Jean-Pierre Laffargue

Tourism, Dutch Disease And Welfare In An Open Dynamic Economy

This paper examines the effects of an expansion in tourism on capital accumulation, sectoral output and resident welfare in an open economy with an externality in the traded good sector. An expansion of tourism increases the relative price of the nontraded good, improves the tertiary terms of trade and hence yields a gain in revenue. However, this increase in the relative price of nontraded goods results in a lowering of the demand for capital used in the traded sector. The subsequent de-industrialization in the traded good sector may lower resident welfare. This result is supported by numerical simulations.

A computational general equilibrium model with vintage capital

This paper presents a vintage capital model assuming putty–clay investment and perfect foresight. The model is written in discrete time and is simulated by using a second order relaxation algorithm. By computing the eigenvalues of the dynamic system, we have checked the conditions of existence and uniqueness of a solution (Blanchard and Kahns conditions) and identified the echo effect that characterizes vintage capital models and the related dynamics of creation and destruction. By calibrating the model on French data, it has been proved useful to explain the medium-term movements in the distribution of income in France during the last three decades.

A DYNAMIC MODEL OF TOURISM, EMPLOYMENT AND WELFARE: THE CASE OF HONG KONG

The present paper uses a dynamic open-economy model with wage indexation to examine the impact of tourism on employment and welfare. Both short-run and long-run situations are analysed. It is well known that tourism converts non-traded goods into tradable goods. An increase in the demand for a non-traded good raises its relative price, which results in an expansion of the non-traded sector at the expense of the traded goods sector. This output shift raises labour employment in the short run. However, in the long run, the higher relative price leads to higher wages, resulting in a negative impact on labour employment. If the output effect is dominant, the expansion in tourism raises employment and welfare. However, under realistic conditions tourism may lower both labour employment and welfare due to rising costs. These results are demonstrated by simulating a dynamic model for the case of Hong Kong.

A Dynamic Model of the French Economy, with Rational Expectations, Monopolistic Competition and Labour Market Bargaining

This paper describes a small dynamic model of the French economy in a situation of imperfect competition on all markets, with some nominal rigidity and part of households facing a liquidity constraint. Economic agents optimise over time. One of the features of this model is that the labour market is modeled in some detail. Dynamic and long-term multipliers are computed, under rational expectations, for changes in fiscal, para fiscal and budgetary policy, for alterations to the environment of France, and for structural shocks. These multipliers are given economic interpretation.

Tourism, jobs, capital accumulation and the economy: A dynamic analysis

This paper examines the effects of tourism in a dynamic model of trade on unemployment, capital accumulation and resident welfare. A tourism boom improves the terms of trade, increases labor employment, but lowers capital accumulation. The reduction in the capital stock depends on the degree of factor intensity. When the traded sector is weakly capital intensive, the expansion of tourism improves welfare. However, when the traded sector is strongly capital intensive, the fall in capital can be a dominant factor in lowering national welfare. This dynamic immiserizing result of tourism on resident welfare is confirmed by simulations on German data.

A Theory of Dynamics and Inequalities Under Epidemics

We develop a tractable general theory for the study of the economic and demographic impact of epidemics. In particular, we analytically characterise the short and medium term consequences of epidemics for population size, age pyramid, economic performance and income distribution. To this end, we develop a three-period overlapping generations where altruistic parents choose optimal health expenditures for their children and themselves. The survival probability of (junior) adults and children depend on such investments. Agents can be skilled or unskilled. The model emphasizes the role of orphans. Ophans are not only penalized in front of death , they are also penalized in the access to education. Epidemics are modeled as one period exogenous shocks to the survival rates. We identify three kinds of epidemics depending on how the epidemic shock alters the marginal efficiency of health expenditures. We first study the demographic dynamics, and prove that while a one-period epidemic shock has no permanent effect on income distribution, it can perfectly alter it in the short and medium run. We then study the impact of the three kinds of epidemics when they hit children and/or junior adults. We prove that while the three epidemics have significantly different demographic implications in the medium run, they all imply a worsening in the short and medium run of economic performance and income distribution. In particular, the distributional implications of the model mainly rely on orphans: if orphans are more penalized in the access to a high llevel of education than in front of death, they will necessarily lead to the medium-term increase in the proportion of the unskilled, triggering the impoverishment of the economy at that time horizon.

Foreign Aid, Wage Inequality and Welfare for a Small Open Economy with Tourism

While the welfare effect of foreign aid has been extensively analyzed, the impact on the distribution of income has received less attention. At the same time, there has been recent work on tourism where it is complementary to aid in improving welfare. By combining these two strands, this paper concentrates on wage inequality in developing countries. We find that an increase in aid in the form of tied aid can lower the relative price of nontraded goods. The rent extracted from tourists declines, reducing welfare of domestic residents. In addition, the fall in the nontradable price can widen the wage inequality between skilled and unskilled workers. Thus, increased foreign aid may have detrimental effects on national welfare and the distribution of income. Rising wage inequality is confirmed by numerical simulations.

A disequilibrium econometric model of the French economy with two sectors and endogenous prices and investment

Abstract A small disequilibrium model of the French economy is estimated. It isolates two sectors, the first sheltered, the second exposed to international competition, with endogenous investment. The sheltered sector is characterized by competitive equilibrium. The firms in the exposed sector face a situation of monopolistic competition, but bear some adjustment costs when they change their prices. Two situations can the be observed: monpolistic equilibrium when theoretical demand is satisfied, classical disequilibrium when some fraction of it is rationed, and is then satisfied by foreign supply. Our conclusion is that classical disequilibrium is the situation that has predominated since 1978. So wage moderation raises employment and investment. On the other hand only weak consequences on output result from a rise of public consumption, which worsens the trade balance.

Intergenerational transfers and the stability of public debt with short-lived governments

Time consistent policies and reforms of intergenerational transfers are analyzed in an overlapping generation model. Governments have preferences, which give much weight to the living generations, and they cannot commit themselves to future taxes and transfers, which will be decided by future governments with different objectives. The economy follows one of two equilibrium paths with perfect foresight. On one path, governments finance the costs of their transfers to the living by increasing public debt recklessly. Consumers pay more and more taxes to finance the cost of this debt, and the successive generations will enter a process of impoverishment. On the other path, in spite of their preference bias, governments borrow less and put the economy on a path of egalitarian consumption flows for the successive generations, with a constant ratio of public debt to national income. The mechanisms, which put an economy on one or the other equilibrium paths, are unconnected to the fundamentals of the model.

The Growth and Decline of the Modern Sector and the Merchant Class in Imperial China

This paper offers an explanation of why, in Imperial China, the merchant class expanded and the economy modernized up to the 13th century, and why it entered into decline from the 14th century onward. The modernization of China required the accumulation of public capital and the building of good institutions, upon which a vibrant class of merchants and entrepreneurs could gradually emerge. This class contributed to the enrichment of the society and the emperor, but its activities also weakened the dominance of the emperor and the elite, who would then prefer to block the modernization of China and to restrict the size of the merchant class, putting the economy into long-run stagnation. However, when the emperor faced severe foreign military threats and when he realized that a modern sector improved the defense capabilities of China, he made the opposite choice.