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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    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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    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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