Oliver Lorz

Enlargement versus Deepening: The Trade-off Facing Economic Unions

This paper analyzes the relationship between the size of an economic union and the degree of policy centralization. We consider a political economy setting in which elected representatives bargain over the degree of centralization within the union. In our model strategic delegation affects the identity of the representatives and hence the equilibrium policy outcome. We show that the relationship between the size of the union and centralization may be non-monotonic: Up to a certain size enlargement leads to deeper integration, whereas beyond that size further enlargement implies less centralization. We also show that freezing the level of centralization and associate memberships can mitigate the trade-off.

Offshoring along the production chain

In this paper, we analyze the offshoring decision of firms whose production process is characterized by a particular sequence of steps. International cost differences vary non‐monotonically along the production chain, and moving unfinished goods across borders incurs transport costs. We show that, in such a setting, firms may refrain from offshoring even if relocating individual steps would be advantageous in terms of offshoring costs, or they may offshore (almost) the entire production chain to save transport costs. Small variations in model parameters may thus have a substantial impact on offshoring activities. (Dans ce memoire, on analyse la decision de delocalisation des firmes dont le processus de production est caracterise par une sequence particuliere d’etapes. Les differences internationales de couts varient de facon non‐monotone le long de la chaine de production, et deplacer des produits au stade intermediaire de production a travers des frontieres implique des couts de transport. On montre que, dans un tel cadre, les entreprises peuvent choisir de ne pas delocaliser meme si la relocalisation de certaines etapes individuelles de production pourrait etre avantageuse en termes de couts, ou elles peuvent delocaliser (presque) la chaine de production dans son entier pour reduire les couts de transport. De faibles variations dans les parametres du modele peuvent avoir un impact substantiel sur les activites de delocalisation.)

Capital mobility, tax competition, and lobbying for redistributive capital taxation

This paper analyzes the impact of international capital mobility on redistributive capital taxation and on lobbying activities by interest groups. It employs a model where different capital endowments lead to a conflict between households concerning their most preferred capital tax rate. Three main results are derived: First, redistributive source based capital taxes or subsidies decline as international tax competition intensifies. Second, lobbying activities of certain interest groups may explain international differences in the capital tax rate. Third, capital mobility may lead to declining lobbying activities of interest groups and thus may be welfare increasing for all households.

Offshoring Along the Production Chain (Délocalisation Le Long De La Chaine De Production)

In this paper, we analyze the offshoring decision of firms whose production process is characterized by a particular sequence of steps. International cost differences vary non‐monotonically along the production chain, and moving unfinished goods across borders incurs transport costs. We show that, in such a setting, firms may refrain from offshoring even if relocating individual steps would be advantageous in terms of offshoring costs, or they may offshore (almost) the entire production chain to save transport costs. Small variations in model parameters may thus have a substantial impact on offshoring activities. (Dans ce memoire, on analyse la decision de delocalisation des firmes dont le processus de production est caracterise par une sequence particuliere d’etapes. Les differences internationales de couts varient de facon non‐monotone le long de la chaine de production, et deplacer des produits au stade intermediaire de production a travers des frontieres implique des couts de transport. On montre que, dans un tel cadre, les entreprises peuvent choisir de ne pas delocaliser meme si la relocalisation de certaines etapes individuelles de production pourrait etre avantageuse en termes de couts, ou elles peuvent delocaliser (presque) la chaine de production dans son entier pour reduire les couts de transport. De faibles variations dans les parametres du modele peuvent avoir un impact substantiel sur les activites de delocalisation.)

International Technology Transfers and Competition

This paper analyzes North-South technology transfers in a model of oligopolistic competition and spatial product differentiation. Two firms in the North supply a high-tech good and a technically related low-tech good. They decide about licensing the low-tech good to suppliers in the South. With the license Southern firms get access to technology from the North, which enables them-with a certain probability-to enter the market for the high-tech good. Northern firms may therefore license strategically to influence the competitive environment in the high-tech market. In this setting, multiple equilibria with and without licensing may arise, and the resulting outcomes may be inefficient from the viewpoint of the Northern firms. Copyright

On the effects of capital mobility on local infrastructure policy and rent-seeking

This paper deals with the influence of factor mobility on local infrastructure policy and rent-seeking activities of local interest groups. It employs a model where households differ with respect to their endowment with the immobile factor land. Local governments decide about the level of productive infrastructure in their jurisdiction. According to their land endowment, different households benefit to a different degree from the infrastructure. This redistribution effect of local infrastructure gives households an incentive for rent-seeking: Landabundant households seek to influence their government to increase the level of infrastructure whereas land-poor households seek to influence their government to reduce the infrastructure level. As this paper shows, factor mobility and fiscal competition between local governments lead to increasing rent-seeking expenditures for a broad class of cases.

Standardization of Intermediate Goods and International Trade

This paper analyzes the relationship between standardization of intermediate inputs and international trade. We employ a two-country, general equilibrium model with differentiated manufacturing goods. Production of manufacturing goods requires specific intermediate inputs, which can be either specialized or standardized. Standardization and the pattern of trade are determined endogenously in our model. In this framework we derive the effects of trade integration, that is, a decline in trading costs for intermediate goods, on the equilibrium outcome.

Mode of International Investment and Endogenous Risk of Expropriation

In this paper, we develop a politico-economic model to analyze the relationship between the mode of international investment and institutional quality in a non-democratic capital importing country. Foreign investors from a capital-rich North can either purchase productive assets in a capital-poor South and transfer their capital within integrated multinational rms or they can form joint ventures with local asset owners. The South is ruled by an autocratic elite that may use its political power to expropriate productive assets. In a joint venture, the domestic asset owner bears the risk of expropriation, whereas in an integrated rm, this risk affects the foreign investor. This effect lowers the incentives for specific investments in an integrated firm and distorts the decision between joint ventures and integrated production. By setting the institutional framework in the host country, the elite in uences the risk of expropriation. We determine the equilibrium risk of expropriation in this framework and the resulting pattern of international production. We also analyze as to how globalization, which is re ected in a decline in investment costs, in fluences institutional quality.

Temporary immigration visas

This paper deals with recent proposals concerning temporary immigration visas as a means to combat the problem of illegal immigration. We set up a simple two-period model of international migration between a poor South and a rich North with temporary visas issued for one period. Because of capital market imperfections, immigrants from the South face additional capital costs when financing the visa fee. In this model, we find that temporary visas can improve welfare in the North if capital costs of the immigrants are sufficiently low. For high capital costs, however, a welfare reduction cannot be ruled out. We extend the model to the case of heterogeneous immigrants and asymmetric information. In this setting, we show that the government in the North may have an incentive to issue temporary visas for those with low capital costs and to tolerate illegal immigration of the others.

A Bertrand model of wage competition with capital mobility

Abstract This paper analyzes wage competition between national trade unions with perfect international capital mobility. A simple neoclassical representation of the capital market equilibrium leads to a Bertrand result for the outcome of international wage competition.