James H. Cassing

Political influence motives and the choice between tariffs and quotas

Abstract Tariffs and quotas are not symmetric under a variety of circumstances. This paper pursues the implications of one such circumstance — domestic market power — for the political choice of protectionist instrument in the context of a political support maximization model. Tariffs dominate quotas in the political model in the absence of revenue seeking motives. In the presence of revenue seeking, ambiguity arises but limits can be placed on the range of tariff or quota levels. Also, some welfare implications emerge.

Transport Costs in International Trade Theory: A Comparison with the Analysis of Nontraded Goods

I. Assumptions and notation, 536. — II. The model, 537. — III. The equations of change, 540. — IV. Autonomous price changes, 541. — V. Factor accumulation, 543. — VI. Conclusions, 548.

Economic policy and political culture in Indonesia

Abstract This paper analyzes the interface of economic policy and political culture in Indonesia. The paper explains how the institutions of Indonesian economic policy formation were an extension of a political regime that emerged after the 1965 demise of Suharto. That regime was largely politically non-competitive, which allowed the economic policy institutions to be used mercantilistically. The paper draws an analogy between mercantilism in Indonesia after 1965 and in England and France in the 18th century.

Trade Pattern Persistence

Internationalization of the world economy has made trade a key factor in the growth potential of nearly every nation’s economy. Hence, economists have become increasingly interested in the determinants of international trade and competitiveness. Empirical Methods in International Trade captures the many aspects of this trend in globalization through practical techniques well-founded in economic theory. The authors, comprising some of the most influential applied international economists of their generation, use cutting-edge models to develop empirical approaches to critical aspects of economic interchange. These approaches are developed and explained carefully with the goal of making them accessible to a wide audience.

Antidumping, Signaling and Cheap Talk

In the United States, there is evidence that domestic non-filing firms do not always support dumping/countervailing duty investigations. Absent other factors, domestic firms have an unambiguous incentive to support petitions filed by other domestic producers. We argue that in cases where the non-complainant firm is not a significant importer or exporter, the most plausible explanation is that non-support acts as a costly signal of private information. Extending the model to allow firms to engage in cheap talk, such signaling can take place even in the absence of an investigation. This result provides an explanation for the puzzling observation that fewer antidumping investigations are filed than one would expect.

Changes in Trade-Policy Regimes

One of the curiosities of trade policy regimes is that policies spawned in response to large but temporary external shocks seem to persist long after the shock has subsided. Thus protection frequently appears in an industry in response to sudden, adverse terms of trade shocks and then lives on even after relative prices have returned to “normal.” Political scientists attribute this to an increased commonality of interests during cyclical troughs which may facilitate overcoming fixed costs of putting a lobby organization in place. The lobby, it must be argued, is then maintained even when “normality” returns to the markets so long as the maintenance costs are less than the perceived benefits secured through the political process. Similarly, free trade is commonly imposed on just the same industries when they experience large favorable terms of trade shocks and then this regime seems to displace the protectionist one when prices return to normal. This is the clear impression from recent studies such as Hufbauer et. al. (1986) wherein industries in the U.S., such as ball bearings, simply do not petition to retain special protection when prices are especially firm even though they lose their protected status for the future. What seems curious is not so much that large shocks engender regime changes, but that the regime thus enfranchised then seems to win the day after the shock has disappeared and to persist in the very same economic environment that had previously supported an alternative policy regime.

A note on growth in the presence of tariffs

Abstract In this paper we derive within the context of the standard 2 x 2 variable proportions trade model the exact conditions under which higher tariffs in place reduce or increase the real measured output growth rate given exogenous factor growth. The answer turns on the magnitudes of some observable data and our attention is focused especially on the substitution elasticities in production.

Per Capita Income and the Mystery of Missing Trade

The literature on the Heckscher–Ohlin–Vanek (HOV) model has concentrated on the production side, particularly the unrealistic assumptions of identical techniques and factor price equalization. However, less is known about the demand side. In this paper, we compare the supply side assumptions versus the demand side assumptions as a cause of the empirical failures in the HOV prediction. While the relaxation in the supply side assumptions is crucial to predict the direction of factor trade, the demand side assumptions are shown to play an important role in explaining why factor trade is “missing” in relation to the HOV prediction. For example of the slope test for labor, the supply side repair improves from 0.026 to 0.162, whereas the demand side repair improves significantly from 0.162 to 0.891.

Trade and growth in the presence of distortions

Abstract Tariffs and other policy distortions typically lower real national income relative to what it otherwise would have been for any given rate of factor accumulation. Even so, policy distortions may raise an economys real measured growth rate and, somewhat deceivingly, give the impression that national welfare has benefited from things like tariff protection. This would be an incorrect conclusion. This paper discusses the issue of how policy distortions can affect the rate of growth for a small, open economy. For example, in the presence of exogenously given factor accumulation, a tariff can either raise or lower an economys growth rate (measured by the change in the value of output at world prices), relative to the no-distortion growth rate. We also discuss the relevance of this result for tariff uniformity, ‘tariff jumping’ foreign direct investment, and the empirical literature on trade and growth. Finally, we use a numerical simulation model of Egypt to assess whether the costs of its tax distortions have increased or declined over time.