Browsing by Subject "F13"

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  • Woo, Wing Thye (2018)
    BOFIT Policy Brief 7/2018
    Our principal policy suggestion to China is that, because China’s economy in 2018 is very different from that in 1978, there should be more reciprocity in China’s trade and investment relations with the advanced economies. China should not only give national treatment in the near future to foreign firms but should also set up a mechanism to start easing up on foreign acquisition of Chinese firms in a manner that is consistent with China’s national security concerns. Our principal policy suggestion to the US is to stop equating strategic competition with economic competition. Strategic competition is normally a zero-sum game while economic competition is usually a zero-sum game in the short-run, but generally creates a win-win outcome in the long-run. National economic dynamism and economic resilience emerge from international economic competition and not from sheltering domestic high-tech firms permanently.
  • Itkonen, Juha (2017)
    Bank of Finland Research Discussion Papers 20/2017
    We model a network of linked permit markets to examine efficiency and dependencies between the markets in a competitive equilibrium. Links enable the participants of one emissions trading system to use the permits of another system. To improve the cost-efficiency of the international policy architecture, the Paris climate agreement set out a framework for linking local policies. International trade in permits reduces costs by merging markets, but in a large network it is generally not obvious which markets end up linked in the equilibrium. Also, indirect links might allow foreign regulators to undermine domestic policy outcomes. We apply graph theory to study dependencies between markets and to determine how the network is partitioned into separate market areas. Our main theorem characterizes the dependency structure of the equilibrium in an exogenous trading network. We show that markets merge when they are connected by a particular pattern of links. The results help to identify potential sources of both cost reductions and foreign interference, and to secure the efficiency of climate change policies.
  • Balistreri, Edward J.; Olekseyuk, Zoryana; Tarr, David G. (2017)
    BOFIT Discussion Papers 2/2017
    The accession negotiations of Belarus to the WTO are unusual since, due to its obligations in the Eurasian Economic Union, WTO accession is not expected to impact its tariffs or formerly substantial trade distorting agricultural subsidies. Nonetheless, we estimate that WTO accession will increase welfare by 8.8 percent per year in Belarus in the medium term. We show that inclusion of (i) foreign direct investment; (ii) reduction on non-discriminatory barriers against services providers; and (iii) our model with imperfect competition and endogenous productivity effects together produce esti-mated gains eleven times larger than a model of perfect competition with only cross-border trade in services. Our analysis is enabled by our production of a dataset on both discriminatory and non-discriminatory barriers in services and their ad valorem equivalents. Based on a new dataset on labor productivity by sector and type of ownership, in our central model we estimate that privatization will increase welfare by 35.4 percent. We find substantial variance in the estimated gains from privatiza-tion depending on model assumptions; but all the estimates of the impacts of privatization indicate substantial welfare gains.
  • Niemi, Riku (2016)
    BOFIT Policy Brief 1/2016
    Russia, Kazakhstan, and Belarus established the Eurasian Customs Union in 2010. Five years later, it became the Eurasian Economic Union. External tariffs have been harmonised and some internal trade barriers have been tackled. Most notably, internal border controls had been abolished by July 2011. This policy brief brings together facts and data on recent changes in trade-related institutions, trade barriers and trade flows across the internal and external borders of the Union. Trade barriers and flows are analysed at the level of product categories. The purpose is to identify the countries and sectors where the greatest trade creation or diversion is likely to have taken place and whether notable changes can be observed.
  • Everaert, Greetje M.M. (2004)
    BOFIT Discussion Papers 12/2004
    In today s increasingly competitive business environment, many firms in declining industries have been confronted with the need to restructure.However, lobbies in these industries have often managed to attract government subsidies instead.This paper looks at the decision of a loss-making firm whether to lobby for subsidies or whether to restructure in the context of a contributions game as in Magee et al.(1989).We further analyse the role of tariffs in restricting uncompetitive practices such as granting state aid to unprofitable firms.Several results stand out.Firstly, there is a trade-off between spending resources on lobbying for subsidies and costly restructuring such that both restructuring and subsidisation take place in our model.Secondly, countervailing tariffs on subsidised exports shift the decision in favour of restructuring, thereby hardening budget constraints. Hence, the model illustrates that external constraints such as countervailing tariffs can help to establish internal financial discipline when first-best solutions are politically unfeasible. Thirdly, the social planner always prefers full restructuring implying that political competition comes at a cost of lower economic welfare in our model. JEL classification: P26, F13 Keywords: soft budget constraints, restructuring, political economy, lobbying, trade policy, declining industries