T. Huw Edwards

Allocation of carbon permits within a country: a general equilibrium analysis of the United Kingdom

Abstract The Kyoto agreement includes international trade in carbon permits from 2008. We have used a CGE model to evaluate methods of allocating permits within the UK. Auctioning is broadly similar to a carbon tax, with revenues recycled to reduce other distortions. ‘Grandfathering’ some permits free to large firms would mean a loss of recycling and, possibly, give windfall profits to foreigners. Alternatively, regularly revised allocation, using ‘best practice’ estimates, would be similar to recycling revenue as an output subsidy. Such a system could allow much of the potential ‘double dividend’ to be realised, though an auction system might still be preferable.

Globalisation as a 'good times' phenomenon: A search-based explanation

Globalisation is associated with long periods of sustained economic growth and credit expansion, whereas major recessions tend to lead to falling trade and protectionism. The sensitivity of trade to global economic conditions is not simply driven by policy: rather, in a model of costly search, firms who are engaged in a searching process are very sensitive to changing economic circumstances. In turn, this causes protectionism to be partly endogenous, since optimal noncooperative tariffs can be high during periods when the sensitive, searching firms have exited the market.

Implicit trade Costs and European single market enlargement

This paper investigates the deeper integration of the new EU accession states into the Single Market. Building on the assumption that observed trade patterns can be taken to reveal trading costs between members and non-members of a bloc, I develop a model-consistent Dixit-Stiglitz general equilibrium-based calibration technique. Using this, I investigate numerically the effects of the recent EU enlargement, suggesting that deeper integration, which removed the border costs implied by 1990s trade patterns, could raise trade by 50–100% and incomes in the accession states by 10–20%.A major current issue in the economics of trade blocs is where the bloc is not just a customs union, but also incorporates substantial regulatory harmonisation or mutual recognition elements. The derivation of the costs of non-membership of such a bloc is not straightforward. In this paper I build on the assumption that observed trade pat- terns can be taken to reveal trading costs, and develop a model-consistent Dixit-Stiglitz general equilibrium-based calibration technique as an alternative to gravity methods previously used. I use the model to investigate numerically the likely trade e¤ects of the recent widening of the European Single Market to incorporate several Central and Eastern European Countries.

How Globalized Really is European Trade

Abstract Using a new set of measures of concentration of trade, I suggest that the opening up of trade to date has been greatly exaggerated. At least judging on the basis of trade concentration, agriculture and service sectors should barely be seen as globalized at all. Contrary to other, recent studies, Europes main economies lag behind the USA in terms of global openness, and most are behind Japan, Canada and China. The Balkans, Poland and the Czech Republic are near the bottom end of the global openness league table. Since there is a strong correlation between concentration of trade and poor economic performance, this should be of concern to those countries and to the EU.Abstract Using a new set of measures of concentration of trade, I suggest that the opening up of trade to date has been greatly exaggerated. At least judging on the basis of trade concentration, agriculture and service sectors should barely be seen as globalized at all. Contrary to other, recent studies, Europes main economies lag behind the USA in terms of global openness, and most are behind Japan, Canada and China. The Balkans, Poland and the Czech Republic are near the bottom end of the global openness league table. Since there is a strong correlation between concentration of trade and poor economic performance, this should be of concern to those countries and to the EU.

Who Gains from Restructuring the Post‐Soviet Transition Economies, and Why?

Post-Soviet restructuring has produced mixed economic results. In general, the more advanced countries, which have now joined the European Union, have fared better, while those further East in the CIS have seen a combination of rapid falls in measured gross domestic product and wages, followed by prolonged recession, while the large gains to a wealthy minority who gained from privatisations have largely been reinvested abroad, following capital flight. I set up a series of theoretical and numerical simulation models, based upon a batting order approach where reform means closure of inefficient capacity. In the presence of significant costs to new firm entry and international capital mobility, restructuring and privatisation can lead to falls in GDP and real wages, while capital is transferred abroad. This situation can occur even under perfect competition, but is worse when industrial production is concentrated and trade costs are high. By contrast, workers can gain when costs of establishing new firms are low, and/or when the inefficient industries are capital- intensive. For countries with high costs of firm setup and of trade, capital controls may be justified to protect wages.Abstract To explore the mixed economic results and huge distributional changes experienced by post‐Soviet economies, I set up a series of theoretical and numerical simulation models using an approach based upon heterogeneous firms, where ‘reform’ means closure of inefficient capacity. In the presence of significant costs to new firm entry and international capital mobility, restructuring and privatisation can lead to falls in GDP and real wages, while capital is transferred abroad. This situation can occur even under perfect competition, but is worse when industrial production is concentrated and trade costs are high. By contrast, workers can gain when costs of establishing new firms are low, and/or when the inefficient industries are capital‐intensive. For countries with high costs of firm set‐up and of trade, capital controls may be justified to protect wages.

Good neighbours matter: economic geography and the diffusion of human rights

ABSTRACT Using multi-country panel data, this paper investigates the geopolitical and economic aspects of human rights performance. Human rights performance depends on the relative levels of economic development and spatial proximity to ‘good’ and ‘bad’ neighbours. The paper tests for basic effects of income, and applies spatial weighting models, to analyse the neighbours’ impact on human rights levels, treating this impact as partly endogenous. It takes into account size and distance when comparing each country’s human rights performance with what would be predicted from a weighted average of its neighbours’ performance. There are (1) geographical clusters and (2) size and proximity effects for human rights performance.

Mutual Recognition versus National Treatment of Standards in a Classical Monopoly or Oligopoly

We examine strategic biases in the international regulation of monopolistic or oligopolistic industries, where a minimum vertical quality standard is imposed on a classical monopoly or duopoly, to correct an undersupply of quality. This differs from Hotelling-based studies, where the aim of minimum quality standards is to correct excessive product differentiation. It also allows examination of unbalanced trade, not considered in previous work. Noncooperative regulators tend to overregulate for profit-shifting reasons, though only when producers can vary standards across countries. However, even in this latter case, mutual recognition is only unambiguously welfare-improving when trade is balanced, and it reduces trade flows when quality is taken into account.

Good times and bad times, with endogenous trade policy responses

Globalisation is associated with long periods of sustained economic growth and credit expansion, whereas major recessions tend to lead to falling trade and protectionism. I investigate this, using a model where an important component of trade is search by rms trying out new trade part- ners. To model this, I set up a schematic model of upstream-downstream matching between rms, where match quality determines prots. Prior to globalisation, Northern upstream and downstream rms work together, to avoid trade costs. As trade is liberalised, new North-South matches begin to develop, but at rst these are footloose (since many are experimental in nature), and can be driven out rapidly if there is a demand crisis. The presence of a highly elastic, searching element of trade, during pe- riods of global liberalisation and fast growth means that countries cannot gain terms-of-trade advantage from protection. By contrast, if a prolonged recession drives out searching rms, the remaining trade is relatively price- inelastic, and beggar-thy-neighbour taris become attractive. Such observations are consistent with the rapid and damaging switch to protectionism after the 1929 Stock Market Crash, and emphasise the need for continued multilateral commitment to trade liberalisation, in the aftermath of the 2008 Great Trade Recession.

Economic Geography and Human Rights

This paper investigates the geo-political and international economic aspects of human rights performance using a pooled cross-section time-series data set. We start with simple descriptive accounts of the recent geographic history of human rights performance. We then test for basic economic effects of income and then apply tools from the spatial economics literature to examine the degree to which clusters of relative human rights performance exist. Using spatial weighting models we analyse the spatial impact of proximity and human rights performance of neighbours on overall levels of human rights performance. Unlike previous studies, our approach treats this spatial impact as partly endogenous: one country’s human rights performance may affect its neighbours through a variety of potential geographical spillover mechanisms. The spatial weighting models take into account size and distance of neighbours in order to compare each country’s human rights performance with what would be predicted by regression on a weighted average of its neighbours’ performance. The findings suggest that there are (a) geographical clusters of human rights performance and (b) size and proximity effects for human rights performance, both of which have significant implications for the promotion and protection of human rights.