We study the impact of transnational terrorism diffusion on security and trade. We set a simple theoretical model predicting that the closer a country to a source of terrorism, the higher the negative spillovers on its trade. The idea is that security measures, which impede trade, are directed both against the source country of terror and its neighbor countries where terrorism may diffuse. In c...

This paper studies the impact of trade liberalization in terms of tariff cuts within the Eastern European enlargement on German and Austrian firm productivity. Unique matching of data from 1994 to 2003 suggests that tariff reductions raise parent firm productivity significantly. A ten percentage point decrease in tariff rates can lead to total factor productivity gains of up to 2 percent. The d...

This paper examines how a tariff affects firms’ efforts to produce safer foods that are supplied to consumers whose preference for safety of foods are different. I analyze the optimal trade policy for importing country that can impose a tariff or a subsidy on the foods. I show that the raise in tariff rate makes importing country’s firm chooses less effort to produce safer foods but foreign fir...

We examine South’s incentive to protect IPR in a North-South duopoly model where (i) the North firm owns a better technology and has the option of serving the South market via exports or FDI, and (ii) the South firm can invest in absorptive capacity to reduce the technology gap. While FDI by North firm makes absorption easier for South, investment in absorptive capacity by the South firm might ...

Using firm level data from the U.S. steel industry, we find that lobbying for import protection is habit forming. Controlling for firm performance and other factors, past lobbying increases the likelihood of current lobbying in our full sample. Expecting heterogeneity in lobbying behavior among firms, we let an EM algorithm sort our firms into groups with different propensities to lobby. A two-...

In this paper we introduce a new nonparametric test for Granger non-causality which avoids the over-rejection observed in the frequently used test proposed by Hiemstra and Jones [1994. Testing for linear and nonlinear Granger causality in the stock price-volume relation. Journal of Finance 49, 1639–1664]. After illustrating the problem by showing that rejection probabilities under the null hypo...

the relationship between economic growth and developments in the ‎financial sector has been one of the most discussed areas in economics ‎for a long time; and the direction of causality – whether financial ‎development causes economic growth or vice versa – is by no means a ‎settled issue.‎this paper investigates the short- run and long-run granger causality ‎between financial development and e...

Government budget balance forces the endogenous use of distortionary tax instruments when an exogenous reform is implemented. The aggregate efficiency of such reforms is based on comparisons of simple summary measures of the Marginal Cost of Funds of the various tariff or quota changes with the Marginal Cost of Funds of the alternative taxes, or of the Marginal Benefit of Government supplied go...

Recent global initiatives on debt relief and development assistance call for increasing aid for trade to the poorest countries. We apply a multi-country computable general equilibrium model, to analyze if aid for trade offers the possibility that, instead of the developing and least developed countries’ being worse off—as so many were as the result of the last round of trade negotiations—they w...

Recent research has underlined the efficiency of the GATT/WTO rules from the standpoint of politically motivated governments, emphasizing that the current multilateral rules are capable of delivering a politically efficient equilibrium. Such an equilibrium is, however, economically inefficient. Global free trade, in particular, is generally unattainable even in a fully cooperative world, provid...