I show in this paper that incomplete contracts affect a firm’s decision about serving foreign customers through exports or local sales from an affiliated plant. When contracts between two agents within a firm are too costly to write, the share of multinational firms may be higher or lower compared to a world without contractual frictions. Incomplete contracts also provide a novel explanation fo...

The flows of traded goods across countries are known to follow a gravity pattern: their volumes are greater between countries that are larger in size and closer to each other. We find a similar pattern in the flows of territories across countries between 1870 and 2008. During this period, countries experienced inflows and outflows of territories, mirroring the international flows of goods. We f...

I study the conversion of 13,000 miles of railroad track in the U.S. South to standard gauge on May 31 and June 1, 1886 as a large-scale natural experiment in compatibility. Using route-level freight traffic data, I find a large redistribution of traffic from steamships to railroads that declines with distance, with no effect on prices or aggregate shipments due to carriers’ anticompetitive con...

The enlargement of the European Union will bring many political, economical and structural changes on the Continent, which require careful and deep analysis to be made. This paper will grasp the enlargement of the European Union from the aspect of the trade pattern and trade specialization of six major European Union candidates; namely, Turkey, Bulgaria, Hungary, Romania, Poland and the Czech R...

We characterise the relationship between two network based oligopoly markets when local players share the interconnection’s ownership. To that purpose, we analyse the case of the Bacton (UK)-Zeebrugge (Belgium) natural gas pipeline using Vector Auto-regressive Representation techniques. We conclude that there is a threshold of capacity deployment after which the two local markets split. As a re...

EU enlargement is supposed to entail profound impact on the location of economic activities in Europe. Although there is concern about the implications of enlargement for regional disparities in the EU, corresponding empirical results are still rare. The objective of this analysis is to provide empirical evidence on enlargement effects with a special focus on border regions in the EU27 since th...

A simple two-country model of economic geography is constructed in order to examine the effect of tariff competition on the spatial distribution of manufacturing activities as well as on welfare. We show that when the transport cost is sufficiently small, tariff competition with firm migration leads to a core-periphery economy, where one of the two countries imposes no tariff in Nash equilibriu...

This paper characterises the world real interest rate as a common trend in real interest rates in Germany, Japan, and the United States from 1964Q1 to 1996Q2. This single common trend has desirable properties as the world real interest rate and has been moving together with the world real return on the stock market, and the world real fiscal policy variable, suggesting financial integration and...

Fiscal Union Consensus Design under the Risk of Autarky* Inspired by the current debate over the future of the monetary union in Europe, this paper provides a simple model for the determination of the conditions of survival of the common good, which requires the creation of an effective fiscal union. We highlight the importance of institutional design and varying decision weights for the enlarg...

The paper examines the interrelationship between fiscal and monetary policy in a two-country monetary union. The worst scenario occurs when an independent central bank (CB) sets the nominal interest rate and responds to rising government debt/GDP ratios by monetisation. The result is high inflation, high debt/GDP ratios and a large public sector. Government debt and inflation are contained if t...