Tests for long-run purchasing power parity (PPP) may lack power with sample periods corresponding to the span of the recent float, leading researchers to use more powerful multivariate unit root tests. We point out a potential problem with such tests: joint non-stationarity of real exchange...

Exclusive dealing contracts between manufacturers and retailers force new entrants to set up their own costly dealer networks to enter the market. We ask whether such contracts may act as an entry barrier, and provide an empirical analysis of the European car market. We first estimate a demand...

This paper provides insights into the relationship between the substantial ageing of the European labour force, large migration movements, and individual labour mobility. First, qualitative predictions are derived using the theory of production with multiple inputs. Second, quantitative...

This paper argues that the theoretical foundations for the gravity equation are general, while the empirical performance of the gravity equation is specific to the type of goods examined. Most existing theory for the gravity equation depends on the assumption of differentiated goods. We show...

Development accounting exercises based on an aggregate production function find technology is biased in favour of a country's abundant production factors. We provide an explanation to this finding based on the Heckscher-Ohlin model. Countries trade and specialize in the industries that use...

We construct and numerically solve a dynamic Heckscher-Ohlin model in which the initial distribution of production factors in the world makes worldwide factor price equalization impossible, and leads countries to group in two diversification cones. We study the dynamics of income per capita and...

In Centre for Economic Policy Research Discussion Paper Nos. 164 and 165 I presented econometric models of the industrialized countries (North) and the oil-importing developing countries (South). This paper links the two models so that the economic interdependence between North and South can be...

This paper investigates the consequences of the completion of the internal market in the EC using a computable general equilibrium model of trade under imperfect competition. The focus of the paper is the welfare consequences of reducing trade barriers and the changes in production and trade...

There is a well-established methodology for measuring the effects of economic policy in a model that is `causal' or backward-looking. In this paper a complementary methodology is described for the case in which the model is `non-causal' or forward-looking. The methodology is then applied to an...