Politics and International Relations Research Collection

This paper gives a general framework for analyzing a trade divergence that runs across both the New International trade theory and the traditional analysis of export policy. The source of the trade divergence, the motive for intervention and the analytical framework is shown to be the same in all models. The sign of the trade divergence and hence the policy recommendation is determined by the market structure chosen to endogenise the divergence. The magnitude of the subsidy in all models is determined by the maximum potential profitability of the home industry. It is argued that interpretations based on "profit shifting" or on a "terms of trade improvement" as a motive for trade intervention are misleading.

In this paper we analyse a railroad cartel run by the Joint Executive Committee (JEC) in the United States in the nineteenth century. The JEC was a cartel whose members anticipated a periodic fall in demand due to competition from the Great Lakes. In a simplified situation we model the optimal price setting behaviour of a cartel that fully anticipates a large and prolonged (infinite) switch to a lower level of demand. We show that joint profit maximisation is not sustainable as a perfect equilibrium before the switch (in the lakes closed regimes). We also show that an optimal cartel may have had to revise its official rate downwards in the periods leading up to the infinite switch in demand. Empirically we show that the number of weeks leading up to the opening of the lakes is a significant factor in explaining downward price revisions by the JEC in lakes closed regimes. Unanticipated demand shocks and entry of new firms are also found to be significant factors. The factors that determine price revisions in the lakes open regimes cannot be analysed due to insufficient data points and control variables.

This paper is a contribution to the research on Irish unemployment which for the first time models the flows into and out of the Live Register. Using the quarterly flow data contructed by the authors (see A Flow Analysis of the Irish Live Register,Economic and Social Review, Volume 26, pp. 45-58, 1994), the analysis proceeds within a small open labour market framework, making use of the concepts of cointegrations and error-correction to model the flows and hence the migratory movements between Ireland and Britain. We outline the advantages of using flow data to link unemployment in a small region and a large region within an integrated labour market. We show that demographic changes resulting from natural increases in population and migration anre likely to be the key determinants of unemployment turnover in Ireland. We conclude that any explanation of Irish unemployment must account for these special features of the economy, and in particular must indicate why domestic employment movements seem to have had so little effect on the unemployment flows.

Ireland provides us with a unique case-study of the effects of discrimination in the labour market. Since the ninteen-sixties and until the late nineteen-eighties, gradual reforms of explicit discrimination against females with regard to entitlement to and duration of unemployment assistance and benefit have been introduced. The primary aim of this paper is to asses the impact that these reforms have had on the level of female turnover activity in the Live Register. The results show that the reforms may be modelled as well defined discrete shifts in the inflows and it is noteworthy that the more significant of the estimated effects of reforms are those corresponding to those which gave the large numbers of females that were in non-activity the option of entering the Live Register without any prior need of employment contributions. The results also provide evidence of a secondary effect of reforms on the level of female outflows, and appear to support the hypothesis that the reforms have encouraged females to remain on the Live Register for longer periods of time.

In this paper we investigate the build-up in male long-term unemployment by allowing for heterogeneity both in the unemployment inflow and conditional survival rates. We construct semi-annual series of the male flows into and out of the Irish Live Register for the period 1967 to 1995 and develop a methodology that allows us to decompose the unemployment inflow by age and unemployment scheme and the unemployment outflow by duration of spell, age and unemployment scheme. Our results in conjunction with other evidence indicate that it was heterogeneity in the unemployment inflow caused by the changing occupational structure of employment over the 1980s that caused the build-up and persistance of male long-term unemployment in Ireland.

The Competition Act in 1991 repealed all legally binding Orders in Ireland except for the 1987 Groceries Order. Article 11 of this Order categorically prohibits retail pricing in the grocery sector below the net invoice price of the wholesaler or manufacturer. The vast range of products retailed through outlets and the convenience of 'one stop' shopping result in imperfect costumer information and consumer switching costs. This enables retailers to price below cost on Known-Value-Items (KVIs) to attract customer entry and subsequently impose higher price-cost mark-ups on other non-KVIs, a practice defined as loss leading. This practice was deemed to be essentially predatory in effect by the Fair Trade Commission (FTC) in 1987. In this paper we examine the potential legitimacy of below cost selling by modeling the optimal pricing of a multi-product retailer in a game-theoretic framework. We show that loss leading is an equilibrium outcome that is socially desirable in an imperfectly competitive market. We also model the repercussions of introducing the ban for equilibrium profits, corresponding services and concentration levels in the market. Our analysis suggests that a removal of the ban in favour of the 1991 Competition Act would be welfare improving.

On aspect of transition economics is the fact that large scale inter and intra sector adjustments in employment will have to take place in the transition period to a market economy. The required decline of agriculture and manufacturing and the rise in services induce large inter-sectoral employment adjustment. The restructuring of state and previously state owned firms will induce large intra-sectoral employment adjustment. This process has to be facilitated by a large re-allocation of workers from their initial state. Restructuring of this kind can be expected to create a lot of frictional unemployment, due to congestion in the labour market, and structural unemployment, due to individuals with redundant human capital been separated from pre-transidonal job security. In this paper we write down a structural and frictional model of unemployment resulting from structural adjustment in employment in the spirit of Aghion and Howitt (1998). The relationship between regional development and unemployment rates is not monotonic in Poland. Using Polish county level unemployment register data this papers shows that the dynamics of regional labour demand in Poland have determined unemployment in a systematic way by changing the magnitude and composition of the inflows and the regional probabilities of exit conditional on duration, gender, age, education and previous tenure. Restructuring in employment can be facilitated by the social security system by allowing workers to use unemployment as a temporary pit stop in periods of congestion created by the transition process. Restructuring can also act as a cleansing process that sheds inefficient and redundant human capital from employment with compounds in unemployment creating a long term structural component of unemployment. We show the stage of regional restructuring and development determines the levels and composition of individuals in short term and long term spells. Restructuring induces both larger throughputs and deeper structural. problems in unemployment. In the most advanced regions where congestion is lower unemployment is mainly structural in nature resulting from individuals having undertaken long spells in employment in the planned system .

This paper empirically analyses price dispersion between brand within product catgories in the Independent grocery sector. The methodology adopted allows us to discriminate between the impact which various structural demand and supply side features have on price dispersion in both traditional and game-theoretic frameworks. Specifically we estimate how differences in the product cycle, sales structure, distribution structure, and downstream retailer power impact patterns of price dispersion while controlling for idiosyncratic product effects. Our results suggest that competitive pricing of brands in product categories, and hence price dispersion, will rise with a slump in the product cycle, fragmentation in the sales structure, greater distribution coverage in outlets, and factors which restrict downstream retailer power.

We estimate the factors that affect the life expectancy of plants operating in the manufacturing sector of Ireland over the period 1980-1994. Our results suggest that real exchange rate appreciations have caused a great number of infant mortalities in domestic plants both in the traditional and high tech sectors over this period. Real effective exchange rate movements are estimated to have no effect on the plant life expectancy of foreign owned firms. Domestic plants operating in the high-tech sector are estimated to have a higher life expectancy than those operating in the traditional sector. In addition, the real exchange rate effect on the survival rates of domestic plants in the R&D intensive sectors even though significant is weaker compared with the traditional sector.

We examine the evolution of industrial output in Bulgaria, Hungary, Poland and Romania over the period 1989-1995 in terms of product trade orientation prior to the transition process, some products traded in a market economy while others traded in the artificial market of the Soviet Bloc. We theoretically and empirically model the growth dynamics of EU oriented output within sectors of industry, ex-post trade and market liberalisation, as Foreign Direct Investment (FDI) induced Schumpeterian (vertical) waves of product innovation. We estimate the growth dynamics of non-EU oriented output within sectors as unobservable deterministic sector and country specific heterogeneity. The results indicate that the evolution of industrial production within sectors that were EU oriented prior to transition grew with increasing convexity over time. This growth was unconstrained by the transition process due to increased access to the European market, foreign capital and foreign expertise. Pre-transition non-EU industrial production is estimated to follow the same pattern as that observed in CIS countries. Hence the faster recovery, or the U-Shape industrial output, observed in CEE as compared with CIS countries is mainly explained by the inherited presence of EU oriented production and its unconstrained growth over the transition period.

We undertake an analysis of the evolution of industrial output in Bulgaria, Hungary, Poland and Romania over the period 1989-1995. We theoretically and empirically model the growth dynamics of EU oriented output within sectors of industry, ex-post trade and market liberalization, as investment induced Schumpeterian waves of product innovation. Greater assess to the EU market and investors is estimated to have induced growth with increasing convexity over-time in all sectors of each country but particularly in traditionally larger sectors. This growth, unconstrained by the transition process, was in product categories that already exported to the EU before 1989. We estimate the growth dynamics of non-EU oriented output within sectors as unobservable deterministic sector and country specific heterogeneity. We demonstrate that the evolution of non-EU industrial output followed the pattern as that observed in CIS countries. The different shape in the industrial output of CEE compared to CIS countries is explained mainly by the evolution of traditionally EU oriented production that benefited greatly from increased access to the EU market and EU investors.

In this paper we test the effects of ownership, competition and disorganisation on firm level employment dynamics using a unique data set of 150 Russian and 300 Ukrainian firms. Our results, in contrast to findings in Central and East European Countries, suggest that newly established firms do not out perform those that existed under central planning during the transition process. In addition, while competition seems to play no role in employment determination, disorganisation is shown to constrain firm employment in the Ukraine but not in Russia. Such outcomes are explained by the nature and timing of restructuring in these countries.

In the transition to a market economy we examine the relationship between inherited human capital structures and the evolution of unemployment within a two-sector model of endogenous restructuring. We find evidence across Polish regions for the predictions of our theory. The inherited dominance of ineffective human capital in eastern regions of Poland has delayed restructuring, reduced unemployment turnover and lowered the number of workers with out-dated human capital in the unemployment stock. On the other hand, the dominance of effective human capital in western regions has induced restructuring, boosted unemployment turnover and increased the number of workers with out-dated human capital among the unemployed. We argue that the role of government to prevent such outcomes is limited. Yet, intervention conceived as social rather than economic policies can lessen the social cost created from the inheritance of out-dated human capital, which is a legacy of central planning.

A ban on pricing below cost was implemented under the 1987 Groceries Order based on the premise that loss leading used in multi-product retail pricing distorts competition and exploits consumers in the short run, while driving a more concentrated structure and reducing welfare in the long run. Loss leading is examined for multi-product retailers selling in imperfectly competitive market niches with imperfect consumer information. We develop a theoretical argument in a simple two-stage framework that illustrates how loss leading on a subset of products is an equilibrium outcome of price competition that leaves overall welfare equal to that observed under laissez faire.

From the early 1980s, the European Commission and Parliament made a series of attempts to use television as a tool to foster a European identity in audiences and strengthen popular support for European integration. In this paper, I first examine their efforts to help set up a pan-European multilingual television channel in order to confront the audience with non-national (and thus supposedly European and "Europeanizing") programs. Second, I trace their attempts to foster the Europeanization of the audiovisual productions sector by, in the first instance, subsidizing multinational co-productions. I show that in both areas those efforts have largely come to nothing. They stumbled over the resistance mounted by some national governments and/or were frustrated by continued audience preferences for national as opposed to foreign or non-national television programs. All this, I contend, points to the underlying difficulties of trying to promote among mass publics a cultural form that stands divorced from their respective national contexts, be it through television or other means, and it hints at the formidable obstacles that hinder the European Union's attempts to forge among Europeans a shared identity beyond the nation-state. Résumé: Dès le début des années 80, la Commission européenne et le Parlementeuropéen tentèrent à plusieurs reprises d’utiliser la télévision comme moyend’encourager une identité européenne chez les téléspectateurs et de les motiver àappuyer l’intégration européenne. Dans un premier temps, j’ai examiné leursefforts pour aider à lancer une chaîne de télévision multilingue paneuropéenne.Le but de cette chaîne était de présenter aux téléspectateurs des émissions déna-tionalisées (et ainsi censées être européennes et «européanisantes»). Dans undeuxième temps, j’ai étudié leurs tentatives pour favoriser l’européanisation dumarché audiovisuel, essentiellement en subventionnant les co-productions multi-nationales. Dans ces deux domaines, ces efforts n’ont pas abouti à grand-chose.Ils se sont heurtés à la résistance dont ont fait preuve certains gouvernementsnationaux et/ou ont échoué du fait que les téléspectateurs continuaient à préférerles émissions de télévision nationales plutôt que des émissions étrangères oudénationalisées. Tout cela, je l’affirme, indique les difficultés sous-jacentes aux-quelles on se heurte si l’on essaie de promouvoir parmi les publics de masse une forme de culture qui est séparée de leurs contextes nationaux respectifs, que cesoit au moyen de la télévision ou par d’autres méthodes. Et cela donne un aperçudes obstacles énormes confrontant l’Union européenne dans ses efforts de forgerparmi les Européens une identité collective au-delà de l’état-nation.

We model job reallocation and unemployment as outcomes jointly determined by the structure of inherited social capital within a two-sector Optimal Speed of Transition model. Treating regions of Poland as independent labour markets, the socio-economic inheritance of regions is found to be a legacy of planning that determines regional job reallocation rates. In turn, higher rates of (instrumented) regional job reallocation is shown to boost regional unemployment turnover, reduce the duration of frictional and increase the incidence of structural unemployment. At the regional level, the benefit system facilitates the job reallocation process and accumulates out-of–date human capital.

We model the growth and failure of small business in Irish Manufacturing during the period 1973-1994. We estimate the effect of start-up size on the employment growth while controlling for the business cycle, the life cycle and the probability of business survival, amongst other factors. Learning models of firm selection and evolution are accepted in Homogenous Goods but rejected in R&D sectors. Due to high (low) entry and failure costs in R&D (Homogenous Goods) sectors, learning is undertaken ex-ante (ex-post), inducing entry with certainty (uncertainty) concerning ex-post performance, causing Gibrat’s law to hold (fail).

The paper documents ongoing job creation and job destruction within 3- digit Irish manufacturing sectors over the period 1973 to 1994. Within sectors of low-technology manufacturing, this was due to the gradual development of historical export product lines and gradual decline in historical domestic oriented production. In contrast, the structural change in jobs within sectors of hightechnology manufacturing resulted from the gradual accumulation of foreign capital with new export product lines and a phasing out of inefficient import substituting industry. Ireland’s industrial performance is shown to be an outcome of such path dependent structural change.

In the last twenty years in Ireland, we have witnessed debates - notably about abortion and divorce - which featured not only radically opposed viewpoints but also significantly different vocabularies. Many advocates of divorce legislation, for example, spoke of the individual's right to remarry, focused on individual freedom as the most important value at stake, and opposed state intervention in matters perceived to be of personal morality. Their opponents spoke of the common good and the fabric of society, and argued that the state should support social institutions that embody the values of the community. At least at the polarised extremes of this debate, inhabited by so-called 'fundamentalist liberals' and 'authoritarian conservatives' the protagonists often seemed to talk different languages, built respectively around 'individual freedom' and 'the common good'.