A. de Vaal

Producer services, economic geography, and services tradability

We investigate how the incorporation of producer services linkages affects the outcome of an economic geography model. We specify the production of manufactures such that a variety of producer services is needed to transform tradable unfinished goods into final consumption goods. We find that service linkages promote the concentration of economic activity in a single region, but whether full concentration is achieved depends on the costs and mode of services trade. Applying the model to a multiregion world shows that incorporating producer services may also give rise to regions that specialize in different economic activities.

On labour standards and free trade

We investigate the effectiveness and efficiency of alternative measures to increase standards in low-income countries in a two-country framework where (a) trade and standards in low-income countries are negatively related, and (b) free trade is not longer optimal for the high-income country due to a negative psychological externality that low standards in low-income countries exert. We find that any uncoordinated, unilateral action by the high-income country to decrease the psychological externality is dominated by coordinated action; both with respect to the psychological externality as with respect to the welfare consequences for both countries. Coordination is also shown to be feasible and incentive compatible, provided that standards are objectively verifiable. (JEL D62, F13)