Economics - Research Publications

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    Import dynamics and demands for protection
    Hillberry, R ; McCalman, P (WILEY-BLACKWELL, 2016-08-01)
    What kinds of changes in foreign competition lead domestic industries to seek import protection? To address this question, we use detailed monthly US import data to investigate changes in import composition during a 24-month window immediately preceding the filing of a petition for import protection. A decomposition methodology allows a comparison of imports from two groups of countries supplying the same product: those that are named in the petition and those that are not. The same decomposition can be applied to products quite similar to the imports in question, but not subject to a petition. The results suggest that industries typically seek protection when faced with a specific pattern of shocks. First, a persistent positive relative supply shock favours imports from named countries. Second, a negative demand shock hits imports from all sources just prior to domestic industries’ petition for protection. The relative supply shock is a broad one; it applies both to named commodities and to the comparison product group. The import demand shock, by contrast, is narrow, hitting only named products. This negative import demand shock appears to be a key event in the run-up to the filing of a petition. This latter shock has been missed by previous studies using more aggregated data.
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    THE "NEW" ECONOMICS OF TRADE AGREEMENTS: FROM TRADE LIBERALIZATION TO REGULATORY CONVERGENCE?
    Grossman, GM ; McCalman, P ; Staiger, RW (WILEY, 2021-01-01)
    What incentives do governments have to negotiate trade agreements that constrain their domestic regulatory policies? We study a model in which firms design products to appeal to local consumer tastes, but their fixed costs increase with the difference between versions of their product destined for different markets. In this setting, firms' profit‐maximizing choices of product attributes are globally optimal in the absence of consumption externalities, but national governments have unilateral incentives to invoke regulatory protectionism to induce firm delocation. An efficient trade agreement requires commitments not to engage in such opportunistic behavior. A rule requiring mutual recognition of standards can be used to achieve efficiency, but one that requires only national treatment falls short. When product attributes confer local consumption externalities, an efficient trade agreement must coordinate the fine details of countries' regulatory policies.
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    International trade, product lines and welfare: The roles of firm and consumer heterogeneity
    McCalman, P (Elsevier, 2020-09-01)
    A central prediction of international trade models is that increased integration leads to specialization. This mechanism has been used to gain insight into the location of industries across countries, the reallocation of output across firms as well as the variation of a firm's product range as countries liberalize. Nevertheless, the notion that international trade will lead firms to rationalize their product portfolios and concentrate on their “best” products doesn't always square with reality. In particular, firms in prominent industries have, on occasion, extended their offerings to include a lower quality version/option as international competition increases – expanding rather than contracting their product portfolio. This paper demonstrates that such behavior can be generated in a standard trade model if there is consumer heterogeneity within a country and firms leverage these differences to their advantage. In this setting, increased competition can be associated with either product line reductions or extensions. That is, both types of behavior can arise in equilibrium from ostensibly similar shocks. Since trade costs directly influence the intensity of competition, their variation has important implications for product line design and also the distribution of welfare gains. In particular, product line extensions due to trade liberalization have especially large welfare benefits for low income consumers.
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    Contingent trade policy and economic efficiency
    McCalman, P ; Stähler, F ; Willmann, G (Springer (part of Springer Nature), 2019-05-09)
    This paper models the competition for a domestic market between one domestic and one foreign firm as a pricing game under incomplete cost information. As the foreign firm incurs a trade cost to serve the domestic market, it prices more aggressively, giving rise to the possibility of an inefficient allocation. In spite of asymmetric information, we can devise a contingent trade policy to correct this potential market failure. National governments, however, make excessive use of such a policy due to rent shifting motives, thus creating another inefficiency. The expected inefficiency of national policy is found to be comparatively larger (lower) at low (high) trade costs. Hence contingent trade policy conducted by national governments is preferred only when trade costs are high.
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    The Doha agenda and development prospects for intellectual property rights reform
    McCalman, P (Asian Development Bank, 2002)
    At the World Trade Organization Ministerial Conference in Doha, a number of key declarations were made that will directly impact the operation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). These declarations perform a multidimensional function: clarifying and reiterating existing rights and obligations, as well as setting out a negotiating agenda. By providing clarity on a number of critical issues, the Doha Ministerial Conference attempted to clear the way for future work on TRIPS. Overall, the Doha Declarations with respect to the TRIPS Agreement are seen as a major step for developing (and particularly the least developed) countries towards securing flexibility in the use of intellectual property rights (IPRs), especially with respect to public health issues. Specifically, the Declaration on the TRIPS Agreement and Public Health helps to ensure that in situations where a national emergency has to be dealt with, the set of options is not limited by the architecture of international IPRs. More generally, it reiterates the ability of countries to interpret the TRIPS Agreement in a way that is beneficial to them or reflective of their needs. The right to exercise flexibility over IPRs has historically been available to countries during their industrializing phase. While the TRIPS Agreement does limit the flexibility a country has, much work has attempted to emphasize the scope for discretion a country has in the design of its IPR system. The results of the Doha Ministerial Conference can be seen as an attempt to further stress the flexibility within the TRIPS Agreement.
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    International trade, income distribution and welfare
    McCalman, P (Elsevier, 2018-01-01)
    This paper studies the relationship between income distribution and international integration in a canonical trade setting with one change. In the standard model prices are solely a function of (constant) marginal costs and (constant) elasticities, implying that information on individual incomes are of no value to a firm. To allow a more realistic role for consumer level information, a firm's strategy space is expanded to include non-linear prices. Now profit maximizing firms use information on income distribution to design a product for each income class and set prices to induce each group to optimally select the appropriate option. Equilibrium involves designs below the first best for low income groups and above the first best for high income groups – welfare differences are more exaggerated than income differences. When countries with differing income distributions integrate this has implications for the size of these distortions, influencing the gains from trade both within and across countries. These implications are quantified and shown to be potentially significant factors affecting welfare outcomes from integration – with the consequences more pronounced at lower trade costs. The structure of trade and expenditure patterns that emerge also match a range of empirical findings. These results are driven by firm strategy based on income difference alone as preferences are assumed to be identical and homothetic across countries, placing the distribution of income at the center of the analysis.
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    Endogenous firm heterogeneity and the dynamics of trade liberalization
    Ederington, J ; McCalman, P (ELSEVIER, 2008-03-01)