Positive and normative aspects of trade policy are examined when firms offer incentive pay to workers, such as piece-rate pay and profit sharing, to deal with worker moral hazard. Protection increases the incentive pay rate. Its effect on effort depends upon the degree of labor mobility and the...

The paper examines the optimal pollution standard for a large open economy. Using a two-country partial-equilibrium framework, the optimal standards are characterized for autarky, free trade, and free trade together with cooperation among countries in setting standards. If pollution is local, at...

This paper examines the choice among alternative modes of direct foreign investment, namely, the wholly owned subsidiary (the S option) and joint venture (the J option), vis-a-vis licensing (the L option). The focus is on the role of moral hazard, difference in risk attitude and the prospect of...

The link between trade among similar countries and personal distribution of income and wealth is explored, with heterogeneous savings rates among households (dynasties) being the source of inequality. The real effect of trade occurs through greater oligopolistic competition and scale economies....