Pareto Inferior Trade

Newbery, David; Stiglitz, Joseph E.

doi:10.2307/2297701

Cited by 336 publications

(189 citation statements)

References 13 publications

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“…Our contribution can hence be seen as complementary. 6 See, for example, Burns (1960), Newbery and Stiglitz (1984), Greenwood and Jovanovic (1990), SaintPaul (1992), Obstfeld (1994), Acemoglu and Zilibotti (1997), and Kraay and Ventura (2001). 7 See, for example, Hopenhayn and Muniagurria (1996), and Gavin and Hausmann (1998).…”

Section: Methodsmentioning

confidence: 99%

Volatility and Development

Koren

Tenreyro

2007

The Quarterly Journal of Economics

442

353

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Why is GDP growth so much more volatile in poor countries than in rich ones? We identify four possible reasons: (i) poor countries specialize in more volatile sectors; (ii) poor countries specialize in fewer sectors; (iii) poor countries experience more frequent and more severe aggregate shocks (e.g. from macroeconomic policy); and (iv) poor countries' macroeconomic fluctuations are more highly correlated with the shocks of the sectors they specialize in. We show how to decompose volatility into these four sources, quantify their contribution to aggregate volatility, and study how they relate to the stage of development. We document the following regularities. First, as countries develop, their productive structure moves from more volatile to less volatile sectors. Second, the level of specialization declines with development at early stages, and slowly increases at later stages of development. Third, the volatility of country-specific macroeconomic shocks falls with development. Fourth, the covariance between sector-specific and country-specific shocks does not vary systematically with the level of development. We argue that many theories linking volatility and development are not consistent with these findings and suggest new directions for future theoretical work.

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Section: Methodsmentioning

confidence: 99%

Volatility and Development

Koren

Tenreyro

2007

The Quarterly Journal of Economics

442

353

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“…Early theoretical arguments by Newbery and Stiglitz (1984) recognize that international trade, by increasing volatility, may reduce welfare and a number of studies has examined the link between trade and volatility at the country or sector level (e.g. Rodrik, 1998;Easterly et al, 2001;Bejan, 2006;di Giovanni and Levchenko, 2009).…”

Section: Introductionmentioning

confidence: 99%

Volatility and diversification of exports: Firm-level theory and evidence

Vannoorenberghe

Wang

2016

European Economic Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We show using detailed firm-level Chinese data that, among small exporters, firms selling to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This result, which stands in marked contrast to standard portfolio theory for small exporters, is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising volatility. These results cast doubt on the commonly held belief that diversification must decrease volatility. Terms of use: Documents inJEL-Code: F100.

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“…Related studies in which imperfect market assumptions are invoked have employed other a pproaches such as structural methods (e.g., Azzam and Pagoulatos, 1990;Holloway, 1991;Hyde and Perloff, 1998) and reduced-form techniques (e.g., Panzar and Rose, 1987;Hall, 1988;Zhoa et al, 1996) among others. Barrett (1996) a rgues that the implicit perfectly competitive market assumption is flawed in that even if price differences exactly equal transfer costs, one cannot reasonably presume perfect competition, since this is equally consistent with monopolistic limit pricing, with collusive pricing by a spatial oligopoly (Faminow and Benson, 1990) or with Pareto inferior trade (Newbery and Stiglitz, 1984). Using linear-quadratic models, however, Karp and Perloff (1989; have shown that the dynamic behaviour of oligopolistic markets is relatively more competitive than collusive.…”

Section: Introductionmentioning

confidence: 99%

The long run, market power and retail pricing

Jumah

2004

Empirical Economics

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The paper uses the Johansen cointegration approach to analyse long-run pricing strategies of pork and chicken retailers in Austria. Long-run retail pricing strategy is found to be dependent on market share and price elasticity of demand for product. A combination of mark-up pricing strategy for pork and a competitive pricing strategy for chicken is considered by retailers to yield maximum profit. Long-run price adjustment reveals linkages to pricing strategy. The versatility of the Johansen cointegration technique as a tool capable of analysing both competitive and imperfect market situations is also revealed. The paper recommends meat policy to be product specific rather than holistic. KeywordsMarket power, markup pricing, cointegration, long run JEL Classifications C32, D43, L11, Q13 CommentsThe research on which this article is based began in 1995 at the Federal Institute of Agricultural Economics, Vienna, with the support of the Austrian Federal Ministry of Agriculture and Forestry. An earlier version of the paper was presented at the 264 th NFJ Seminar, Alnarp, Sweden, 1996. The author is grateful to Karl M. Ortner for the data and to Robert M. Kunst, Karl M. Ortner, Martin Wagner, and seminar participants for useful comments on earlier drafts.

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Pareto Inferior Trade

Cited by 336 publications

References 13 publications

Volatility and Development

Volatility and Development

Volatility and diversification of exports: Firm-level theory and evidence

The long run, market power and retail pricing

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