Duration and Term Structure of Trade Agreements

Why are some trade agreements concluded for a limited period of time while others have the form of evergreen contracts supplemented with an advance termination notice clause? We use a dynamic incomplete contracting model to demonstrate that the time structure of the trade agreement is related to the nature of the underlying trade-related investments (or other types of irreversible resource adjustments). If these investments are lumpy and specialized to trade in a particular homogeneous good, the agreements with the \u85xed term of duration are more likely. The xed-term agreement provides incentives for the initial investment but leaves the parties the exibility to revisit the need for future investment by resorting to renegotiation. If the agreement covers trade in goods or services requiring incremental investments with spillovers of the investment bene\u85ts across industries, there is a lower risk of overinvestment. Therefore, the parties are more likely to choose an evergreen agreement (with an advance termination notice or an escape clause). We show that these predictions are consistent with the econometric evidence on the trade agreements to which the U.S. is a party. We are grateful to Arnaud Costinot, Petros Mavroidis, Marc Melitz and the participants of the Midwest In

Imperfect Competition in Financial Markets and Capital Structure

Sergei Guriev, Dmitriy Kvaso

Knowledge Disclosure, Patents and Optimal Organization of Research and Development

We develop a model of two-stage cumulative research and development (R&D), in which one Research Unit (RU) with an innovative idea bargains to license her nonverifiable interim knowledge exclusively to one of two competing Development Units (DUs) via one of two alternative modes: an Open sale after patenting this interim knowledge, or a Closed sale in which precluding further disclosure to a competing DU requires the RU to hold a stake in the licensed DU's post-invention revenues. Both models lead to partial leakage of RU's knowledge from it's description, to the licensed DU alone in a closed sale, and to both DUs in an open sale. We find that higher levels of interim knowledge are more likely to be licensed via closed sales. If the extent of leakage is lower, more RUs choose open sales, generating a non-monotonic relationship between the strength of Intellectual Property Rights (IPR) and aggregate R&D expenditures. We also develop a rationale for the ex ante acquisition of control rights over the RU by a DU, rooted in the RU's incentives to create knowledge under alternative modes of sale thereof, and her wealth constraint in ex interim bargaining.R&D organisation, patents, intellectual property rights

The Resource Curse: A Corporate Transparency Channel

We propose and investigate a new channel through which the resource curse - a stylized fact that countries rich in natural resources grow slower - operates. Predatory governments are more likely to expropriate corporate profits in natural-resource industries when the price of resources is higher. Corporations whose profits are more dependent on the price of resources can mitigate the risk of expropriation by reducing corporate transparency. Lower transparency, in turn, leads to inefficient capital allocation and slower economic growth. Using a panel of 72 industries from 51 countries over 16 years, we demonstrate that the negative effect of expropriation risk on corporate transparency is stronger for industries that are especially vulnerable to expropriation, in particular, for industries whose profits are highly correlated with oil prices. Controlling for country, year, and industry fixed effects, we find that corporate transparency is lower in more oil price-dependent industries when the price of oil is high and property rights are poorly protected. Furthermore, corporate growth is hampered in oil price-sensitive industries because of less efficient capital allocation driven by adverse effects of lower transparency.Resource Curse, Oil Reserves, Expropriation, Autocracy, Transparency and Disclosure, Investment Efficiency, Industry Growth

Determinants of interregional mobility in Russia: evidence from panel data

The paper studies determinants of internal migration in Russia. Using panel data on gross region-to-region migration flows in 1992-99, we estimate the effect of economic, political and social factors. Although overall migration is rather low, it turns out that its intensity does depend on economic factors even controlling for fixed effects for each origin-destination pair. People move from poorer and job scarce regions with worse public good provision to ones that are richer and more prospering both in terms of employment prospects and public goods. Migration is however constrained by the lack of liquidity; for the poorest regions, an increase in income raises rather than decreases outmigration. Our estimates imply that up to a third of Russian regions are locked in poverty traps.internal migration, liquidity constraints, gravity model, Russia's transition

Ownership concentration in Russian industry

Using a unique dataset built for the World Bank’s Country Economic Memorandum, we find that a relatively small number of tycoons ('oligarchs') control a substantial share of Russia’s economy. Oligarchs seem to run their empires more efficiently than other Russian owners. While the relative weight of their firms in Russian economy is huge, they do not seem to be excessively large by the standards of the global economy where most of them are operating. However, a majority of the Russian population deems their property rights illegitimate, which creates a fundamental problem for building a democratic and prosperous Russia.

Human Smuggling

Despite its importance in global illegal migration, there is little, and mostly theoretical research on human smuggling. We suggest an analytical framework to understand the micro structure of the human smuggling market. Migrants interact with smuggling and financing intermediaries; these may or may not be integrated with each other, and with the migrants' employers. Policies of receiving countries (border controls, employer sanctions, deportation policies, sales of visa) affect the interactions in the smuggling market, and, hence, migration flows. We review the theoretical work, point to the scarce empirical evidence, and identify challenges for future theoretical, empirical work and policy advice.illegal migration, trafficking