into Economic (Dis)Integration

Standard international economic theory suggests that people should embrace economic integration because it promises large gains. But recent events such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment, based on a strategic analytical framework, of how size and distribution of potential gains from integration influence outcomes and individuals’ inclination to embrace integration. We find that cross-country inequality in potential gains acts as a friction to realize those gains. This suggests that to better understand recent phenomena, international economic theory should account for distributional considerations and behavioral aspects it currently ignores