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To explore whether market-oriented reform can help reduce CO2 emissions, by adopting the spatial panel data model based on the provincial panel data of China during 2001-2017, this article empirically tests the impact of labor market distortion and capital market distortion on CO2 emissions. The main findings are yielded as follows. (1) The labor market distortion and capital market distortion are widespread in China. The high wages caused by the insufficient supply of labor and the low marginal output of labor due to the shortage of human capital stock are the main reason for the positive labor market distortion. The capital market distortion can be put down to the excessive interventions of the government on the allocation of capital. (2) The labor market distortion can enhance CO2 emissions, that is, promoting market-oriented reform in the labor market can curb CO2 emissions. (3) The connection between capital market distortion and CO2 emissions can be described as a U-shaped curve. The complete marketization of the capital market and excessive government intervention in the allocation of capital can both cause an increase in CO2 emissions. (4) Improving the marketization of the labor market is effective for reducing CO2 emissions in almost all provinces. In the central region, the capital market distortion can exacerbate CO2 emissions. However, in the western region, the governmental intervention on the allocation of capital can enable limited funds to more effectively move to environmentally friendly enterprises, and avoid these provinces becoming a pollution refuge. Based on these findings, this article goes into more detail on the policy implications.

Having recognised the significant role of natural gas in reducing carbon abatement costs, China is rapidly promoting its growth. However, obvious distortions exist in China’s natural gas market, an...

The Supreme Court’s ruling in Kelo v. New London (2005) justified the use of eminent domain for redevelopment takings based on the anticipated spillover benefits to the community in the form of increased taxes and new jobs. This paper asks whether this is a coherent economic rationale for allowing expropriation of residential land for private development. We show that, in the absence of a market distortion, the answer is generally no. However, when there is a pre-existing imperfection in the land and/or labor market, it is possible, though not guaranteed, that allowing eminent domain will increase social welfare. The reason, however, is not because of the increased tax revenue or employment per se, but rather because eminent domain increases industrial/commercial land use above the inefficiently low level that arises in the presence of the distortions. Thus, setting aside questions about fairness or holdouts, we show that whether using eminent domain for private takings can be justified on the basis of economic efficiency hinges on the existence of market distortions and the relative values of residential vs. industrial/commercial land in that particular market.

PurposeThis paper aims at developing a behavioral agent-based model for interacting financial markets. Additionally, the effect of imposing Tobin taxes on market dynamics is explored.Design/methodology/approachThe agent-based approach is followed to capture the highly complex, dynamic nature of financial markets. The model represents the interaction between two different financial markets located in two countries. The artificial markets are populated with heterogeneous, boundedly rational agents. There are two types of agents populating the markets; market makers and traders. Each time step, traders decide on which market to participate in and which trading strategy to follow. Traders can follow technical trading strategy, fundamental trading strategy or abstain from trading. The time-varying weight of each trading strategy depends on the current and past performance of this strategy. However, technical traders are loss-averse, where losses are perceived twice the equivalent gains. Market makers settle asset prices according to the net submitted orders.FindingsThe proposed framework can replicate important stylized facts observed empirically such as bubbles and crashes, excess volatility, clustered volatility, power-law tails, persistent autocorrelation in absolute returns and fractal structure.Practical implicationsArtificial models linking micro to macro behavior facilitate exploring the effect of different fiscal and monetary policies. The results of imposing Tobin taxes indicate that a small levy may raise government revenues without causing market distortion or instability.Originality/valueThis paper proposes a novel approach to explore the effect of loss aversion on the decision-making process in interacting financial markets framework.

Following regulatory reform in the late 20th century, US rail carriers have consistently negotiated less rigid work rules which may create a business environment that enhances carriers’ ability to employ an allocatively efficient mix of inputs. This study explores the possibility of movement away from railroad input market distortion found in research examining pre-regulatory reform input allocation, and movement toward allocative efficient use of inputs following regulatory reform. Shadow input costs are estimated using Class I railroad cost information from 1983 to 2015 to examine the change in input usage over time. Using labor as the benchmark of comparison, we find that the use of all inputs aligns in a more allocatively efficient way with labor now than in 1983. This comports well with the notion that significant easing of work rule restrictions facilitates a more efficient use of labor relative to non-labor inputs.

Market mechanism is the most important thing in determining the price level in the market. This research aims to see how the market mechanism relevance according to Abu Yusuf with modern market mechanisms. The research method used is a qualitative research methodology with a library research approach. The results showed that there is a relevance of Abu Yusuf's Islamic economic thought with modern economics. This means that there are similarities between the concept of the market mechanism according to Abu Yusuf and the modern market mechanism. Abu Yusuf opposes government intervention in setting prices. The government acts as a regulator / referee in the market mechanism. This means that the government has the duty to ensure that prices in effect in the market are fair prices, which are obtained from natural market mechanisms (based on levels of demand and supply), not monopoly or market engineering. However, the government may intervene in price when there is a monopoly or market distortion.

Using data from Chile, we find that more restrictive standards are associated with a reallocation of domestic sales from small to large firms, which has allocative efficiency implications. Guided by this evidence, we study the welfare effects of the reallocation brought about by stricter standards in a model with monopolistically competitive, heterogeneous firms, and a general demand system. Restrictive standards have an ambiguous effect on welfare. On the one hand, they improve allocative efficiency because low-quality firms over-produce in the market allocation. This market distortion is driven entirely by the presence of variable markups and exists to varying degrees in both homothetic and non-homothetic frameworks. On the other hand, the imposition of stricter standards forces firms to pay a fixed cost that is welfare reducing. We estimate our model for Chile and find significant heterogeneity in the welfare gains from moving to the optimal standards policy across industries.

Purpose Some recent empirical studies have found that developing countries are more prone to external terms-of-trade shocks compared to developed nations. With this background, the purpose of this paper is to the question of whether developing countries possess any built-in mechanism that can cope with external terms-of-trade (TOT) shocks both theoretically and empirically. Design/methodology/approach This paper uses a two-sector, full-employment general equilibrium model with endogenous labour market distortion to conduct its theoretical analysis and then uses an annual panel dataset of 13 small developing countries over the recent time period of 2000-2012 to substantiate its theoretical findings. Findings Theoretically, this study finds that developing countries possess an inherent shock-absorbing mechanism that stems from their peculiar institutional characteristics and can lessen the gravity of detrimental welfare consequence of exogenous TOT movements. This analytical result has been found to be empirically valid based on a panel dataset of 13 countries from 2000-2012. Originality/value The authors’ analyses suggest that that the developing countries should take utmost caution before adopting the policy of labour market reform because these might impair the effectiveness of their in-built shock-absorbing mechanism against adverse international price movements.

By considering the term-of-trade and volume-of-trade effects, Jones (2012) examines the distributive effect in a competitive economy with non-traded goods. This paper reexamines the effect in an imperfectively competitive economy with firm dynamics. A rise in foreign demand can generate revenue and also mitigate market distortion, whereas skilled-unskilled wage inequality can be magnified or mitigated via the effect on firm entry or exit. Thus, how to achieve the trade-off among growth, inequality and the environment becomes an important task for government decision-makers, especially so during the pandemic of Covid-19.

This study investigates the potential role of the reference rate in an interbank market where individual banks cannot fully identify the nature of underlying shocks affecting their interbank transactions. We find that the reference rate does not always mitigate the market distortion arising from imperfect information. When the number of sample transactions is smaller than a certain threshold, the reference rate magnifies the distortion even if the reference rate is not affected by any reporting noise. The threshold depends on the relative size of aggregate and idiosyncratic shocks. Noise in the reported interest rates, which is potentially increased by banks' manipulations, distorts individual banks' inferences about the underlying shocks, and thereby raises the threshold. When noise is highly correlated among multiple sample transactions, perhaps owing to collusive manipulations, it is possible that increasing the number of sample transactions may never mitigate the market distortion.

Using the MLS and the land registration data from Indiana, this paper identifies and explains price distortions associated with out-of-state sellers and buyers in the housing market. We find that out-of-state buyers pay 20.4% higher prices than local buyers, and the premium is fully explained by the former purchasing larger homes than the latter. On the other hand, out-of-state sellers receive a 21.2% price discount, among which 9.3% is attributable to differences in transactional characteristics, 3.2% is explained by increased motivation and weak bargaining power of out-of-state sellers, and 1.5% is due to differences in agent characteristics and behaviours. The remaining 7.2% discount varies systematically with the informational disadvantage of out-of-state sellers, and with the market condition. Our results are robust to model misspecification.

In practice, a market does not comprise only one type of firm, resulting in two distortions: negative externalities caused by pollution damage and pricing power enjoyed by dominant firms. This paper examines choice of environmental policy instruments (tax-centered, quota-centered, and mixed policy) in markets where multiple dominant firms are price makers and multiple fringe firms are price takers. Environmental policy is not necessarily applied to all firms or facilities. This study focuses on the situation where only dominant firms are objects of environmental policy because this situation best reflects actual policy instruments. Understanding whether abatement costs exceed the environmental damage is essential to determining the best policy. The major finding of the study is that deadweight loss is reduced if dominant firms adopt eco-friendly technology and the regulator increases the ratio of taxed dominant firms to all dominant firms. Additionally, mixed policy is efficient when market distortion as a result of pricing power decreases.

The case describes the competitive advantages that U.S. farmers enjoy in the global cotton industry and the subsidies they receive from the U.S. federal government. Arguments for and against the subsidies are presented in the context of global competition. The case includes the data needed to estimate a supply curve for 2004 cotton production and predict the average 2004 cotton price using total cotton consumption for 2004. Students can also estimate the result of eliminating the U.S. cotton subsidies on the average 2004 cotton price.Students have the opportunity to learn about the history and structure of U.S. cotton subsidies as well as their impact on global cotton prices. Students also are able to practice building and interpreting an industry supply curve.

When Adam Smith gave us the theory of the perfect market in 1776 he gave us a model with two embedded distortions, one social and one environmental, because he assumed that economic activity works under social and environmental externality neutrality or it had minimal social and environmental impacts making them external factors to the economic model. In 1987 the Bruntland Commission said in “Our Common Future” that evidence existed indicating that social and environmental impacts are relevant and needed to be incorporated or included in our development models. In essence, the Bruntland Commission called for the fixing of Adam Smith’s tradit ional market model. From 1987 to 2012 a process of testing different sustainable development models took place and in 2012 Rio +20 it was decided that development now was going green market, green growth and green economy through a win-win partnership environment and the economy to make the economy an environmentally friendly entity. To correct the environmental distortion embedded in Adam Smith’s model the only thing that needed to be done was to internalize the cost of being environmentally friendly in the pricing mechanism of traditional markets to shift them to green markets, green producers and green consumers, but instead they went the way of environmental externality management (e.g. carbon pricing) as they took the environmental distortion embedded in Adam Smith’s model as an environmental externality led market failure. Hence, instead of correcting Adam Smith’s model to eliminate the environmental distortion by reflecting environmental costs in the pricing mechanism and making that way environmental issues endogenous issues as they should have been from the beginning had Adam Smith proposed green markets instead of the traditional market they are treating an embedding distortion in Adam Smith’s model that before was irrelevant, but now it is relevant, as an environmental externality led market failure. And this raises the question: Is environmental externality management a correction of Adam Smith’s model to make it environmentally friendly and shift it to green markets or is it a distortion on top of another distortion? Among the goals of this paper are: a) to show analytically and graphically that the proper correction of Adam Smith’s model to eliminate the embedded environmental distortion in it and shift it to green markets is environmental cost internalization; and b) to point out analytically and graphically that environmental externality management is a distortion on top of an embedded environmental distortion in Adam Smith’s model; and therefore it is unconnected to perfect green market thinking.

This theoretical paper shows that developing countries possess an inherent shock-absorbing mechanism that stems from their peculiar institutional characteristics and can lessen the gravity of detrimental welfare consequence of international terms-of-trade disturbances in terms of a static two-sector, full-employment general equilibrium model with endogenous labour market distortion. The supply of foreign capital in the economy is a positive function of the return to capital. Subsequently, it has been verbally explained why the main result of the full-employment model would remain valid even in a two-sector specific-factor Harris-Todaro type model with urban unemployment. The analysis leads to a couple of important policies that should be adhered to preserve this in-built system. Finally, it offers three important statistically testable hypotheses which would pave the way for future empirical research in this area.

Using a recently implemented Price Deficiency Payments (PDP) policy in India known as the Bhavantar Bhugtan Yojana (BBY), we examine how such farm support policies affect farm-gate prices and quantity arrivals. We study two major crops covered under the scheme, Urad (Black-gram) and Soyabean. We find that Urad prices fell by 4 percent, and quantity arrivals increased by 42 percent during the BBY period. In contrast, we find no significant effect on Soyabean. We argue that the size of deficiency payments can explain this difference in market outcomes. Using bid-level crop auction data, we rule out collusion among intermediaries as a potential explanation for our results. Finally, we estimate the monetary losses incurred by the farmers and the government due to this policy.

An important context for contemporary trade frictions is the emergence, since the 1990s, of a wide range of new forms of market capitalism, of which China’s hybrid market economy is the most significant. Institutional diversity of this kind is a source of strength and dynamism for the global trading system, but it is also the cause of very serious friction. The General Agreement on Tariffs and Trade/World Trade Organization system has dealt with this problem before, but the existing settlement regarding the legitimate boundaries of institutional diversity is under pressure and needs to be revisited. One concept that has been incorporated into World Trade Organization trade defence law (and elsewhere) to help draw these boundaries is the concept of the ‘market distortion’. The concept can be a useful one, but it has so far been interpreted and applied with an inadequate appreciation of its serious conceptual and practical difficulties. The potential result is a system of trade defences targeted in a discriminatory and even punitive manner against heterodox institutional forms, in ways that may excessively disincentivize institutional experimentation. In response, this paper argues for an approach to the interpretation and application of this concept, which proceeds from an understanding of the institutionally embedded character of markets. This does not take the form of a readily available ‘solution’, but rather a messy and evolving set of legal techniques that, in the best case, can form the legal basis of a practical and justifiable approach to the tensions caused by institutional diversity. A toolkit of legal techniques of this kind clearly cannot take the place of a more foundational political settlement of some sort, but it is a necessary accompaniment to it, if we are to preserve the aspiration towards a genuinely non-discriminatory and rules-based global economic order.

This study examines information flow between new and old forks after Bitcoin splits. Particularly, we estimate the transfer entropy between Bitcoin and Bitcoin Cash as an information-theoretic approach. When a symbolic analysis is applied, asymmetric information flow from Bitcoin to Bitcoin Cash is observed. We further provide evidence that this relationship is due to the role of liquidity in price leadership. Our findings suggest that (i) investors could forecast the fluctuation of price evolution in the Bitcoin Cash using the rise–fall pattern of Bitcoin price and (ii) policymakers (regulators) must closely monitor the information flow between the two markets, in a state with strong market integration, to prevent market distortion and regulatory arbitrage.

This article examines workfare schemes in rural Hungary and their contribution to relieving rural poverty. It does so on the basis of an analysis of European Union statistics and a series of semi-structured interviews which were conducted in 2013-2015 as part of a larger project investigating the contemporary state of rural Hungary. The paper comprises four sections: following a short description of the methodology, regional disparities and deprivation in rural areas are introduced with the help of a typology on deprivation and Eurostat data, thus providing evidence for European comparison. Following this, the main findings of our extensive qualitative research into workfare policies in rural Hungary are introduced and discussed on the basis of related legislation4. The article finds that workfare schemes in the rural sector are unique to Central and Eastern Europe, and are especially favoured in Hungary; it also discovers that economists are correct in assessing that said workfare schemes create few new jobs. Nevertheless, they are ‘better than nothing’, and have become embedded in rural society, where they are appreciated by beneficiaries and local officials alike. They necessarily make a paternalistic distinction between the deserving and undeserving poor, and the more commercially-oriented schemes raise issues of market distortion.

We study how the presence of state-owned enterprises (SOEs) distorts private firms' decision on interprovincial sales in China. Using data from World Bank Investment Climate Survey and Annual Survey of Manufacturing Firms in China, we find evidence that the prevalence of SOEs in a city-industry where private firms reside will affect these firms' decision on the allocation of sales between interprovincial markets versus adjacent market. The direction of the effect on private firms, however, depends crucially on the private firms' access to credit. Specifically, the prevalence of SOEs leads to a higher propensity to sell to remote markets for firms with adequate financial access, whereas the opposite is true for firms who are credit constrained. We build a parsimonious model which links political/market distortion, market access, and credit constraint to explain these patterns, and argue that remote markets can serve as shelters for local distortions resulted from SOEs presence for some private firms.

Public policies such as feed-in tariffs have been widely introduced to stimulate the development of renewable energies, and sustain a decarbonisation of the electricity sector. Proponents argue that these governance instruments safeguard public goods such as the climate – yet they are accused of creating political markets, and political prices, here understood as market distortion. This paper studies the ‘politics’ of pricing by following the adoption of the first feed-in tariff in France. Pricing as a way of achieving non-economic ends, such as climate mitigation, brings the values of several public goods into play, all the while prompting a translation of these values into a single price. Following the struggles over the pricing of wind power in the early 2000s, the study illustrates that rather than a pollution of the market sphere by that of politics, a politics of pricing can be observed in four distinct struggles: namely the framing of the public interest; valuation as the articulation of the future; the possible agencies of governance; and role of valuation methods and calculations.

This article confirms that China’s economic sanction in the form of restricting salmon imports from Norway was in retaliation for the 2010 Nobel Peace Prize awarded to a Chinese dissident. By combining personal accounts of stakeholders interviewed in the Norway–China salmon trade with an examination of trade data, there is strong evidence that links changes in trade patterns of fresh/chilled whole Norwegian salmon to border measures applied in response to the peace prize. While disproportionate border measures targeting Norwegian salmon have distorted China’s market since 2011, private actors appear to have busted the sanction by circumventing these measures, including rerouting, falsifying country-of-origin certification, and smuggling. This could have long-term consequences for trade patterns and quality. Official statistics record a reduced Norwegian market share and decreased Norway–China salmon trade despite an expansion of the volume of Chinese imports. However, official data do not record Norwegian salmon entering illegally, which some stakeholders estimate at between 50 and 70 per cent of the market. Norway’s official refusal to meet the Dalai Lama in May 2014 suggests that China’s sanction has affected foreign policy. The salmon sanction demonstrates that China has become more assertive in its international relations.

In developing economies like India, ‘informal’ sector occupies a large portion of GDP and employment. In the wake of slowdown in investments across countries and ensuing fall in the GDP growth rates, the question that arises is the following. If an economy suffers from growth slowdown, and since investment is often believed to be a driver of growth, should more investments go to the formal sector or to the informal sector? In what ways outcomes are different in terms of composition of output, employment, and wages? The issue may be a particular interest to India where slowdown in investments is believed to be the primary reason behind the recent sluggish growth of the economy. This paper theoretically evaluates the effects of investments on sectoral wage rates, output and employment composition, and growth in a developing economy consisting of a vast informal sector in a general equilibrium framework with endogenous demand and sector specific capital. The model traces, beginning with capital market disequilibrium and labour market distortion, whether investments into the sectors lead to equilibrium in capital and labour markets over time. This approach is distinctly different from the existing literature that is primarily engaged with finding out comparative statics results of a change in policy variables such as tariff rate and subsidy/tax. This paper also brings in endogenous demand that is mostly missing thus far. The model highlights the following results. Investments in the formal sector increase the size of the sector and cause the informal sector to shrink. The labour market distortion goes away as wages are eventually equalized across the sectors, after which the capital market equilibrium is achieved. Equalisation of wages is similar to the ‘turning point’ of the Lewis model of development. On the other hand, investments in the informal sector increase its own size but do not alter the size of the formal sector. Much contrary to the previous case, capital market equilibrium is achieved first, so the labour market distortion stays, leading to the existence of a persistent wage gap in the long run. One way of avoiding the possibility of the informal sector becoming large in size would be to subsidize the short-run capital return in the formal sector. This of course is a ‘second-best’ policy to counteracting the distortion in the labour market.

This paper analyzes the role of allocative efficiency of energy resources with respect to total factor productivity (TFP) in the Korean manufacturing sector. Using firm-level data for Korea, we extend the framework of Hsieh and Klenow (2009) to measure allocative inefficiency of energy markets as a function of energy price distortions. Our results indicate that between the years 2000 and 2014, intra-industry misallocation has increased. With respect to energy resources, this is truer in the low-oil-price periods than in other periods. An improvement in allocative efficiency could be attained by equalizing total factor revenue productivity across firms within an industry. In reallocating capital, labor, and energy resources, hypothetical TFP increases of 51.3 % and 71.7 % above actual levels in 2000 and 2014, respectively, could have been achieved. The evolution of firm productivity has been shaped by energy (electricity and fuel) market distortion and capital market distortion. Our evidence suggests that government (energy) price intervention is likely to have played an important role in productivity loss and in allocative inefficiency observed in energy markets.

A loose financial policy through the provision of loans and fiscal subsidies to state-owned enterprises and households has long been practiced in China, though financial liberalization since the 1980s has revitalized banks and other institutions. By using provincial data, this paper attempts to show the relationship between liquidity and productivity in post-reform China. China’s total factor productivity growth is estimated by the Malmquist index. A total of four regression models have been employed and the findings support the inverse relationship between liquidity and productivity, especially since 2008. China’s loose financial policy that promoted “cash-richness” must be reexamined as excessive liquidity coexisted with decline in total factor productivity. An increase of 1% in liquidity would result in about 0.6% loss in total factor productivity due to market distortion.

Negative prices are a correct signal representing the system's scarcity of downward flexibility, but also result from a market distortion caused by renewable support mechanisms. In the worst case, these withhold active market participation, as in Germany, with its feed-in-tariff coupled with a stringent curtailment policy. In the best case, these result in negative bids under their marginal production cost to recover lost subsidies, as in Belgium.

This paper studies the effect of market distortions in the manufacturing sector in Morocco. Recent microdata are used to calculate the extent of resource misallocation associated to these distortions and the potential total factor productivity (TFP) gain resulting from their removal. Market distortions in the manufacturing sector in Morocco are higher compared with developed countries and slightly more important compared with other developing countries, such as China and India. These distortions decreased between 2007 and 2013. Full liberalization would raise TFP by about 84 percent. If distortions are removed to the level of selected developed countries with better resource allocation, the increase in TFP would be of 56 percent. The paper also finds that industries that are more opened to competition (international and domestic) such as machinery and textiles industries present lower levels of market distortions compared with more protected industries with relatively little competition, such as the food industry. Besides, a higher level of TFP can be achieved if more resources are allocated to “young” and “small” firms. The main results of the paper are robust to an alternative estimation that uses a different methodological framework with a less extensive theoretical framework. The paper discusses policies to further limit the extent of product and factor market distortions in Morocco.

International trade is primarily conducted by large, multiproduct firms (MPFs) that pay above average wages and exhibit high productivity. In this paper we show that if firms can invest in management technologies for identifying worker skill then they will enjoy a form of market power in the labor market that artificially lowers their labor costs. This market failure results in excessive consumption of resources by large, productive exporting firms relative to the social optimum. Trade liberalization then has an ambiguous effect on aggregate welfare: lower trade costs increase access to foreign goods but also exacerbates the labor market distortion as resources are transferred to large firms. The model highlights the need to know why firms “excel” before drawing welfare conclusions regarding cross firm reallocations of resources.

Sustainable economic development has played a major role in the decline Of global poverty in the past two decades. There is no doubt that competitive markets are key drivers of economic growth and productivity. They are also valuable channels for consumer welfare. Competition policy is a powerful tool for complementing efforts to alleviate poverty and bring about shared prosperity. An effective competition policy involves measures That enable contest-ability and firm entry and rivalry, while ensuring the enforcement of antitrust laws and State aid control. Governments from emerging and developing economies are increasingly requesting pragmatic solutions tor effective competition policy implementation, as well as recommendations for pro-competitive sectoral policies. A Step Ahead: Competition policy for Shared Prosperity and Inclusive Growth puts forward a research agenda that advocates the importance Of market competition, effective market regulation, and competition policies for achieving inclusive growth and shared prosperity in emerging and developing economies. It is the result of a global partnership and shared commitment between the World Bank Group and the Organization for Economic Co-operation and Development (OECD). Part I of the book brings together existing empirical evidence. On the benefits of competition for household welfare. It covers the elimination Of anti-competitive practices and regulations that restrict competition in key markets and highlights the effects of competition on small producers and employment. Part II of the book focuses on the distributional effects of competition policies and how enforcement Can be better aligned with shared prosperity goals.

Scientific discoveries, technological achievements and R&D investment are mainly from the developed countries. Developing economies belong to the technical followers and imitators. So, international technology spillover is significant for them. Considering our Chinese policy and market characteristics, the paper selected 1999–2015 Provincial Panel Data, gave an empirical test about the effects of factor market distortions on international technology spillovers before and after policy-oriented. The results showed that the technology spillover effects of the import trade, FDI and patent applications presented different feature in different stages. In the original phase (1999–2007), local governments controlled the resource elements' pricing power leading to factor market distortions, thus weakening and barraging the international spillover effects. In policy orientation phase (2008–2015), government payed more attention to the quality of economic development, the degree of market distortion factors significantly reduced and the role of market mechanism played, international technology spillover got an increase gradually.

This chapter examines endogenous growth models in which equilibrium intermediacy may emerge. It is known that some endogenous growth models assume that there is no market distortion and that every production factor is reproducible under constant returns to scale technologies. In this class of models, the perfect-foresight competitive equilibrium coincides with the optimal growth path of a social planning problem, so that equilibrium indeterminacy will not arise in those models. However, the majority of endogenous growth models assume the presence of technological spillover and external effects to sustain continuing growth in the absence of exogenous technical change.

This paper analyses three typical barriers that lead to market distortion in contemporary China: market segmentation, industry monopoly, and industrial policy. Then we estimate the efficiency and welfare loss caused by these three barriers. The results show that the loss caused by market segmentation and industry monopoly respectively account for 6.42% and 18% of annual GDP. And either market segmentation or industry monopoly has been deeply influenced by industrial policies. These distortions must be corrected if we truly want to establish a unified and open market system with orderly competition identified by the third plenary session of the 18th Communist Party Central Committee of CPC. To achieve this goal, we should not only change policies, but reform institutions as well.

In this paper we expand the IRSP (integrated resource strategic planning) model by including the external cost of TPPs (traditional power plants) and popularization cost of EPPs (efficiency power plants) with nonlinear functions. Case studies for power planning in China during 2011–2021 are conducted to show the efficacy of the model. Scenarios are compiled to compare the pathways of power planning under different policies. Results show that: 1) wind power will become competitive with technical learning, but its installation is undesirable when the external cost of coal power is not internalized; 2) the existence of popularization cost will hinder EPPs' (efficiency power plants) deployment and pure market mechanism is not enough to deliver EPPs at socially desirable scale; 3) imposition of progressive emission tax on coal power at an average of 0.15–0.20 RMB/KWh can remedy the market distortion and promote the development of wind power by a significant margin; 4) nuclear power will grow stably when its external cost is set no more than 0.187 RMB per KWh, or 87% of its internal cost. The proposed model can serve as a useful tool for decision support in the process of power planning and policy formulation for national government.

Empirical studies show that market concentration and pricing policies regulation have an important impact on price transmission. These factors lead to an asymmetric price transmission, particularly in agricultural commodities markets. This paper investigates farm-retail price transmission along the Canadian dairy and pork values chains using Threshold Autoregressive, Momentum Threshold Autoregressive, Error Correction Models and Granger causality test. Using monthly price data, we found that farm-retail price transmission is asymmetric in short and long-term between raw milk and butter price while it is symmetric in the cheese case. In the pork sector, price transmission is asymmetric in long-term and symmetric in short-term between farm price and respectively pork chops and bacon prices. Because of processor and retailer concentration, consumer prices respond more quickly to upward than downward of farm prices. The processors, retailers and distributors concentration along the value chain in Canadian dairy and pork sectors and the supply management regulation policies as well as income stabilization insurance program are the main factors generating this market structure. Consideration of the characteristics of farmers, processors, and retailers in the value chain and the actors’ potential reactions to the agricultural policy could better protect consumers and producers from market distortion.

Getting a volatility exposure has become easier for investors after the relatively recent introduction of volatility ETNs (exchange-traded notes) and volatility ETFs (exchange-traded funds), and some of these products have enjoyed a surge in popularity. In this article, the authors use the recent crisis with TVIX—a volatility ETN—to underline important differences between ETNs and ETFs that appear to be at the source of the observed market distortion. The authors emphasize an important feature of these products—that they track constant maturity VIX futures indexes rather than the VIX index itself, which has an impact on the quality of the volatility exposure because of the roll-over costs and the lack of cash-and-carry-arbitrage relationship.

This paper investigates the role of recent pension reforms for the development of the social security system and economic growth in Austria. We use a computable general equilibrium model that is built up of overlapping generations that differ by their household structure, longevity, educational attainment, and capital accumulation. Each household optimally decides over its consumption paths, work effort, and retirement age according to the life-cycle theory of labor, while they face survival risk. We find that the pension reforms implemented from 2000 to 2004, although in the correct direction, are not sufficient to solve the labor market distortion caused by the Austrian pay-as-you-go (PAYG) pension system. Using alternative policy options, our simulations indicate that a change to a notional defined contribution system and an increase in the educational distribution of the work force would increase the incentive for later retirement ages and thereby increase labor supply and economic growth.

In the practice of the Kyoto Protocol's Clean Development Mechanism (CDM), many CDM host countries heavily rely on high Global Warming Potential (GWP) Greenhouse Gas (GHG) projects. Among them, China might be unique in that it imposes a discriminative tax on projects dealing with high GWP GHGs. The Chinese government takes 65% of the carbon credits from HFC-23 (trifluoromethane) projects, 30% from N2O (nitrous oxide) projects, but only 2% from other types of projects. Previous studies have expected that this tax has multiple effects: rent-seeking effect, a deterrent effect on the HFC-23 and N2O projects, a channelling effect that switches the investment from HFC-23 and N2O projects to other types of projects, and a market distortion effect. However, with the positive analysis and empirical evidence, the present study shows that this tax only has rent-seeking effect, thus China's discriminative tax has been over read.

China has run a current account surplus for two decades. Its current account surplus is not simply a result of the saving gap. Rather, the current account surplus, as well as the saving gap, is a result of complicated interaction among various factors in a dynamic fashion. While running a large current account surplus, China has also run a large capital account surplus mainly in the form of FDI over decades. China’s ‘twin surpluses’ are a reflection of market distortion, which has caused large welfare losses for the country. The Chinese government should not only pay attention to internal balance but also to external imbalance. Hence it should combine expenditure-switching policies and expenditure-changing policies to maintain a decent non-inflationary growth rate, while keeping the current-account-balance-to-GDP ratio at a rational level. Copyright 2013, Oxford University Press.

Already, the Kenyan banking industry mirrors a perfect market failure which has led to a market distortion. This is so, if viewed from a competition law stand point. The market failure manifests itself in the banking system where a few banks are oligopolistic ‘powers’. Such powers have proven oppressive to the common Kenyan as well as the Small and Medium size Enterprises.In this paper, I make a critical analysis of the banking sector, and more importantly the effect of the capping of interest rates on the 6 dominant banks that control control 52.4% of the entire industry of 42 banks in Kenya.

The article examines how the competition issues raised by the public service broadcasters? (PSBs) new media engagement have been handled in Germany and the United Kingdom. Private communications interests, and certain political actors, have sought to restrict the scope of public service broadcasting, particularly with regard to their online media operations. EU ?state aid? rules have been called into play by complaints from the private media sector about unfair competition and market distortion. The article looks at how the PSBs and media policy-makers have handled the competition issues raised by the PSBs? online media engagement, and explains how they have met the requirements of EU state aid rules. To be precise, the article examines the development of the Public Value Test in the United Kingdom and its equivalent in Germany, the Three-Step-Test (Drei Stufen Test). The article considers the issues surrounding implementation of these tests and the implications of the new procedures for the future organization, accountability and output of the PSBs.

PurposeThe purpose of this paper is to critically review the process of urban land ownership reform in China. It seeks to illustrate how the detachment of the concept of land ownership from its significance in a planned socialist state has contributed to the development of a real estate sector, and how the concept of land ownership should now be regarded in the new era of marketization. In particular, it focuses on the widespread influences of political forces in these processes.Design/methodology/approachThe paper analyses relevant legislation enacted within the People's Republic of China. This analysis is undertaken within the context of the social, political and economic changes that have occurred within the country during the period under consideration.FindingsTwo findings emerge from the study. First, an economic‐based notion of land ownership has evolved in China as a consequence of the economic and social changes accompanying the process of economic liberalisation. This reflects the elimination of political forces in defining land values in the new era. Second, however, the involvement of political power in the process of land asset distribution is shown to have led to market distortion. This may, in turn, lead to market failure and social conflict. For the development of a healthy real estate market, the influences of these political forces should, therefore, be restricted through a process of ongoing reforms.Originality/valueThe paper presents a detailed analysis of the impact of political forces on the changed patterns of land allocation in transitional China. The country's unique social background and system of land tenure have not previously been subjected to detailed scholarly attention. The research published in this paper suggests further possibilities for China's continuing system of land ownership reform and also contributes to a redefinition of the concept of land ownership in the new era of marketization and globalization.

In this article we examine the dual-track pricing system in China's stock market since its inauguration, a legacy of its economic transition and a major source of institutional predation in the market. We then examine the share structure reform initiated in 2005 that sought to eliminate the distortion this predation had elicited. We interpret the reform push as a process of institutional change and focus on the drivers and theoretical explanations of such changes in China's stock market. We thus advance a model for understanding institutional change, Chinese style. We argue that, initially, the institutional arrangement was constructed by the dynamics of transition – the juxtaposition of the Leninist state and the emerging stock market. This provided huge incentives for state corruption in the emerging market. As the market transition proceeded, the societal and political costs of corruption and market distortion also grew, which produced a crisis that eventually attracted the attention of powerful leaders of the party state. We argue from this case that the broader political context in which specific examples of institutional change occur needs to be examined. Specifically, we argue that powerful agents who are external to given institutional environments can play an important role in institutional change, thus highlighting the political dynamics of an authoritarian state amid systemic transition and global integration.

The welfare cost of imperfect competition in the product and labor markets in the United States is quantified in a dynamic general equilibrium model. We find that the welfare cost of imperfect competition in the product market is 3.62 percent while it is 0.58 percent in the labor market, taking the transition path from the distorted to the optimal steady state into account. If we also take into account that the US economy is characterized by distortionary taxation, the welfare cost of the product market distortion increases to 13.51 percent and the labor market distortion to 4.35 percent.

Market Distortion on Securties Transaction Process in Secondary MarketMarket distortion is aaberration which causes an imbalance and injustice on the market to be avoided. This study aims to learn more about other forms of distortions such as tadlis, gharar, maysir, ihtikar and bay 'najasy and to recognize its form at the process of transaction in the Islamic capital market, especially the secondary market so that the process securities transactions sharia truly reflects the activity of sharia economic transactions which has values of brotherhood, mutual interest, morality, the orientation of the hereafter and no exploitation. The approach taken is the approach of Jurisprudence and Islamic economics. Results of this study will deepen understanding and clarify the forms of distortion at the transactions in the secondary market so that it can be avoided as much as possible where the transaction finally truly reflect Islamic sharia securities transactions in the capital market.DOI: 10.15408/etk.v14i2.2269

This paper investigates the channels through which colonial origin affects economic outcomes in sub-Saharan Africa (SSA). It focuses on four key channels of transmission namely, human capital, trade openness, market distortion and selection bias. In contrast with previous studies where only initial conditions at independence were held to influence the subsequent growth path, the methodology that we apply in this paper combines (1) the pre-colonisation initial conditions, (2) the initial conditions at independence and (3) the subsequent post-colonial changes in explaining income differences amongst former SSA colonies. Our sample comprises of 38 SSA countries studied over the period 1960-2000, and we use pooled OLS and Hausman-Taylor estimation techniques in a panel framework. The results suggest that former British colonies have had marginally higher income levels than former French colonies, and this is attributable to the legacy of British colonisation in trade openness and human capital. We do not find robust evidence in support of the market distortion and selection bias channels. Besides highlighting the importance of the trade openness channel, the study is also the first, to the best of our knowledge, to simultaneously examine a range of feasible transmission channels between colonial origin and economic growth performance.

Among multitude of issues, global imbalance has attracted more attention than may be warranted because it is perceived to be policy induced and constrain global growth, or a zero sum game in the sense of growing at another countries’ expense. Yet many of those with a current account surplus face a rapidly aging population that motivates high savings to ensure consumption smoothing. Those with a deficit, on the other hand, may need to be there for the opposite reason. Thus, a current account imbalance could be a rational market outcome, rather than a policy induced market distortion.

The family firm is generally viewed as an organizational solution to agency costs in the labor market for managers and institutional underdevelopment. Consistent with this view, this paper links the preponderance of family firms in the surgical instrument industry of Sialkot to the prevailing agency and institutional problems. However, strong dependence on family management coupled with restrictions on family size constrains the firms from optimally choosing management size. The resulting labor market distortion is manifested by a significant positive correlation between the founder's family size and the firm size such that the founders who have more brothers (a larger pool of potential managers) end up with bigger firms.

A limitation of most empirical cross-country studies that focus on determinants of gross domestic product (GDP) is that they fail to distinguish explicitly between inputs used in production and conditions that facilitate production. For example, physical capital, human capital, and labor are production inputs, whereas the quality of institutions, macroeconomic stability, and market quality are conditions that facilitate production. This article takes this distinction seriously and uses a stochastic frontier approach to study factors affecting economic performance. A panel data set of 71 countries for the 1980-98 periods is used to estimate a production frontier with physical capital, human capital, and labor as inputs. The article also analyzes what drives productive efficiency, using the institutional framework, macroeconomic stability, market quality, and urbanization as possible explanatory factors. Urbanization turns out to be an important determinant, with the rule of law, inflation rate, and market quality also affecting productive efficiency.