The European Union (EU) can only act internationally on competences that have been transferred to... more The European Union (EU) can only act internationally on competences that have been transferred to it by its Member States. Trade agreements negotiated by the EU that include provisions outside its exclusive competences should be concluded as ‘mixed’. Mixed trade agreements must be ratified following not only the procedures set out in the EU treaties, but also the national ratification procedures of the Member States. As a result, national or even regional parliaments may block trade deals agreed between the EU and its trading partners after years of negotiations. Should the EU then avoid negotiating mixed trade agreements? We argue that the answer to this question depends crucially on the objectives of the EU when negotiating with its trading partners. If the EU is mostly driven by market-access motives, it should restrict the agreement to policy areas under its exclusive competence, thus insulating the trade deal from the legal and political risks of mixity. When instead its motive...
text may be downloaded only for personal research purposes. Additional reproduction for other pur... more text may be downloaded only for personal research purposes. Additional reproduction for other purposes, whether in hard copies or electronically, requires the consent of the author(s), editor(s). If cited or quoted, reference should be made to the full name of the author(s), editor(s), the title, the working paper, or other series, the year and the publisher.
The dispute Argentina-Measures Affecting the Importation of Goods concerns a series of measures i... more The dispute Argentina-Measures Affecting the Importation of Goods concerns a series of measures imposed by Argentine authorities on economic operators as a condition for obtaining import licenses. These measures were introduced with the goal of advancing the Argentine government's stated policies of re-industrialization, import substitution, and elimination of trade balance deficits. From a legal point of view, the least interesting feature of the dispute was the substantive compatibility of these measures with Article XI:1 GATT as they clearly constituted import restrictions. Identifying and classifying the measures involved, however, proved more challenging: based on vague policy guidelines, devoid of any legal basis, and consisting largely of wholly discretionary ad hoc action by the authorities, clouded in confidential obscurity, the measures escaped familiar categories and distinctions of WTO law. From an economic perspective, although Argentina's measures appear to have had no impact on its overall imports, they imposed large costs on foreign companies, as well as on Argentine importers and consumers.
This paper examines the impact of policymakers' horizon on the sustainability of international co... more This paper examines the impact of policymakers' horizon on the sustainability of international cooperation. We describe a prisoners' dilemma game between two infinitely-lived countries run by policymakers. We show that re-election incentives can act as a discipline device, making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely-lived policymakers. We also show that, when voting suffers from a recency bias, policymakers may have incentives to "collude" to get re-elected and term limits may help international cooperation.
We describe a model of international, multidimensional policy coordination where countries can en... more We describe a model of international, multidimensional policy coordination where countries can enter into selective and separate agreements with di®erent partners along di®erent policy dimensions. The model is used to examine the implications of negotiation tie-in|the requirement that agreements must span multiple dimensions of interaction|for the viability of multilateral cooperation when countries are linked by international trade°ows and transboundary pollution. We show that, while in some cases negotiation tie-in has either no e®ect or can make multilateral cooperation more viable, in others a formal tie-in constraint can make an otherwise viable joint multilateral agreement unstable.
We describe a model of international, multidimensional policy coordination where countries can en... more We describe a model of international, multidimensional policy coordination where countries can enter into selective and separate agreements with di®erent partners along di®erent policy dimensions. The model is used to examine the implications of negotiation tie-in|the requirement that agreements must span multiple dimensions of interaction|for the viability of multilateral cooperation when countries are linked by international trade°ows and transboundary pollution. We show that, while in some cases negotiation tie-in has either no e®ect or can make multilateral cooperation more viable, in others a formal tie-in constraint can make an otherwise viable joint multilateral agreement unstable.
We employ a common agency model of policy making to examine how green lobbies affect the determin... more We employ a common agency model of policy making to examine how green lobbies affect the determination of trade and environmental policies in two large countries that are linked by trade flows and transboundary pollution. We show that the impact of green lobbying on environmental policy outcomes depends crucially on the prevailing trade regime-cooperative or non-cooperative-on whether environmental agencies act in a unilateral or coordinated manner, and on the size of the emission leakages and transboundary spillovers. Under free trade, a unilateral increase in pollution taxes reduces domestic emissions at the cost of increased foreign emissions; in this case, if the emission leakages and the associated transboundary spillovers are large enough, green lobbying can create a bias towards lower pollution taxes.
We develop a simple model of trade relations in which legislators with different stakes in import... more We develop a simple model of trade relations in which legislators with different stakes in import-competing and export industries decide whether to grant fast-track authority (FTA) to the president, giving up the power to amend international trade agreements. We show that strategic delegation motives are key to understanding FTA votes, which involve a decision between alternative country representatives: the executive or the majority in Congress. We then examine the determinants of all votes by US congressmen on FTA since the introduction of this institutional procedure in 1974. Our empirical analysis provides strong support for the predictions of the model. (JEL D72, F12, F13)
This dispute was sparked in January 2006, when Japan imposed a 27.2 percent countervailing duty o... more This dispute was sparked in January 2006, when Japan imposed a 27.2 percent countervailing duty on imports of dynamic random-access memories (DRAMs) made by South Korea’s Hynix, after calling into question whether financial support received by this chip producer constituted government subsidies.
We study how trade policy affects firms ’ ownership structures. We embed an incomplete contracts ... more We study how trade policy affects firms ’ ownership structures. We embed an incomplete contracts model of vertical integration choices into astandardperfectly-competitive international trade framework. Integration decisions are driven by a trade-off between the pecuniary benefits of coordinating production decisions and themanagers’privatebenefits of operating in preferred ways. The price of output is a crucial determinant of this choice, since it affects the size of the pecuniary benefits: higher prices lead to more integration. Because tariffs increase domestic product prices, this effect provides a novel theoretical channel through which trade policy can influence firm boundaries. We then examine the evidence, using a unique dataset to construct firm-level indexes of vertical integration for alargesetofcountries. Inlinewiththepredictionsofourmodel, we obtain three main results. First, higher tariffs lead to higher levels of vertical integration. Second, differences in ownership s...
Bargaining theory predicts that married women who experience a relative improvement in their labo... more Bargaining theory predicts that married women who experience a relative improvement in their labor market position should experience a comparative gain within their marriage. However, if renegotiation possibilities are limited by institutional mechanisms that achieve long-term commitment, the opposite may be true, particularly if women are specialized in household activities and the labor market allows comparatively more flexibility in their labor supply responses. Evidence from the German Socio-Economic Panel indeed shows that, as long as renegotiation opportunities are limited, comparatively better wages for women exacerbate their “double burden ” of market and household work.
This paper shows that elections are good for peace and that politicians ’ fear of losing office i... more This paper shows that elections are good for peace and that politicians ’ fear of losing office is the reason why disputes between democracies are extremely rare. To examine the impact of electoral accountability on military conflicts, we construct a new dataset of executive term limits for a sample of 177 countries over the 1816-2001 period, and combine this information with a large dataset of interstate militarized disputes. In line with previous studies, we find that democracies are much less likely to fight one another than autocracies or mixed pairs of states. However, this “democratic peace ” result does not hold for democracies in which the leaders face binding term limits, which are as conflict prone as autocracies. We also find that disputes involving democracies with term limits are more likely to occur during the executive’s last mandate. To explain these findings, we provide a simple theoretical model
We examine how uncertainty affects firms ’ internationalization choices. We begin by unveiling a ... more We examine how uncertainty affects firms ’ internationalization choices. We begin by unveiling a new empirical regularity: using a unique dataset that allows us to study the dynamics of firms ’ exports and foreign direct investments (FDI) in individual destinations, we show that most firms serve a market via exports before investing there. To rationalize this pattern, we describe a model in which firms are uncertain about their profitability in a foreign market and may experiment via exports before engaging in FDI. In line with this idea, we show that the probability that a firm starts investing in a foreign country increases with its export experience in that country. In more uncertain destinations, firms delay FDI entry, experimenting longer with exports before establishing foreign affiliates.
This paper examines firms ’ choice between serving a foreign market through exports or foreign di... more This paper examines firms ’ choice between serving a foreign market through exports or foreign direct investment (FDI). We begin by unveiling a new empir-ical regularity: using a unique dataset that allows us to study the dynamics of firms ’ export and FDI choices in individual destination markets, we show that the overwhelming majority of firms serve a foreign market via exports before es-tablishing affiliates in that market. To explain this pattern, we develop a simple dynamic model of export and FDI choices, in which a firm can only discover its ability to earn profits in a foreign market once it starts serving it. We show that uncertainty can lead to a gradual internationalization process, whereby the firm tests the foreign market via exports, before engaging in FDI. Consistent with the model’s predictions, we find that most firms start serving a foreign market through exports; in the first years following export entry, many firms drop out of the foreign market, others survive a...
The European Union (EU) can only act internationally on competences that have been transferred to... more The European Union (EU) can only act internationally on competences that have been transferred to it by its Member States. Trade agreements negotiated by the EU that include provisions outside its exclusive competences should be concluded as ‘mixed’. Mixed trade agreements must be ratified following not only the procedures set out in the EU treaties, but also the national ratification procedures of the Member States. As a result, national or even regional parliaments may block trade deals agreed between the EU and its trading partners after years of negotiations. Should the EU then avoid negotiating mixed trade agreements? We argue that the answer to this question depends crucially on the objectives of the EU when negotiating with its trading partners. If the EU is mostly driven by market-access motives, it should restrict the agreement to policy areas under its exclusive competence, thus insulating the trade deal from the legal and political risks of mixity. When instead its motive...
text may be downloaded only for personal research purposes. Additional reproduction for other pur... more text may be downloaded only for personal research purposes. Additional reproduction for other purposes, whether in hard copies or electronically, requires the consent of the author(s), editor(s). If cited or quoted, reference should be made to the full name of the author(s), editor(s), the title, the working paper, or other series, the year and the publisher.
The dispute Argentina-Measures Affecting the Importation of Goods concerns a series of measures i... more The dispute Argentina-Measures Affecting the Importation of Goods concerns a series of measures imposed by Argentine authorities on economic operators as a condition for obtaining import licenses. These measures were introduced with the goal of advancing the Argentine government's stated policies of re-industrialization, import substitution, and elimination of trade balance deficits. From a legal point of view, the least interesting feature of the dispute was the substantive compatibility of these measures with Article XI:1 GATT as they clearly constituted import restrictions. Identifying and classifying the measures involved, however, proved more challenging: based on vague policy guidelines, devoid of any legal basis, and consisting largely of wholly discretionary ad hoc action by the authorities, clouded in confidential obscurity, the measures escaped familiar categories and distinctions of WTO law. From an economic perspective, although Argentina's measures appear to have had no impact on its overall imports, they imposed large costs on foreign companies, as well as on Argentine importers and consumers.
This paper examines the impact of policymakers' horizon on the sustainability of international co... more This paper examines the impact of policymakers' horizon on the sustainability of international cooperation. We describe a prisoners' dilemma game between two infinitely-lived countries run by policymakers. We show that re-election incentives can act as a discipline device, making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely-lived policymakers. We also show that, when voting suffers from a recency bias, policymakers may have incentives to "collude" to get re-elected and term limits may help international cooperation.
We describe a model of international, multidimensional policy coordination where countries can en... more We describe a model of international, multidimensional policy coordination where countries can enter into selective and separate agreements with di®erent partners along di®erent policy dimensions. The model is used to examine the implications of negotiation tie-in|the requirement that agreements must span multiple dimensions of interaction|for the viability of multilateral cooperation when countries are linked by international trade°ows and transboundary pollution. We show that, while in some cases negotiation tie-in has either no e®ect or can make multilateral cooperation more viable, in others a formal tie-in constraint can make an otherwise viable joint multilateral agreement unstable.
We describe a model of international, multidimensional policy coordination where countries can en... more We describe a model of international, multidimensional policy coordination where countries can enter into selective and separate agreements with di®erent partners along di®erent policy dimensions. The model is used to examine the implications of negotiation tie-in|the requirement that agreements must span multiple dimensions of interaction|for the viability of multilateral cooperation when countries are linked by international trade°ows and transboundary pollution. We show that, while in some cases negotiation tie-in has either no e®ect or can make multilateral cooperation more viable, in others a formal tie-in constraint can make an otherwise viable joint multilateral agreement unstable.
We employ a common agency model of policy making to examine how green lobbies affect the determin... more We employ a common agency model of policy making to examine how green lobbies affect the determination of trade and environmental policies in two large countries that are linked by trade flows and transboundary pollution. We show that the impact of green lobbying on environmental policy outcomes depends crucially on the prevailing trade regime-cooperative or non-cooperative-on whether environmental agencies act in a unilateral or coordinated manner, and on the size of the emission leakages and transboundary spillovers. Under free trade, a unilateral increase in pollution taxes reduces domestic emissions at the cost of increased foreign emissions; in this case, if the emission leakages and the associated transboundary spillovers are large enough, green lobbying can create a bias towards lower pollution taxes.
We develop a simple model of trade relations in which legislators with different stakes in import... more We develop a simple model of trade relations in which legislators with different stakes in import-competing and export industries decide whether to grant fast-track authority (FTA) to the president, giving up the power to amend international trade agreements. We show that strategic delegation motives are key to understanding FTA votes, which involve a decision between alternative country representatives: the executive or the majority in Congress. We then examine the determinants of all votes by US congressmen on FTA since the introduction of this institutional procedure in 1974. Our empirical analysis provides strong support for the predictions of the model. (JEL D72, F12, F13)
This dispute was sparked in January 2006, when Japan imposed a 27.2 percent countervailing duty o... more This dispute was sparked in January 2006, when Japan imposed a 27.2 percent countervailing duty on imports of dynamic random-access memories (DRAMs) made by South Korea’s Hynix, after calling into question whether financial support received by this chip producer constituted government subsidies.
We study how trade policy affects firms ’ ownership structures. We embed an incomplete contracts ... more We study how trade policy affects firms ’ ownership structures. We embed an incomplete contracts model of vertical integration choices into astandardperfectly-competitive international trade framework. Integration decisions are driven by a trade-off between the pecuniary benefits of coordinating production decisions and themanagers’privatebenefits of operating in preferred ways. The price of output is a crucial determinant of this choice, since it affects the size of the pecuniary benefits: higher prices lead to more integration. Because tariffs increase domestic product prices, this effect provides a novel theoretical channel through which trade policy can influence firm boundaries. We then examine the evidence, using a unique dataset to construct firm-level indexes of vertical integration for alargesetofcountries. Inlinewiththepredictionsofourmodel, we obtain three main results. First, higher tariffs lead to higher levels of vertical integration. Second, differences in ownership s...
Bargaining theory predicts that married women who experience a relative improvement in their labo... more Bargaining theory predicts that married women who experience a relative improvement in their labor market position should experience a comparative gain within their marriage. However, if renegotiation possibilities are limited by institutional mechanisms that achieve long-term commitment, the opposite may be true, particularly if women are specialized in household activities and the labor market allows comparatively more flexibility in their labor supply responses. Evidence from the German Socio-Economic Panel indeed shows that, as long as renegotiation opportunities are limited, comparatively better wages for women exacerbate their “double burden ” of market and household work.
This paper shows that elections are good for peace and that politicians ’ fear of losing office i... more This paper shows that elections are good for peace and that politicians ’ fear of losing office is the reason why disputes between democracies are extremely rare. To examine the impact of electoral accountability on military conflicts, we construct a new dataset of executive term limits for a sample of 177 countries over the 1816-2001 period, and combine this information with a large dataset of interstate militarized disputes. In line with previous studies, we find that democracies are much less likely to fight one another than autocracies or mixed pairs of states. However, this “democratic peace ” result does not hold for democracies in which the leaders face binding term limits, which are as conflict prone as autocracies. We also find that disputes involving democracies with term limits are more likely to occur during the executive’s last mandate. To explain these findings, we provide a simple theoretical model
We examine how uncertainty affects firms ’ internationalization choices. We begin by unveiling a ... more We examine how uncertainty affects firms ’ internationalization choices. We begin by unveiling a new empirical regularity: using a unique dataset that allows us to study the dynamics of firms ’ exports and foreign direct investments (FDI) in individual destinations, we show that most firms serve a market via exports before investing there. To rationalize this pattern, we describe a model in which firms are uncertain about their profitability in a foreign market and may experiment via exports before engaging in FDI. In line with this idea, we show that the probability that a firm starts investing in a foreign country increases with its export experience in that country. In more uncertain destinations, firms delay FDI entry, experimenting longer with exports before establishing foreign affiliates.
This paper examines firms ’ choice between serving a foreign market through exports or foreign di... more This paper examines firms ’ choice between serving a foreign market through exports or foreign direct investment (FDI). We begin by unveiling a new empir-ical regularity: using a unique dataset that allows us to study the dynamics of firms ’ export and FDI choices in individual destination markets, we show that the overwhelming majority of firms serve a foreign market via exports before es-tablishing affiliates in that market. To explain this pattern, we develop a simple dynamic model of export and FDI choices, in which a firm can only discover its ability to earn profits in a foreign market once it starts serving it. We show that uncertainty can lead to a gradual internationalization process, whereby the firm tests the foreign market via exports, before engaging in FDI. Consistent with the model’s predictions, we find that most firms start serving a foreign market through exports; in the first years following export entry, many firms drop out of the foreign market, others survive a...
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