claustre bajona - Academia.edu (original) (raw)

Papers by claustre bajona

In models in which convergence in income levels across closed countries is driven by faster accum... more In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We make this point using a dynamic Heckscher-Ohlin model-a combination of a static two-good, twofactor Heckscher-Ohlin trade model and a two-sector growth model-with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.

We contrast the properties of dynamic Heckscher-Ohlin models with overlapping generations with th... more We contrast the properties of dynamic Heckscher-Ohlin models with overlapping generations with those of models with infinitely lived consumers under both closed and open international capital markets. In both environments, if capital is mobile, factor price equalization occurs after the initial period. If capital is not mobile, the properties of equilibria differ drastically across environments: With infinitely lived consumers, factor prices equalize in any steady state or cycle and, in general, there is positive trade in any steady state or cycle. With overlapping generations, we construct examples with steady states and cycles in which factor prices are not equalized, and any equilibrium that converges to a steady state or a cycle with factor price equalization has no trade after a finite number of periods.

RePEc: Research Papers in Economics, 2009

We investigate the theoretical relationship between trade policy and growth. We use simple versio... more We investigate the theoretical relationship between trade policy and growth. We use simple versions of some of the most common international trade models to investigate a number of specific mechanisms by which trade liberalization is thought to enhance growth or productivity: improvements in the terms of trade, increases in product variety, reallocation toward more productive firms, and an increased incentive to accumulate capital. In each model, trade liberalization improves social welfare. This is to be expected, but our results on real GDP may come as a surprise. In the static models, there is no general connection between trade liberalization and increases in real GDP per capita-the relationship may even be negative. In a dynamic model with capital accumulation, some countries will have slower rates of growth under free trade than under autarky. Opening to trade improves welfare, but does not necessarily increase real GDP per capita or speed up growth. If openness does in fact lead to large increases in real GDP, these increases do not come from the standard mechanisms of international trade. _______________________________________________________________________ *This paper was prepared for the conference "New Directions in International Trade Theory" at the University of Nottingham. We thank the participants and the discussant, Doug Nelson, for comments. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.

RePEc: Research Papers in Economics, Mar 1, 2006

Countries that wish to erect trade barriers have a variety of instruments at their disposal. In a... more Countries that wish to erect trade barriers have a variety of instruments at their disposal. In addition to tariffs and quotas, countries can offer tax relief, low interest financing, reduced regulation, and other subsidies to domestic industries facing foreign competition. In a trade agreement, countries typically agree to reduce not only tariffs, but also subsidies. We consider the effect of a free trade agreement on pollution emissions. We show that while reducing tariffs may indeed increase output and pollution, reductions in some subsides required by the trade agreement reduce pollution in general equilibrium for reasonable parameter values. Reducing subsidies has three effects on pollution: (1) reducing subsidies to firms reduces pollution-causing capital accumulation, (2) if subsidized firms are more pollution intensive, then reducing subsides moves capital and labor from more to less pollution intensive firms, and (3) reducing subsidies concentrates production in more productive firms, increasing output and thus pollution. We derive straightforward conditions for which (1) and (2) outweigh (3). We then calibrate the model to China in 1997, which is prior to implementing the reforms specifically required by the US-China World Trade Organization (WTO) Bilateral Agreement. Our model predicts that pollution emissions in China are up to 4.9% lower than a benchmark in which China does not enter the WTO, without any pollution abatement policy changes or environmental side agreements.

Computer Codes, 2011

If you experience problems downloading a file, check if you have the proper application to view i... more If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. ...

Hong Kong Conference in November, 2002

Economics Study Area Working Papers, 2004

China's WTO accession has major implications on China's massive state-owned enterprise ... more China's WTO accession has major implications on China's massive state-owned enterprise (SOE) sectors. In China, SOEs as a whole generate substantial losses and absorb majority of financial resources, creating increasing risks for financial crisis. This paper argues that ...

Trends in GDP and TFP growth in the former socialist economies seem to indicate that these econom... more Trends in GDP and TFP growth in the former socialist economies seem to indicate that these economies were converging to unusually low long-run growth rates in the late 1980s. In this paper we develop an endogenous growth model of entrepreneurship that is able to account for the difference in long-run performance between centrally planned economies and market-oriented ones. Long-run growth rates of output and productivity are determined by the growth of the stock of entrepreneurial knowledge, which in turn depends on the share of the population involved in entrepreneurial activities and on the time that they spend on those activities. We analyze the effect of two characteristics of centrally planned economies on their growth performance. First, in centrally planned economies factors of production are distributed by the central planner to the firms' managers through a contest that uses up some of the managers' productive effort. Second, the leadership is "egalitarian", in the sense that it treats individuals with different abilities equally. We show that these two features reduce the fraction of people becoming entrepreneurs/managers, as well as their entrepreneurial effort, which in turn reduces long-run output and TFP growth. We also find that the centrally planned economies have lower income inequality and slightly higher capital-output ratios.

In models in which convergence in income levels across closed countries is driven by faster accum... more In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We make this point using a dynamic Heckscher-Ohlin model — a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model — with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.

Countries that wish to erect trade barriers have a variety of instruments at their disposal. In a... more Countries that wish to erect trade barriers have a variety of instruments at their disposal. In addition to tariffs and quotas, countries can offer tax relief, low interest financing, reduced regulation, and other subsidies to domestic industries facing foreign competition. In a trade agreement, countries typically agree to reduce not only tariffs, but also subsidies. We consider the effect of a trade agreement on pollution emissions. We show that while reducing tariffs may indeed increase pollution intensive production in a country, reductions in some subsides required by the trade agreement reduce pollution in general equilibrium for reasonable parameter values. The reduction results from two effects. First, a reduction in subsidies to firms reduces pollution-causing capital accumulation. Second, if subsidized firms, industries, and/or state owned enterprises are sufficiently more pollution intensive, then reducing subsides moves capital and labor from more to less pollution intensive firms. We then calibrate the model to China in 1997, which is prior to implementing the reforms specifically required by the US-China World Trade Organization (WTO) Bilateral Agreement. Our model predicts that pollution emissions in China are up to 22.9% lower than a baseline in which China does not enter the WTO, without any pollution abatement policy changes or environmental side agreements.

Energy Economics, 2015

Green tax reforms are popular in some circles not only because of their direct effect on reducing... more Green tax reforms are popular in some circles not only because of their direct effect on reducing pollution but also because their revenue capacity may allow to reduce other more distortionary taxes. Despite their potential benefits, the political implementation of green tax reforms is not straightforward. Changes in environmental taxes have different intergenerational effects which need to be taken into account when considering their political support among a country's population. In this paper, we analyze the economic and intergenerational welfare effects of introducing a green tax reform to ameliorate the Spanish social security system. We consider two types of energy taxes: an energy-consumption tax and an energy input tax. We find that both types of reforms are favored by young individuals, but rejected by older generations. The number of generations supporting the reform depends crucially on the disutility that individuals derive from pollution, suggesting that an increase in environmental awareness may be needed for green tax reforms to be politically viable.

Fortran code to replicate the numerical examples of the article

SSRN Electronic Journal, 2012

As tariff barriers have fallen worldwide, regulation of domestic policy has become increasingly i... more As tariff barriers have fallen worldwide, regulation of domestic policy has become increasingly important in international trade agreements. This has led to the emergence of a theoretical literature addressing the integration of perfectly observable domestic policy into trade agreements. However, the assumption that domestic policy is perfectly observable is problematic since the interpretation and enforcement of domestic policy statues is often non-transparent. Thus, it may be difficult to determine whether lack of market access is due simply to random shocks or to the use of domestic policies as hidden trade barriers. In this paper, we model international coordination over trade and domestic policy when domestic policy is private information and thus can be used as a form of "hidden protection". We show that the optimal design of an efficient agreement depends greatly on whether domestic policy is observable or unobservable.

Many developing economies have joined or applied to join the WTO as part of their process of tran... more Many developing economies have joined or applied to join the WTO as part of their process of transformation to market-oriented economies. Accession to the WTO involves provisions to liberalize capital markets and to signican tly reduce domestic industrial subsidies to the, usually large, state-owned sector. Therefore, any welfare gains derived from such policies are to be considered as part of the welfare gains of trade liberalization. In this paper we develop a dynamic applied general equilibrium model to quantitatively assess the welfare benets of capital market liberalization and domestic industrial policy reform, and we apply it to the case of China's accession to the WTO. We nd that most of China's benets of accessing the WTO are derived from the reduction of the state-owned sector driven by the reform in domestic policy required by the treaty. The highest welfare benets occur when both domestic policy reform and capital market liberalization are jointly implemented. ...

Review of Economic Dynamics, 2010

In December 2001 China became a member of the World Trade Organization (WTO). By signing the acce... more In December 2001 China became a member of the World Trade Organization (WTO). By signing the accession protocol, China not only agreed to reform its trade policy, but it also accepted regulations that implied reductions on government subsidies to the state-owned sector. In this paper we claim that the latter, largely ignored in the literature, generate important welfare gains that need to be attributed to WTO accession. We develop a dynamic general equilibrium model with state and private enterprises. We calibrate the model to the Chinese economy and we quantitatively assess the economic effects of reducing subsidies to the state sector as required by the WTO. We find the welfare benefits of such reduction in subsidies to be substantial. Using the context of China, this paper identifies a new channel through which WTO accession increases a country's welfare: it induces reforms on domestic subsidies which lead to an increase in economic efficiency. * We are very grateful to Timothy Kehoe for his help and support with this and previous versions of this paper. We also thank Sonia Wong and Jim Schmitz for valuable discussions, and

Journal of Environmental Economics and Management, 2012

RePEc: Research Papers in Economics, 2009

RePEc: Research Papers in Economics, Mar 1, 2006

Computer Codes, 2011

Hong Kong Conference in November, 2002

Economics Study Area Working Papers, 2004

In models in which convergence in income levels across closed countries is driven by faster accum... more In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We make this point using a dynamic Heckscher-Ohlin model — a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model — with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.

Countries that wish to erect trade barriers have a variety of instruments at their disposal. In a... more Countries that wish to erect trade barriers have a variety of instruments at their disposal. In addition to tariffs and quotas, countries can offer tax relief, low interest financing, reduced regulation, and other subsidies to domestic industries facing foreign competition. In a trade agreement, countries typically agree to reduce not only tariffs, but also subsidies. We consider the effect of a trade agreement on pollution emissions. We show that while reducing tariffs may indeed increase pollution intensive production in a country, reductions in some subsides required by the trade agreement reduce pollution in general equilibrium for reasonable parameter values. The reduction results from two effects. First, a reduction in subsidies to firms reduces pollution-causing capital accumulation. Second, if subsidized firms, industries, and/or state owned enterprises are sufficiently more pollution intensive, then reducing subsides moves capital and labor from more to less pollution intensive firms. We then calibrate the model to China in 1997, which is prior to implementing the reforms specifically required by the US-China World Trade Organization (WTO) Bilateral Agreement. Our model predicts that pollution emissions in China are up to 22.9% lower than a baseline in which China does not enter the WTO, without any pollution abatement policy changes or environmental side agreements.

Energy Economics, 2015

Fortran code to replicate the numerical examples of the article

SSRN Electronic Journal, 2012

Review of Economic Dynamics, 2010

Journal of Environmental Economics and Management, 2012