Deardorff's Glossary Of International Economics 2

Front 1

Prospective analysis

Back 1

Ex ante analysis.

Front 2

Protection

Back 2

1. Without any adjective, or as "import protection," this refers to restriction of imports by means of tariffs and/or NTBs, and thereby intended to insulate domestic producers from competition with imported goods.

Front 3

Protection

Back 3

2. As "IP protection," or "intellectual property protection," this refers to enforcement of intellectual property rights by granting patents, copyrights, and trademarks and by prosecuting those who violate them.

Front 4

Protectionism

Back 4

Advocacy of protection. The word has a negative connotation, and few advocates of protection in particular situations will acknowledge being protectionists.

Front 5

Protocol of accession

Back 5

Legal document specifying the procedures for a country to join an international agreement or organization, including the rights and responsibilities that accompany such accession.

Front 6

Provision

Back 6

In the context of international economics, a provision is likely to mean a portion of an agreement, such as the investment provisions of NAFTA or the balance of payments provisions of the GATT. In that context, it is less precise than article.

Front 7

PSE

Back 7

Producer support estimate or producer subsidy equivalent.

Front 8

PTA

Back 8

Preferential Trading Arrangement

Front 9

Public debt

Back 9

The amount that has been borrowed by a government.

Front 10

Public finance

Back 10

A general term encompassing both the spending by government and the methods used to pay for that spending, especially taxation and borrowing.

Front 11

Public good

Back 11

A good that is provided for users collectively, use by one not precluding use of the same units of the good by others.

Front 12

Public procurement

Back 12

Government procurement.

Front 13

Pump priming

Back 13

Priming the pump.

Front 14

Punitive tariff

Back 14

A high tariff the purpose of which is to inflict harm on a foreign exporter as punishment for some previous behavior.

Front 15

Purchasing power

Back 15

The amount of goods that money will buy, usually measured (inversely) by the CPI.

Front 16

Purchasing power parity

Back 16

1. The equality of the prices of a bundle of goods (usually the CPI) in two countries when valued at the prevailing exchange rate. Called absolute PPP.

Front 17

Purchasing power parity

Back 17

2. The equality of the rates of change over time in the prices of a bundle of goods in two countries when valued at the prevailing exchange rate. Called relative PPP. Implies that the rate of depreciation of a currency must equal the difference between its inflation rate and the inflation rate in the currency to which it is being compared.

Front 18

Purchasing power parity exchange rate

Back 18

An exchange rate calculated to yield absolute purchasing power parity. Useful for making comparisons of real values (wages, GDP) across countries with different currencies. Since absolute purchasing power parity theory is rarely correct, this contrasts with the nominal exchange rate.

Front 19

Purchasing power parity theory

Back 19

A theory of the exchange rate that the rate will adjust to achieve purchasing power parity, in either its absolute or its relative form.

Front 20

Pure competition

Back 20

Same as perfect competition.

Front 21

Pure exchange economy

Back 21

A theoretical economy in which goods are not produced, but exist as endowments, and are then traded among consumers.

Front 22

Put

Back 22

A put option.

Front 23

Put option

Back 23

A financial contract that permits (but does not require) the buyer of the option to sell a commodity or financial instrument (perhaps a currency) to the seller of the option at a specified time and price.

Front 24

QR

Back 24

Quantitative Restriction

Front 25

Quad

Back 25

Refers both to the Quadrilateral Meetings and to the participants in those meetings, the U.S., Canada, EU, and Japan.

Front 26

Quadrilateral meetings

Back 26

Meetings that occur occasionally involving the trade ministers of the U.S., Canada, EU, and Japan to discuss trade policy issues.

Front 27

Qualitative

Back 27

1. Referring only to the characteristics of something being described, rather than exact numerical measurement.

Front 28

Qualitative

Back 28

2. Indicative only of relative sizes or magnitudes, rather than their numerical values. A qualitative comparison would say whether one thing is larger, smaller, or equal to another, without specifying the size of any difference. As opposed to quantitative.

Front 29

Quality

Back 29

One dimension along which products can be differentiated. One basis for intraindustry trade is product differentiation in quality, together with differences in comparative advantage for producing quality as well as differences in preference for quality within a heterogeneous population.

Front 30

Quantitative

Back 30

Expressed in numerical values. See qualitative.

Front 31

Quantitative Restriction

Back 31

A restriction on trade, usually imports, limiting the quantity of the good or service that is traded; a quota is the most common example, but VERs usually take the form of QRs. QRs on traded services are more likely to restrict the number or activities of foreign service providers than the services themselves, since the latter are hard to monitor and measure.

Front 32

Quantity definition

Back 32

A method of defining relative factor abundance based on ratios of factor quantities: Compared to country B, country A is abundant in factor X relative to factor Y iff XA/YA > XB/YB, where IJ is the quantity of factor I with which country J is endowed, I=X,Y, J=A,B.

Front 33

Quantity index

Back 33

A measure of the average quantities of a group of goods relative to a base year. This is usually obtained by using a price index to convert nominal value (price times quantity) to real values, which are then compared to provide the quantity index.

Front 34

Quantity quota

Back 34

A quota specifying quantity, in units, weight, volume, etc. of a good.

Front 35

Quantity theory of money

Back 35

The classic theory of the price level and therefore of inflation, building on the equation of exchange and the additional assumption that velocity of money is constant. Together, these imply that the rate of inflation equals the rate of growth of money minus the rate of growth of real output.

Front 36

Quarter

Back 36

One of the four three-month periods into which the calendar year is divided for the reporting of economic data.

Front 37

Quartile

Back 37

One of four segments of a distribution that has been divided into quarters. For example, the second-from-the-bottom quartile of an income distribution is those with incomes above the bottom 25% of the population and below the top 50%.

Front 38

Quasi-fiscal

Back 38

Having to do with financial transactions of units that are not included in a government's budget but that have some of the same effects as fiscal policy. Most often mentioned as having quasi-fiscal effects are central banks.

Front 39

Quasi-linear utility

Back 39

A utility function of the form U(x0,x1,...,xn) = x0 + Siui(xi), where ui(×) are strictly concave functions. This is useful for generating demand functions for goods xi that depend only on their own prices in terms of the numeraire x0.

Front 40

Quasi money

Back 40

Near money

Front 41

Quasi-rent

Back 41

Like economic rent, but usually larger, because it is the excess of return over short run opportunity cost, which does not include the fixed cost of replacing or duplicating fixed assets such as a piece of capital or an invention. Thus, inframarginal rent.

Front 42

Quid pro quo FDI

Back 42

FDI in response to the threat of protection. Done by a firm that exports into the domestic market, the motive is to create jobs there and lessen the threat that its exports will be restricted. Due to Bhagwati (1985).

Front 43

Quintile

Back 43

One of five segments of a distribution that has been divided into fifths. Analogous to quartile.

Front 44

Quota

Back 44

1. A government-imposed restriction on quantity, or sometimes on total value.

Front 45

Quota

Back 45

2. An import quota specifies the maximum amount of an import per year, typically administered with import licenses that may be sold or directly allocated, to individuals or firms, domestic or foreign. May be global, bilateral, or by country.

Front 46

Quota

Back 46

3. An IMF quota.

Front 47

Quota by country

Back 47

A quota that specifies the total amount to be imported (or exported) and also assigns specific amounts to each exporting (or importing) country.

Front 48

Quota fill rate

Back 48

The percentage of an import quota that is used.

Front 49

Quota rent

Back 49

The economic rent received by the holder of the right (or license) to import under a quota. Equals the domestic price of the imported good, net of any tariff, minus the world price, times the quantity of imports.

Front 50

R&D

Back 50

Research and development.

Front 51

Race to the bottom

Back 51

The idea that, if one country provides a competitive advantage to its firms by lax regulation (of the environment, for example), then competing firms in other countries will demand even weaker regulation by their governments, and regulation will be reduced to minimal levels everywhere.

Front 52

Radical political economy

Back 52

See political economy.

Front 53

Ramsey growth model

Back 53

A growth model in which savings is determined endogenously to be optimal, in contrast to the Solow Model in which the savings propensity was a parameter.

Front 54

Random variable

Back 54

An economic or statistical variable that takes on multiple (or a continuum of) values, each with some probability that is specified by a probability distribution (or probability density function).

Front 55

Random walk

Back 55

Characterizing the behavior of a random variable that is, essentially, equally likely to rise as to fall at each step. Since in an efficient market, the price of an asset such as a currency already embodies all available information, that price should follow a random walk.

Front 56

Rapprochement

Back 56

In international relations, an improvement in relations between two countries that have previously been less than cordial.

Front 57

Ratchet effect

Back 57

The implication for a variable that (like a ratchet) can move one direction but not the other. Thus if wages or prices are are inflexible downward but not upward, then fluctuations in the economy will only cause them, intermittently, to rise.

Front 58

Rate of inflation

Back 58

Inflation rate.

Front 59

Rate of interest

Back 59

Interest rate.

Front 60

Rate of return

Back 60

The percentage of an asset's value that the owner of the asset earns, usually per year.

Front 61

Ratification

Back 61

The approval of an international agreement that has been negotiated, such as a trade agreement, by a country's governing body.

Front 62

Ration

Back 62

1. In the presence of excess demand (for a good, etc.), to allocate among demanders by some means other than the price they are willing to pay.

Front 63

Ration

Back 63

2. The quantity of a rationed good allocated to one demander.

Front 64

Ration foreign exchange

Back 64

To ration access to scarce foreign currency under a pegged exchange rate with an over-valued currency. Usually done by means of import licensing. See exchange control.

Front 65

Rational agent

Back 65

Most economic models assume that agents are rational, meaning that they do the best they can, given the constraints they face, to maximize their own well being.

Front 66

Rational expectations

Back 66

In forming opinion about future events, the use of all available information to assess the probabilities of the possible states of the world. More simply, expectations that are as correct as is possible with available information.

Front 67

Raw material

Back 67

A good that has not been transformed by production; a primary product.

Front 68

Ray

Back 68

A straight line drawn from the origin of a diagram. In the Heckscher-Ohlin Model, two rays are used to define a diversification cone.

Front 69

RCA

Back 69

Revealed comparative advantage.

Front 70

Reaction curve

Back 70

The graph of a reaction function.

Front 71

Reaction function

Back 71

The function specifying the choice of a strategic variable by one economic agent as a function of the choice of another agent. Most familiar: specifying output choices of firms in a Cournot duopoly.

Front 72

Real

Back 72

1. Expressed in terms of the amounts of goods and services that something is worth at market prices.

Front 73

Real

Back 73

2. Adjusted for inflation.

Front 74

Real

Back 74

3. Referring only to real economic variables as opposed to nominal, or monetary ones, as in real models.

Front 75

Real

Back 75

4. Used with "appreciation" or "depreciation," refers to the real exchange rate. Thus a real appreciation means that the nominal value of a country's currency has increased by more than its relative price level may have decreased, so that the prices of its goods relative to foreign goods have increased.

Front 76

Real

Back 76

5. The name of one unit of the Brazilian currency. One real equals 100 centavos. Pronounced "ray-all'".

Front 77

Real balances

Back 77

The amount of money held by the public, adjusted for inflation. An early debate in Keynesian economics concerned whether a rise in real balances would stimulate consumption

Front 78

Real effective exchange rate

Back 78

The effective exchange rate adjusted for the rates of inflation in each country.

Front 79

Real exchange rate

Back 79

1. The nominal exchange rate adjusted for inflation. Unlike most other real variables, this adjustment requires accounting for price levels in two currencies. The real exchange rate is: R = EP*/P where E is the nominal domestic-currency price of foreign currency, P is the domestic price level, and P* is the foreign price level.

Front 80

Real exchange rate

Back 80

2. The real price of foreign goods; i.e., the quantity of domestic goods needed to purchase a unit of foreign goods. Equals the reciprocal of the terms of trade. Equivalent to definition 1.

Front 81

Real exchange rate

Back 81

3. The relative price of traded goods in terms of nontraded goods.

Front 82

Real GDP

Back 82

The real counterpart to nominal GDP, obtained by valuing output in a given year at prices from another year, called the base year.

Front 83

Real interest rate

Back 83

The nominal interest rate adjusted for inflation, to get the percentage yield an asset holder receives in terms of real resources. Equals the nominal interest rate minus the rate of inflation.

Front 84

Real model

Back 84

An economic model without money. Most general equilibrium models of trade are real models. This includes the Ricardian Model, the Heckscher-Ohlin Model, and the models of the New Trade Theory.

Front 85

Real money balances

Back 85

The real value of the amount of money held by a person, household, or firm, or the amount in circulation in the economy.

Front 86

Real national income

Back 86

National income adjusted for inflation.

Front 87

Real terms

Back 87

Same as real. A "wage expressed in real terms" is just the real wage.

Front 88

Real trade

Back 88

A shorthand term for most of the theory of international trade, which consists largely of real models. Contrasts with international finance.

Front 89

Real wage

Back 89

The wage of labor -- or more generally the price of any factor -- relative to an appropriate price index for the goods and services that the worker (or factor owner) consumes.

Front 90

Recession

Back 90

A significant decline in economic activity. In the U.S., recession is approximately defined as two successive quarters of falling GDP, as judged by NBER. A recession in one country may be caused by, or may itself cause, recession in another country with which it trades.

Front 91

Reciprocal demand

Back 91

The concept that, in international trade, it is not just supply and demand that interact, but demand and demand. That is, a trading equilibrium is a reciprocal equilibrium in which one country's demand for another country's products (and willingness to pay for them with its own) matches with the other country's demands for the products of the first.

Front 92

Reciprocal demand curve

Back 92

An offer curve. So called to emphasize that a country exports in order, reciprocally, to get imports in return.

Front 93

Reciprocal dumping

Back 93

The sale by firms from two countries into each others' markets for prices below what each charges at home. So called because the exports of both firms meet the price-discrimination definition of dumping. Brander and Krugman (1983) introduced the term and showed that this is likely to happen in an international duopoly with transport costs.

Front 94

Reciprocal trade agreement

Back 94

Agreement between two countries to open their markets to each other's exports, usually by each reducing tariffs. Early trade rounds under the GATT consisted mostly of reciprocal trade agreements, extended to other contracting parties by the MFN requirement.

Front 95

Reciprocal Trade Agreements Act of 1934

Back 95

US legislation in 1934 in which Congress delegated the setting of tariffs to the President, who was then authorized to negotiate reciprocal trade agreements.

Front 96

Reciprocity

Back 96

A principle that underlies GATT negotiations, that countries exchange comparable concessions.

Front 97

Reciprocity Conditions

Back 97

In the production structure of the Heckscher-Ohlin Model, the fact that the effect of a small change in any factor endowment on output of any good is equal to the effect of a small change in the price of that good on the price of that factor. That is, the matrices of Rybczynski derivatives and Stolper-Samuelson derivatives are the same. Also called Samuelson's reciprocity conditions, from Samuelson (1953).

Front 98

Red box

Back 98

A category of subsidies that is forbidden under WTO rules. This terminology is used in the Agriculture Agreement, where however there is no red box. Presumably equivalent to prohibited subsidies. See box.

Front 99

Red tape

Back 99

The bureaucratic inconvenience one must suffer (forms to be filled out and approved, etc.) in order to get action by an organization. Most often, the action is just permission to do something, and the organization is an agency of government. When the action is importing, red tape becomes a nontariff barrier.

Front 100

Redistributed tariff revenue

Back 100

Refers to a common assumption that tariff revenue is given to consumers as transfer payments (not in proportion to what they paid by importing) to be spent like any other income. Since in general equilibrium the effects of a tariff depend on how the revenue is spent, this is a useful neutral assumption.

Front 101

Redistribution

Back 101

A policy that taxes some individuals and uses the proceeds to pay transfers to others.

Front 102

Reduced form

Back 102

The system of equations that results when an economic model is solved, with each endogenous variable expressed as a function of only exogenous variables.

Front 103

Redundant tariff

Back 103

A tariff that, if changed, will not change the quantity of imports, either because the tariff is prohibitive, or because some other policy such as a quota or an embargo is limiting quantity.

Front 104

Reexport

Back 104

The export without further processing or transformation of a good that has been imported. See entrepot trade.

Front 105

Reference price

Back 105

See minimum price system.

Front 106

Reflation

Back 106

Expansionary monetary or fiscal policy.

Front 107

Regional aid

Back 107

A subsidy directed at a geographic region within a country to assist its development. Such subsidies are non-actionable under WTO rules.

Front 108

Regional integration

Back 108

The formation of closer economic linkages among countries that are geographically near each other, especially by forming preferential trade agreements.

Front 109

Regional policy

Back 109

In a trade context, this usually refers to a regional aid.

Front 110

Regional trade

Back 110

Trade among countries that are geographically close together, especially on the same continent.

Front 111

Regionalism

Back 111

The formation or proliferation of preferential trading arrangements.

Front 112

Registered exports and imports

Back 112

If a country regulates what can be traded, then "registered" means legal. In contrast, unregistered exports and imports are smuggled in some fashion.

Front 113

Regression analysis

Back 113

The statistical technique of finding a straight line that approximates the information in a group of data points. Used throughout empirical economics, including in both international trade and finance.

Front 114

Regression model

Back 114

See linear regression model.

Front 115

Regressor

Back 115

In a linear regression model, an independent -- or right-hand-side -- variable. That is, one of the variables that is being used to explain another.

Front 116

Regulation

Back 116

Any government effort to influence the performance of the economy or the behavior of economic agents, especially firms, within it. Conflicts sometimes arise between domestic regulations and international commerce or commitments.

Front 117

Reinsurance

Back 117

The insurance that is sold to companies that sell insurance to the public, thus protecting them, in turn, from major losses due especially to major disasters such as hurricanes and floods.

Front 118

Relative demand

Back 118

The ratio of the demand for one good to the demand for another, most useful in representing general equilibrium in a two-good economy, where relative price adjusts to equate relative supply and relative demand.

Front 119

Relative factor abundance

Back 119

Factor abundance, in ratio form, compared across countries. Thus country A is abundant in capital relative to labor, compared to country B, if KA/LA > KB/LB, where KI, LI, I=A,B are capital and labor endowments.

Front 120

Relative factor intensity

Back 120

Factor intensity, in ratio form, compared across industires. Thus industry X is intensive in capital relative to labor, compared to industry Y, if KX/LX > KY/LY, where KI, LI, I=X,Y are capital and labor employed in industries X and Y when they face the same factor prices.

Front 121

Relative factor prices

Back 121

The ratio of the price of one factor to the price of another. In a two-factor model with constant returns to scale, this alone determines the ratio of factors employed in a sector.

Front 122

Relative price

Back 122

The price of one thing (usually a good) in terms of another; i.e., the ratio of two prices. The relative price of good X in terms of good Y is pX / pY.

Front 123

Relative supply

Back 123

The ratio of the supply of one good to the supply of another, most useful in representing general equilibrium in a two-good economy, where relative price adjusts to equate relative supply and relative demand.

Front 124

Remedy

Back 124

In a trade dispute in the WTO or other forum, the measure recommended by the dispute settlement panel to resolve the dispute, usually a measure that will bring the offending country into compliance with WTO (or other) rules.

Front 125

Remittance

Back 125

Payment from one country to another that is not payment for anything (goods, services, assets, the use of capital, etc.), such as a charitable contribution, a gift to family members, and government aid.

Front 126

Remuneration

Back 126

Payment in return for services rendered.

Front 127

Renminbi

Back 127

The name of the currency of the People's Republic of China, the principal unit of which is the yuan. The word renminbi means "people's currency."

Front 128

Rent

Back 128

1. Economic rent: The premium that the owner of a resource receives over and above its opportunity cost.

Front 129

Rent

Back 129

2. The payment to the owner of land or other property in return for its use.

Front 130

Rent seeking

Back 130

The using up of real resources in an effort to secure the rights to economic rents that arise from government policies. In international economics the term usually refers to efforts to obtain quota rents. Term introduced by Krueger 1974.

Front 131

Rental price

Back 131

The payment per unit time for the services of a unit of a factor of production, such as land or capital.

Front 132

Rentier

Back 132

A person whose income comes mainly from rent on land or, more broadly, from assets rather than labor. (Pronounced "Ron' Tee Yay".)

Front 133

Reparations

Back 133

Payment or other compensation provided by a government to a group of people or to another country to compensate for loss or damage that it has caused. Internationally, reparations have been paid after a war by the losers to the winners, most notably by Germany after World War I.

Front 134

Repatriation

Back 134

To return something, especially money or profit, to the country of its owner or its origin.

Front 135

Repo

Back 135

Repurchase agreement.

Front 136

Repurchase agreement

Back 136

An agreement to sell a security for a specified price and to buy it back later at another specified price. A repo is essentially a secured loan.

Front 137

Reschedule

Back 137

To renegotiate the terms of a loan, reducing payments by extending them over time and/or forgiving a portion of the principal. Debt rescheduling has been a primary means of dealing with international debt crises.

Front 138

Research and development

Back 138

The use of resources for the deliberate discovery of new information and ways of doing things, together with the application of that information in inventing new products or processes.

Front 139

Reserve asset

Back 139

Any asset that is used as international reserves, including a national currency, precious metal such as gold, or SDRs.

Front 140

Reserve currency

Back 140

A currency that is used as international reserves, often because it is an intervention currency. See also seigniorage.

Front 141

Reserve ratio

Back 141

The ratio of a commercial bank's reserves to its deposits.

Front 142

Reserve requirement

Back 142

The level of the reserve ratio that a commercial bank is required by government or the central bank to maintain or exceed.

Front 143

Reserves

Back 143

1. International reserves of a government or central bank.

Front 144

Reserves

Back 144

2. Amounts held by commerical banks in their vaults or on deposit with the central bank as backing for deposits.

Front 145

Resource

Back 145

1. An input to be used in an activity, especially production.

Front 146

Resource

Back 146

2. A natural resource.

Front 147

Resource allocation

Back 147

Sometimes said to be the fundamental problem of economics: how to allocate an economy's resources (including its land, labor, natural resources, etc.) to the various purposes to which they could be put.

Front 148

Resource curse

Back 148

The idea that countries with abundant natural resources are actually likely to be worse off than countries where such resources are scarce. Reasons for the resource curse include that resources attract exploitation by foreigners, corruption among domestic residents, Dutch disease, and lost incentives to pursue other alternatives.

Front 149

Rest of world

Back 149

In a model or in a display of data that include one or more countries specifically, row=rest of world is used to represent collectively all of the other countries of the world (or all other countries for which data are available).

Front 150

Restricted trade

Back 150

Trade that is restrained in some fashion by tariffs, transport costs, or NTBs.

Front 151

Restriction on trade

Back 151

See trade restriction.

Front 152

Restrictive business practice

Back 152

Action by a firm or group of firms to restrict entry by other firms, that is, to prevent other firms from selling their product or in their market. This is a restraint of competition and would normally be illegal under competition policy.

Front 153

Restructure

Back 153

To alter the terms of repayment of a debt, usually by extending repayment over a longer period of time, perhaps at a lower interest rate.

Front 154

Results-based trade policy

Back 154

The use of trade policies targeted to specific indicators of economic performance. For example, in the early 1990s, the U.S. insisted on achieving specified market shares in trade with Japan.

Front 155

Reswitching

Back 155

In balanced growth, the use of one set of techniques at both a high and low interest rate, but a different set of techniques at an interest rate in between. Such reswitching is argued to undermine the legitimacy of the concept of an aggregate capital stock.

Front 156

Retained earnings

Back 156

The portion of a corporation's profit that it does not pay in taxes and does not distribute to its shareholders. An important source of financing for investment.

Front 157

Retaliation

Back 157

1. The use of an increased trade barrier in response to another country increasing its trade barrier, either as a way of undoing the adverse effects of the latter's action or of punishing it.

Front 158

Retaliation

Back 158

2. The formal procedure permitted under the GATT whereby a country may raise discriminatory tariffs above bound levels against a GATT member that has violated GATT rules and not provided compensation.

Front 159

Retrospective analysis

Back 159

Ex post analysis.

Front 160

Return

Back 160

The amount that is earned by someone who holds an asset, usually expressed as a percentage of what it cost to acquire the asset. The return includes interest, dividends, and capital gains and losses, the latter due to both changes in the price of the asset and, for international holdings, changes in exchange rates.

Front 161

Return to capital

Back 161

Same as the rental price of capital. Since capital can only be measured in monetary units, the rental price is, say, dollars per dollar's worth of capital per unit time, and it therefore has the form of a rate of return like an interest rate.

Front 162

Returns to scale

Back 162

Same as increasing returns to scale.

Front 163

Revaluation

Back 163

1. A reassessment of what something is worth, especially an upward reassessment.

Front 164

Revaluation

Back 164

2. Of an exchange rate, opposite of a devaluation. Thus, and appreciation.

Front 165

Revealed comparative advantage

Back 165

Balassa's (1965) measure of relative export performance by country and industry, defined as a country's share of world exports of a good divided by its share of total world exports. The index for country i good j is RCAij = 100(Xij /Xwj)/(Xit /Xwt) where Xab is exports by country a (w=world) of good b (t=total for all goods).

Front 166

Revealed preference

Back 166

The use of the value of expenditure to "reveal" the preference of a consumer or group of consumers for the bundle of goods they purchase compared to other bundles of equal or smaller value. Used by Samuelson (1939) and Ohyama (1972), especially, to examine the gains from trade.

Front 167

Revenue

Back 167

Referring to a tariff, the money collected by the government. Equals the size of the tariff times the quantity of imports. An analysis of the effects of a tariff needs to account for the revenue, and in a general equilibrium model it must specify whether and how the revenue is spent.

Front 168

Revenue argument for a tariff

Back 168

The use of a tariff to raise revenue for the government. Many other kinds of tax cause smaller distortions and are therefore preferable to tariffs for this purpose. However, a tariff is one of the easier taxes to collect, and it is therefore common in the early stages of a country's development.

Front 169

Revenue deficit

Back 169

1. In general use, this seems to be essentially the same as a budget deficit, but with attention given to the low level of revenue rather than to the high level of expenditure.

Front 170

Revenue deficit

Back 170

2. More precisely, this means a larger deficit (or smaller surplus) than had been budgeted for.

Front 171

Revenue-maximizing output

Back 171

The level of output (and sales) that brings in the largest revenue to a firm, as opposed to the (usually smaller) output that brings in the largest profit.

Front 172

Revenue-maximizing tariff

Back 172

The level of tariff that brings in the largest revenue to a government, as opposed to the (usually smaller) optimal tariff.

Front 173

Revenue Seeking

Back 173

The use of real resources in an effort to secure a share of the disposition of tariff revenues. Term due to Bhagwati and Srinivasan 1980.

Front 174

Reverse engineering

Back 174

The process of learning how a product is made by taking it apart and examining it.

Front 175

Ricardian Model

Back 175

The classic model of international trade introduced by David Ricardo to explain the pattern of, and the gains from, trade in terms of comparative advantage. It assumes perfect competition and a single factor of production, labor, with constant requirements of labor per unit of output that differ across countries.

Front 176

Ricardo point

Back 176

On the world PPF of a two-country, 2-good Ricardian Model, the point at which each country is specialized in production of a different good; the kink of the world PPF.

Front 177

Ricardo-Viner Model

Back 177

A specific factors model with a single specific factor in each industry and one mobile factor, named after two of the many who used this as the standard model of trade prior to the Heckscher-Ohlin Model. It extends the simple Ricardian Model by allowing the marginal product of labor to fall with output. It was revived by Jones (1971), Samuelson (1971), then merged with H-O by Mayer (1974), Mussa (1974), and Neary (1978).

Front 178

Rio Summit

Back 178

The United Nations Conference on Environment and Development, held 3-14 June 1992 in Rio de Janeiro, Brazil. 172 governments participated, including 108 heads of state. Also called the Earth Summit.

Front 179

Risk

Back 179

1. Uncertainty associated with a transaction or an asset.

Front 180

Risk

Back 180

2. The probability of loss. Differs from definition 1 because "uncertainty" includes probability of gain as well.

Front 181

Risk aversion

Back 181

Desire to avoid uncertainty. Risk aversion is usually quantified by the mathematical expected value that one is willing to forego in order to get greater certainty.

Front 182

Risk free rate

Back 182

The interest rate on a riskless, or safe, asset, usually taken to be a short-term U.S. government security.

Front 183

Risk premium

Back 183

1. The higher expected return (in the sense of mathematical expected value) that an uncertain asset must pay in order for risk averse investors to be willing to hold it.

Front 184

Risk premium

Back 184

2. The difference between the interest rate on a risky asset and that on a safe one.

Front 185

Risk premium

Back 185

3. In exchange markets the difference between the forward rate and the expected future spot rate.

Front 186

Risk spreading

Back 186

The holding of a diversified portfolio.

Front 187

Rollback

Back 187

1. The phasing out of measures that are not consistent with an agreement.

Front 188

Rollback

Back 188

2. In the Uruguay Round, the agreement to remove all GATT-inconsistent trade-restricting and trade-distorting measures by the time negotiations were completed. See standstill.

Front 189

ROO

Back 189

Rule of origin.

Front 190

Round

Back 190

See trade round.

Front 191

ROW

Back 191

Rest of world

Front 192

Rule of law

Back 192

A legal system in which rules are clear, well-understood, and fairly enforced, including property rights and enforcement of contracts.

Front 193

Rules-based trade policy

Back 193

Institutional arrangements in which national trade policies are governed by internationally agreed-upon rules, as in the GATT and WTO.

Front 194

Rules of origin

Back 194

Rules included in a FTA specifying when a good will be regarded as produced within the FTA, so as to cross between members without tariff. Typical ROOs are based on percentage of value added or on changes in tariff heading.

Front 195

Run on a currency

Back 195

The short-term capital outflows that occur when a pegged exchange rate regime is thought to be running out of reserves and is thus expected (and therefore forced) to devalue.

Front 196

Rybczynski derivative

Back 196

The effect of a small change in a single factor endowment on the output of a good.

Front 197

Rybczynski Theorem

Back 197

The property of the Heckscher-Ohlin Model that, at constant prices, an increase in the endowment of one factor increases the output of the industry that uses that factor intensively and reduces the output of the other (or some other) industry. Due to Rybczynski (1955). Illustrated with Edgeworth production box. See figure.

Front 198

SA8000

Back 198

A system of international labor standards and mechanisms for compliance and certification overseen by the nonprofit Social Accountability International with participation by corporations, unions, and NGOs.

Front 199

Safeguard protection

Back 199

Import protection provided under the Safeguards Clause.

Front 200

Safeguards Clause

Back 200

Article XIX of the GATT that permits countries to restrict imports if they cause injury. Restrictions must be for a limited time and nondiscriminatory. See escape clause.

Front 201

SAI

Back 201

Social Accountability International

Front 202

Samueson-Stolper

Back 202

See Stolper-Samuelson Theorem.

Front 203

Sanction

Back 203

1. To approve or give permission for an action, as when an international organization sanctions the use of particular economic policies.

Front 204

Sanction

Back 204

2. A coercive measure used by a nation or group of nations against another as a penalty for violating international law or international norms. Usually plural: sanctions.

Front 205

Sanitary and phytosanitary regulations

Back 205

Government standards to protect health, of humans, plants, and animals. SPS measures are subject to rules in the WTO to prevent them from acting as NTBs.

Front 206

SAP

Back 206

Structural adjustment program.

Front 207

Satisficing

Back 207

Seeking or achieving a satisfactory outcome, rather than the best possible. Contrasts with the optimizing behavior usually assumed in economics and trade theory. Alternative models based on satisficing are spreading within economics, but not yet much in international.

Front 208

Saving

Back 208

The excess of income or revenue over expenditure for current use (as opposed to investment, which is expenditure for future use).

Front 209

Say's Law

Back 209

The proposition that "supply creates its own demand." The idea is clearest in a barter economy, where the act of supplying one thing is, intrinsically, the act of demanding something else. Named for Jean Baptiste Say, although he never stated it in this form.

Front 210

Scale economies

Back 210

Increasing returns to scale.

Front 211

Scarce

Back 211

Available in small supply; opposite of abundant. Usually meaningful only in relative terms, compared to demand and/or to supply at another place or time. See factor abundance, factor scarcity.

Front 212

Scarce factor

Back 212

The factor in a country's endowment with which it is least well endowed, relative to other factors, compared to other countries. May be defined by quantity or by price.

Front 213

Scarcity rent

Back 213

An economic rent that is due to something being scarce.

Front 214

Schedule

Back 214

1. A list. See tariff schedule.

Front 215

Schedule

Back 215

2. A graph of a list of data; thus also a curve. See demand schedule.

Front 216

Schengen Agreement

Back 216

An agreement (later, convention) signed in 1985 to remove all frontier controls and permit free movement of persons between the participating countries. In 1999 it was incorporated into the European Union. As of 2007, there were 15 participants: all EU15 countries except Ireland and the U.K., plus Iceland and Norway.

Front 217

Scientific tariff

Back 217

A made-to-measure tariff.

Front 218

Scitovszky indifference curve

Back 218

An indifference curve for a group of individuals representing the minimum needed to keep all of them at given levels of utility. A well-behaved family of such indifference curves is defined holding utilities of all but one individual constant and varying only the one. These are useful in discussing the gains from trade. Due to Scitovszky (1942).

Front 219

Screwdriver plant

Back 219

A factory that only assembles a product, from parts that were produced elsewhere. When FDI consists only of screwdriver plants, the host country often objects that it employes only low-skilled workers and/or that it provides no technology transfer.

Front 220

SDR

Back 220

Special Drawing Right

Front 221

SDRM

Back 221

Sovereign Debt Restructuring Mechanism

Front 222

Seasonal quota

Back 222

A restriction on the quantity of imports of a good for a specified period of the year.

Front 223

Seasonal tariff

Back 223

A tariff that is levied at different rates at different times of the year, usually on agricultural products, being highest at the time of the domestic harvest.

Front 224

Seattle Ministerial

Back 224

The ministerial meeting of the WTO that was held in Seattle, November 30 - December 3, 1999. It attracted a large group of protesters and ended without agreement among the participating countries.

Front 225

SEC

Back 225

United States Securities and Exchange Commission

Front 226

Second best

Back 226

Refers to what is the optimal policy when the true optimum (the first best) is unavailable due to constraints on policy choice. The Theory of Second Best says that a policy that would be optimal without such constraints (such as a zero tariff in a small country) may not be second-best optimal if other policies are constrained. See Lipsey and Lancaster (1956).

Front 227

Second-best argument for protection

Back 227

1. Any argument for protection that can be countered by pointing to a different and less distortionary policy that would achieve the same desired result at lower economic cost.

Front 228

Second-best argument for protection

Back 228

2. An argument for protection to partially correct an existing distortion in the economy when the first-best policy for that purpose is not available. For example, if domestic production generates a positive externality and a production subsidy to internalize it is not available, then a tariff may be second-best optimal.

Front 229

Second theorem of welfare economics

Back 229

The proposition of welfare economics that any Pareto optimal allocation can be attained by a competitive general equilibrium.

Front 230

Secondary sector

Back 230

The portion of an economy producing manufactured products, in contrast to the primary sector and the tertiary sector.

Front 231

Secondary tariffs

Back 231

Any charges imposed on imports in addition to the statutory tariff, such as an import surcharge.

Front 232

Section 201

Back 232

The escape clause of the U.S. Trade Act of 1974.

Front 233

Section 301

Back 233

The provision of U.S. trade law that permits private parties to seek redress through the U.S. government if their commercial interests have been harmed by illegal or unfair actions of foreign governments.

Front 234

Section 421

Back 234

The special safeguards provision of US law that was agreed to by China as part of its accession to the WTO. It is similar to Section 201, except that its injury requirement is weaker.

Front 235

Sector

Back 235

A portion of the economy producing a particular category of goods or services, as the agricultural sector, the banking sector, etc.

Front 236

Sectoral composition

Back 236

The relative sizes of the various sectors of an economy. Trade tends to change the sectoral composition, as export sectors expand and import competing sectors contract.

Front 237

Securities

Back 237

Stocks, bonds, and other tradable financial assets.

Front 238

Securities and Exchange Commission

Back 238

The United States SEC is the unit of the US government that regulates markets for investment, most importantly the various stock markets located in the US.

Front 239

Segmented markets

Back 239

The situation in which two or more markets for the same product are separated such that buyers in one market cannot buy in the other, thus permitting each market to sustain a different price. Models of international oligopoly often assume this.

Front 240

Seigniorage

Back 240

The difference between what money can buy and its cost of production. Therefore, seigniorage is the benefit that a government or other monetary authority derives from the ability to create money. In international exchange, if one country's money is willingly held by another, the first country derives these seigniorage benefits. This is the case of a reserve currency.

Front 241

Selective

Back 241

Applied to a trade policy, this means one that affects only some countries, not all, in contrast to MFN policy. Selectivity is an important concern in the use of safeguards, which countries often would prefer to make selective but are required by GATT Article XIX to be nondiscriminatory.

Front 242

Self correcting

Back 242

A problem that cures itself if allowed to do so. Thus, for example, a payments imbalance can cause its own elimination through the specie flow mechanism. Likewise, a recession will, eventually, be eliminated by the deflation that it causes.

Front 243

Self-sufficiency

Back 243

Provision by one's self of all of one's own needs. In international trade this means either not trading at all (autarky), or importing only non-necessities.

Front 244

Self-sufficiency argument for protection

Back 244

The view that a country is better off providing for its own needs than depending on imports. It may be based on fear that war or foreign governments will interrupt imports. This is a second-best argument, since many policies could provide for that contingency without sacrificing all the gains from trade.

Front 245

Sell short

Back 245

See short

Front 246

Sensitive

Back 246

In trade negotiations and agreements, countries often identify lists of particular sensitive products or sensitive sectors that they regard as especially vulnerable to import competition and that they wish to exempt from trade liberalization.

Front 247

Sequential game

Back 247

A game with multiple stages, played one after the other.

Front 248

Serious injury

Back 248

The injury requirement of the escape clause, understood to be more stringent than material injury but otherwise apparently not rigorously defined.

Front 249

Service

Back 249

1. A product that is not embodied in a physical good and that typically effects some change in another product, person, or institution. Contrasts with good. Trade in services is the subject of the GATS.

Front 250

Service

Back 250

2. To make the scheduled payments on a debt, usually including both interest and amounts towards repayment of the principal. See debt service.

Front 251

Service barrier

Back 251

Barrier to trade in a service, such as a limit on the functions of a foreign-owned service provider.

Front 252

SEZ

Back 252

Special economic zone.

Front 253

Shadow exchange rate

Back 253

1. The shadow price of foreign exchange.

Front 254

Shadow exchange rate

Back 254

2. What the market exchange rate would be in the absence of various market imperfections.

Front 255

Shadow price

Back 255

The implicit value or cost associated with a constraint. That is, the increased value that will be achieved by relaxing the constraint by one unit. When foreign exchange is rationed, the shadow price of foreign exchange becomes the relevant exchange rate for making decisions.

Front 256

Shallow integration

Back 256

Reduction or elimination of tariffs, quotas, and other barriers to trade in goods at the border, such as trade-limiting customs procedures. Contrasts with deep integration.

Front 257

Shelf life

Back 257

The length of time that a good can be stored while still remaining useful enough to sell. Important for both perishable goods and goods that may become obsolete for reasons of technology or fashion. Relevant for international trade when, for example, customs procedures cause delays.

Front 258

Shift and share analysis

Back 258

A tool for decomposing changes over time in economic magnitudes into those that hold various shares constant versus shifts in those shares. Applied to international trade, it is constant market share analysis.

Front 259

Shift parameter

Back 259

A parameter that determines only the position of a function, but not its slope or shape, usually by simply increasing the value of the function. For example, in the consumption function C=C0+cY, C0 and c are both parameters, but C0 is a shift parameter that can be useful for analyzing a change in the desire to consume.

Front 260

Shock

Back 260

1. An unexpected change.

Front 261

Shock

Back 261

2. Any change in an exogenous variable (although strictly speaking, models often fail to deal adequately with the complications of an exogenous change being expected).

Front 262

Shock therapy

Back 262

One strategy for moving from a centrally controlled economy to a market economy, consisting of a sudden removal of all government controls and rapid privatization.

Front 263

Short

Back 263

1. Used with "sell" or "sale," this means that the seller does not currently have the thing being sold, but intends to acquire it on the market prior to making delivery.

Front 264

Short

Back 264

2. Used by itself as a verb, it means to sell short, as "to short a currency," meaning to sell it forward in anticipation that its value on the spot market will fall.

Front 265

Short run

Back 265

Referring to a short time horizon, usually one in which some aspects of behavior that would vary over a longer time do not have time to do so. In trade models, it usually means that the employment of some factors of production is fixed. Contrasts with long run.

Front 266

Short-term

Back 266

1. Happening within the short run, or within a matter of months.

Front 267

Short-term

Back 267

2. In the case of bonds or capital flows, this refers to financial assets with a maturity of less than one year.

Front 268

Short-term capital flow

Back 268

A capital flow that is short-term; of interest because such capital flows are likely to be very liquid and therefore easily reversed and sources of instability in exchange markets.

Front 269

Short term interest rate

Back 269

1.The interest rate on any financial instrument of short maturity.

Front 270

Short term interest rate

Back 270

2.Denoted STIR, a particular financial instrument that is a futures contract on a short term interest rate, often a 3-month interest rate in any of a variety of currencies.

Front 271

Shrimp-Turtle Case

Back 271

A case filed in the WTO against the United States for restricting imports of shrimp from countries whose shrimp were caught by means that endangered sea turtles. The WTO ruled against the U.S., enraging many environmentalists.

Front 272

Shuttle trade

Back 272

The trade accomplished by individuals and groups traveling to other countries, buying goods, and bringing them home, often in their luggage, to resell. An important source of imports for Russia in the 1990s, some people traveling abroad several times a month for this purpose.

Front 273

Siegel's paradox

Back 273

The observation by Siegel (1972) that the if the forward rate is an unbiased predictor of the spot rate from the perspective of one currency, then it must be a biased predictor from the perspective of the other currency. It follows that profitable speculation will always be possible for risk-neutral speculators somewhere.

Front 274

Silver standard

Back 274

A monetary system in which the value of a currency is defined in terms of silver. If two currencies are both on a silver standard, then the exchange rate between them is approximately determined by their two prices in terms of silver.

Front 275

Singapore Issues

Back 275

The issues on which it was agreed to form working groups at the Singapore Ministerial: trade and investment, competition policy, transparency in government procurement, and trade facilitation.

Front 276

Singapore Ministerial

Back 276

The first ministerial meeting of the WTO, held in Singapore in December 9-13, 1996. It did not attempt to launch a round of trade negotiations, but it agreed to form working groups on several Singapore Issues.

Front 277

Single European Act

Back 277

Treaty, signed in Luxembourg and The Hague and entering into force 1 July 1987, completing the Single Market. See Europe 1992.

Front 278

Single global currency

Back 278

A proposal that the world should share a single currency, managed by a single international central bank.

Front 279

Single Market

Back 279

Removal of the remaining barriers among the countries of the European Union, permitting the free movement of goods, persons, services, and capital; also known as Europe 1992.

Front 280

Single undertaking

Back 280

A term, in trade negotiations, for requiring participants to accept or reject the outcome of multiple negotiations in a single package, rather than selecting among them.

Front 281

SITC

Back 281

Standard International Trade Classification

Front 282

Skill

Back 282

The abilities acquired by workers through education, training, and experience that permit them to be more productive. Essentially the same as human capital.

Front 283

Skill-biased

Back 283

A technological change or technological difference that is biased in favor of using more skilled labor, compared to some definition of neutrality.

Front 284

Skill intensive

Back 284

Describing an industry or sector of the economy that relies relatively heavily on inputs of skilled labor, usually relative to unskilled labor, compared to other industries or sectors. See factor intensity.

Front 285

Skilled labor

Back 285

Labor with a high level of skill or human capital. Identified empirically as labor earning a high wage, with a high level of education, or in an occupational category associated with these; sometimes crudely proxied as nonproduction workers.

Front 286

Slicing up the value chain

Back 286

Term for fragmentation used by Krugman (1996).

Front 287

Slump

Back 287

A decline in performance, either of a firm as a slump in sales or profits, or of a country as a slump in output or employment.

Front 288

SMAC function

Back 288

An acronym for the CES function based on the names of the four authors who introduced it in Arrow et al. (1961).

Front 289

Small country assumption

Back 289

The assumption in an economic model that a country is too small to affect world prices, incomes, or interest rates.

Front 290

Small open economy

Back 290

An economy that is small enough compared to the world markets in which it participates that (as a good approximation) its policies do not alter world prices or incomes. The country is thus a price taker in world markets. The term is normally applied to a country as a whole, although it is sometimes used in the context of only a single product.

Front 291

Smoot-Hawley Tariff

Back 291

The Tariff Act of 1930, this raised average U.S. tariffs on dutiable imports to 53% and provoked retaliation by other countries.

Front 292

Smuggle

Back 292

To take a good across a national border illegally. If the good itself is legal, the purpose is usually to avoid paying a tariff or to circumvent some other trade barrier.

Front 293

Snake

Back 293

An arrangement in which currencies were pegged to each other but left free to float as a group against the U.S. dollar. Named for the graph that the limits of variation of a currency would follow over time.

Front 294

Snake in the Tunnel

Back 294

An arrangement used briefly in Europe after the collapse of the Bretton Woods System in which European currencies were permitted to vary ±1% against each other (the snake but ±2.25% against the dollar (the tunnel).

Front 295

Social Accountability International

Back 295

A U.S.-based nonprofit organization that develops and implements the SA8000 international workplace standards.

Front 296

Social benefit

Back 296

The benefit to society as a whole from an event, action, or policy change. Includes externalities and deducts any benefits that are transfers from others, in contrast to private benefit.

Front 297

Social capital

Back 297

The networks of relationships among persons, firms, and institutions in a society, together with associated norms of behavior, trust, cooperation, etc., that enable a society to function effectively.

Front 298

Social clause

Back 298

A provision in an international trade agreement that would link trade liberalization and labor standards. A social clause has been discussed but not adopted in the WTO. The implementation of GSP by both the EU and the US does include a social clause.

Front 299

Social cost

Back 299

The cost to society as a whole from an event, action, or policy change. Includes negative externalities and does not count costs that are transfers to others, in contrast to private cost.

Front 300

Social dumping

Back 300

Export of a good from a country with weak or poorly enforced labor standards, reflecting the idea that the exporter has costs that are artificially lower than its competitors in higher-standards countries, constituting an unfair advantage in international trade.

Front 301

Social indifference curve

Back 301

A curve showing the combinations of goods that, when available to a country, yield the same level of social welfare.

Front 302

Social welfare function

Back 302

A function mapping allocations of goods to the individuals in an economy to a level of welfare for the economy as a whole. If it depends only on the levels of utility of the individuals rather than separately on the allocations, then it is a Bergsonian social welfare function.

Front 303

Socialism

Back 303

An economic system in which some of the individual needs of the population are provided by government. Since this is true of almost all societies, most would define as socialist only a countries where the level of this government provision exceeds some threshold, and many disagree on what that threshold should be.

Front 304

SOE

Back 304

1. State-owned enterprise.

Front 305

SOE

Back 305

2. Small open economy.

Front 306

Soft budget constraint

Back 306

This characterizes an economic entity, usually a firm, that is likely to receive government support if it gets into financial difficulty. Common in current and former state owned enterprises in economies in transition, this undermines their incentive to perform productively and efficiently. Due to Kornai (1979).

Front 307

Soft currency

Back 307

A currency that is not widely accepted in exchange for other currencies, in contrast to a hard currency.

Front 308

Soft landing

Back 308

Avoidance of economic hardship, in the form of inflation and/or especially recession, as a period of rapid economic growth comes to an end.

Front 309

Soft peg

Back 309

A pegged exchange rate without a strong commitment by the central bank to allow the money supply to vary as necessary to maintain it. A soft peg is particularly subject to speculative attack, and therefore is unlikely to be sustainable.

Front 310

Softwood lumber dispute

Back 310

A trade dispute between the U.S. and Canada that has extended over many years. Canada's forest land is mostly owned by provincial governments, which charge a "stumpage fee" for lumber companies to harvest trees. The U.S. claims that this fee is too low and constitutes an illegal subsidy.

Front 311

Sole importing agency

Back 311

An entity, either private or government, that has been granted by government the exclusive right to import certain goods.

Front 312

Solow model

Back 312

The neoclassical growth model. Also called the Solow-Swan Model.

Front 313

Solow neutral

Back 313

A particular specification of technological change or technological difference that is capital augmenting.

Front 314

Solow residual

Back 314

A measure of technological progress equal to the difference between the rate of growth of output and the weighted average of the rates of growth of capital and labor, with factor income shares as weights. Due to Solow (1957). Also called the growth of total factor productivity. Used to compare sources of growth across countries.

Front 315

Sound money

Back 315

A currency that is responsibly managed so as to avoid excessive inflation.

Front 316

Source country

Back 316

See FDI.

Front 317

Sovereign Debt Restructuring Mechanism

Back 317

A framework proposed by the IMF for permitting countries facing financial crises to restructure their debts in an orderly manner and minimally disruptive manner, analogous to bankruptcy for a private debtor.

Front 318

Sovereign spread

Back 318

The spread on the debt of a sovereign government, and thus a measure of the riskiness of lending to it and the cost to it of borrowing.

Front 319

Sovereign wealth fund

Back 319

Assets held by a government denominated in foreign currencies and in excess of those needed as international reserves. Normally these have been accumulated as a result of a sustained current account surplus.

Front 320

Sovereignty

Back 320

A country or region's power and ability to rule itself and manage its own affairs. Some feel that memberships in international organizations such as the WTO are a threat to their sovereignty.

Front 321

Spaghetti bowl

Back 321

Term frequently used by Bhagwati for the tangle of relationships created by multiple overlapping preferential trading arrangements.

Front 322

Spatial arbitrage

Back 322

Arbitrage on price differences in different locations.

Front 323

Special and differential treatment

Back 323

The GATT principle that developing countries be accorded special privileges, exempting them from some requirements of developed countries. It also permits tariff preferences among developing countries and by developed countries in favor of developing countries, as under the GSP.

Front 324

Special Drawing Right

Back 324

Originally intended within the IMF as a sort of international money for use among central banks pegging their exchange rates, the SDR is a transferable right to acquire another country's currency. Defined in terms of a basket of currencies, today it mainly plays the role of a unit of international account.

Front 325

Special economic zone

Back 325

These exist in several countries, including especially China, and their characteristics vary. Typically they are regions designated for economic development oriented toward inward FDI and exports, both fostered by special policy incentives that may include being an EPZ.

Front 326

Special entry procedure

Back 326

An administrative procedure that is required as a condition of entry for an imported good, such as transport by the importing country's national fleet, or entry through a specific port or customs station.

Front 327

Special product

Back 327

Same as sensitive product.

Front 328

Special safeguard

Back 328

As part of the Agreement on Agriculture of the WTO, a special provision for providing safeguard protection to specified agricultural products that had been subject to tariffication.

Front 329

Specialization

Back 329

1. Producing more than you need of some things, and less of others, hence "specializing" in the first. In international trade, this is just the opposite of self-sufficiency.

Front 330

Specialization

Back 330

2. Doing less than everything, as when a country produces fewer different goods than it consumes. In a 2x2 trade model, this means a country produces just one good. With many goods and countries, it means a country has some goods that it does not (and cannot competitively) produce. Also may be called complete specialization.

Front 331

Specie

Back 331

Coins, normally including only those made of precious metal.

Front 332

Specie flow mechanism

Back 332

Under the gold standard, the mechanism by which international payments would adjust. A country with high inflation would export less, import more, and thus lose specie, i.e., gold. With the money supply fixed to the quantity of gold, the resulting monetary contraction would reduce prices. Due to David Hume.

Front 333

Specific commitment

Back 333

Under the GATS, the identification of a category of services in which a country will apply national treatment and assure market access for foreign service providers.

Front 334

Specific factor

Back 334

A factor of production that is unable to move into or out of an industry. The term is used to describe factors that would not be of any use in other industries and also -- more loosely -- factors that could be used elsewhere but do not, in the short run, have the time or resources needed to move. See specific factors model. The term seems to come from Haberler (1937).

Front 335

Specific factors model

Back 335

A model in which some or all factors are specific factors. The most common version is the Ricardo-Viner Model, with one specific factor (often capital or land) in each industry plus another factor (often labor) that is mobile between them. But an extreme form of the model, the Cairnes-Haberler Model, has all factors specific.

Front 336

Specific tariff

Back 336

A tariff specified as an amount of currency per unit of the good.

Front 337

Specificity

Back 337

The property that a policy measure applies to one or a group of enterprises or industries, as opposed to all industries.

Front 338

Specificity rule

Back 338

The principle that the optimal policy for correcting a distortion is one that deals most directly, or specifically, with that distortion.

Front 339

Speculation

Back 339

The purchase or sale of an asset (or acquisition otherwise of an open position) in hopes that its price will rise or fall respectively, in order to make a profit. See destabilizing speculation and stabilizing speculation.

Front 340

Speculative attack

Back 340

In any asset market, the surge in sales of the asset that occurs when investors expect its price to fall. A common phenomenon in the exchange market, especially under an adjustable pegged exchange rate.

Front 341

Speculator

Back 341

Anyone who engages in speculation. May include those who transfer their assets into different forms (or currencies) in order to avoid a prospective capital loss.

Front 342

Spence-Dixit-Stiglitz

Back 342

Probably the more accurate identifier for what is often called the Dixit-Stiglitz function, since Spence (1976) preceded Dixit and Stiglitz (1977).

Front 343

Spillover

Back 343

A positive externality. The term is often used to refer to the transmission of an advanced technology from a foreign-owned firm (thus FDI) to domestic firms.

Front 344

Splintering

Back 344

Another term for fragmentation. Used by Bhagwati (1984).

Front 345

Spoke

Back 345

See hub and spoke integration.

Front 346

Sporadic dumping

Back 346

Intermittent dumping.

Front 347

Spot

Back 347

On the spot market.

Front 348

Spot market

Back 348

A market for exchange (of currencies, in the case of the exchange market) in the present (as opposed to a forward or futures market in which the exchange takes place in the future).

Front 349

Spot rate

Back 349

The exchange rate on the spot market. Also called the spot exchange rate.

Front 350

Spread

Back 350

1. The difference between the price one must pay to buy something, such as a currency, and the price one receives for selling it.

Front 351

Spread

Back 351

2. The difference between the interest rate on a bond and the risk free rate; thus the risk premium on the bond.

Front 352

SPS

Back 352

Sanitary and phytosanitary

Front 353

SST

Back 353

Stolper-Samuelson Theorem

Front 354

Stability and Growth Pact

Back 354

The 1997 agreement among the countries participating in the EMU to coordinate their fiscal policies in a way that would limit budget deficits and debt.

Front 355

Stabilization policy

Back 355

The use of monetary and fiscal policies to stabilize GDP, aggregate employment, and prices.

Front 356

Stabilize

Back 356

To reduce the size of fluctuations in an economic variable over time. Examples include stabilizing exchange rates by exchange market intervention; stabilizing the price of a commodity by operation of a buffer stock; and stabilizing GDP by macroeconomic stabilization policy.

Front 357

Stabilizing speculation

Back 357

Speculation that decreases the movements of the price in the market where the speculation occurs. See destabilizing speculation. Friedman (1953) provided a classic argument that speculation on a floating exchange rate would be stabilizing.

Front 358

Stable

Back 358

1. Of an equilibrium, that the dynamic adjustment away from equilibrium converges to the equilibrium.

Front 359

Stable

Back 359

2. Of an economic variable, not subject to large or erratic fluctuations.

Front 360

Stackelberg equilibrium

Back 360

A game theoretic equilibrium in which one player acts as a leader and another as a follower, the leader setting strategy taking account of the follower's optimal response. Contrasts with Nash equilibrium in which both players take the other's strategy as given.

Front 361

Stagflation

Back 361

The combination of high or increasing inflation with high or increasing unemployment (stagnation). Said to be due to Iain Macleod, who later would become Britain's Chancellor of the Exchequer, in a speech to Parliament in 1965.

Front 362

Stamp fee

Back 362

See para tariff.

Front 363

Stand-by agreement

Back 363

A lending facility in the IMF established in 1952 for financing short-term payments difficulties.

Front 364

Standard

Back 364

Rule and/or procedure specifying characteristics that must be met for a product to be sold in a country's domestic market, typically to protect health and safety. When a standard puts foreign producers at a disadvantage, it may constitute an NTB.

Front 365

Standard deviation

Back 365

A common measure of the dispersion of a random variable or of a sample of data. Defined as the square root of the variance.

Front 366

Standard error

Back 366

A common measure of the uncertainty associated with a numerical estimate, equal to the standard deviation of the associated error. In a regression analysis, standard errors are often reported with (or below) the coefficient estimates. As a rough rule of thumb, one can be 95% confident that the true coefficient is within ±2 standard errors of the estimate.

Front 367

Standard International Trade Classification

Back 367

A classification system for traded goods that is used as the basis for recording and reporting data on exports and imports, and that is maintained by the United Nations Statistics Division.

Front 368

Standard of living

Back 368

Usually refers to a country's per capita income, but sometimes takes account also of additional conditions that matter for a person's or household's wellbeing, such as leisure or the quality of the environment.

Front 369

Standard trade model

Back 369

There is probably no agreement as to what should be considered the "standard" trade model. But Krugman and Obstfeld (1991), which has been widely used through many editions, gives this name to a model with perfect competition, a curved PPF, and consumer preferences that an be represented by community indifference curves. It therefore includes the H-O Model and specific factors model as special cases.

Front 370

Standstill

Back 370

1. A commitment to refrain from introducing new measures that are not consistent with an agreement.

Front 371

Standstill

Back 371

2. In the Uruguay Round, the agreement not to introduce new GATT-inconsistent trade-restricting and trade-distorting measures during the negotiations. See rollback.

Front 372

Staple theory of economic growth

Back 372

A theory of growth based on production and export of "staples" -- which seems, in this context, to mean raw materials. The theory was designed for understanding the early history of Canada, and is said to be most relevant for economies with an abundance of open land. See Watkins (1963).

Front 373

State bank

Back 373

A bank owned by government, other than the central bank, and performing the same functions as a commercial bank. State banks are often directed by their governments to provide credit to activities or persons favored by the government.

Front 374

State-owned enterprise

Back 374

A firm owned by government. Relations between SOEs and private firms on international markets raise special problems for GATT, since SOEs may not respond normally to market forces and their actions may reflect government policies.

Front 375

State trading enterprise

Back 375

An entity of government that is responsible for exporting and/or importing specified products. See marketing board.

Front 376

Static comparative advantage

Back 376

The normal concept of comparative advantage, as opposed to dynamic comparative advantage.

Front 377

Static gains from trade

Back 377

The economic benefits from trade that arise in static models, including the efficiency gains from exploiting comparative advantage, the reduced costs from scale economies, reduction in distortion from imperfect competition, and increased product variety. Contrasts with dynamic gains from trade.

Front 378

Static model

Back 378

An economic model that has no explicit time dimension. A static model abstracts from the process by which an equilibrium or an optimum might be reached only over time, as well as from the dependence of the variables in the model itself on a changing past or future. Contrasts with dynamic model.

Front 379

Statistical tax

Back 379

See para tariff.

Front 380

Statistically significant

Back 380

1. Said of an estimated parameter if it is sufficiently different from zero, relative to an estimate of its probability distribution, that the probability of the actual parameter being zero is below some small threshold, such as 5%.

Front 381

Statistically significant

Back 381

2. An estimate that is more than twice, in absolute value, its standard error.

Front 382

Status quo

Back 382

The current situation. A preference for the status quo means a reluctance to change.

Front 383

Steady state

Back 383

A type of equilibrium, especially in a neoclassical growth model, in which those variables that are not constant grow over time at a constant and common rate.

Front 384

Stepping stone

Back 384

See stumbling bloc.

Front 385

Sterilize

Back 385

To use offsetting open market operations to prevent an act of exchange market intervention from changing the monetary base. With sterilization, any purchase of foreign exchange is accompanied by an equal-value sale of domestic bonds, and vice versa.

Front 386

Sterling

Back 386

British money, particularly the British pound, a formal name for which is the pound sterling.

Front 387

Sterling Area

Back 387

The group of countries that either used the British pound as their currency or pegged their currencies to the British pound. Most were current or former colonies of the United Kingdom. The sterling area ceased to be meaningful in the 1970s when countries largely switched to floating exchange rates.

Front 388

Sticky price model

Back 388

A model in which one or more prices are assumed not to change when the markets in which they apply move out of equilibrium. Internationally, this can result in a violation of the law of one price.

Front 389

STIR

Back 389

Short term interest rate

Front 390

Stochastic

Back 390

Random; arising from a process that generates different values each with some probability. Contrasts with deterministic.

Front 391

Stock

Back 391

1. A share in the ownership of a corporation.

Front 392

Stock

Back 392

2. A stock, or stock variable, is an economic magnitude that describes a quantity that exists at a point in time. Examples include a country's international reserves, a consumer's wealth, and a country's labor force. Contrasts with a flow.

Front 393

Stockpiling

Back 393

The storage of something in order to have it available in the future if the need for it increases. In international economics, stockpiling occurs for speculative purposes; by governments to provide for national security; and by central banks managing international reserves.

Front 394

Stolper-Samuelson derivative

Back 394

In general equilibrium, the effect of a small change in the price of a single good on the price of a factor of production.

Front 395

Stolper-Samuelson Theorem

Back 395

1. The proposition of the Heckscher-Ohlin Model that a rise in the relative price of a good raises the real wage of the factor used intensively in that industry and lowers the real wage of the other factor.

Front 396

Stolper-Samuelson Theorem

Back 396

2. The further proposition (requiring addition assumptions) that protection raises the real wage of a country's scarce factor and lowers the real wage of its abundant factor. Due to Stolper and Samuelson (1941).

Front 397

Store of value

Back 397

One of three basic properties of money: the ability to retain value over time, and therefore be useful for those who wish to sell something now and not spend he proceeds until later.

Front 398

Straight-line PPF

Back 398

The PPF that arises in the Ricardian Model, or in the HO Model if the two sectors have the same factor intensity. It is a downward sloping straight line with, therefore, a constant marginal rate of transformation.

Front 399

Strategic industry argument for a tariff

Back 399

The view that an industry serves a special "strategic" purpose in an economy and needs to be protected by a tariff to prevent it from disappearing. Views of what constitutes a strategic purpose are often vague and contradictory.

Front 400

Strategic trade policy

Back 400

The use of trade policies, including tariffs, subsidies, and even export subsidies, in a context of imperfect competition and/or increasing returns to scale to alter the outcome of international competition in a country's favor, usually by allowing its firms to capture a larger share of industry profits. The seminal contribution was Brander and Spencer (1981).

Front 401

Strategic trade policy argument for a tariff

Back 401

In an example of strategic trade policy, the use of a tariff to extract monopoly profits from a foreign monopolist, or to shift profit from foreign to domestic competitors in an international oligopoly. The monopoly case seems to have originated with Katrak (1977), but the classic treatment of the larger issue is Brander and Spencer (1984).

Front 402

Strategic variable

Back 402

An economic variable that is chosen with regard to, and sometimes with a view to influencing, economic behavior by someone else. Most frequently refers to the choice of firms in an oligopoly.

Front 403

Strategy

Back 403

In game theory, a set of actions and contingent actions for the several stages of a sequential game, that is, a plan of action for each stage contingent on the outcome of preceeding stages.

Front 404

Structural adjustment

Back 404

The reallocation of resources (labor and capital) among sectors of the economy in response to changing economic circumstances, including trading conditions, or changes in policy.

Front 405

Structural adjustment program

Back 405

The list of budgetary and policy changes required by the IMF and World Bank in order for a developing country to qualify for a loan. This "conditionality" typically includes reducing barriers to trade and capital flows, tax increases, and cuts in government spending.

Front 406

Structural Impediments Initiative

Back 406

A 1990 agreement between the United States and Japan to reduce their bilateral trade imbalance. Among other commitments, the U.S. promised to reduce its budget deficit and encourage saving, while Japan promised to increase spending and facilitate entry of new businesses.

Front 407

Structural unemployment

Back 407

Unemployment that results from a mismatch between supply and demand for workers. That is, workers who cannot find jobs, not because there are no jobs, but because they are not qualified for the jobs that are available.

Front 408

Structure of protection

Back 408

The pattern of protection across sectors of an economy: which sectors are highly protected and which not, perhaps in terms of effective protection, or - even better - in terms of their expansion and contraction that would occur if all protection were removed.

Front 409

Stumbling bloc

Back 409

The term that Bhagwati (1991) used, together with building bloc(k) or stepping stone, to address whether PTAs help move the world toward or away from multilateral free trade. Also stumbling block.

Front 410

Stylized fact

Back 410

Something that is has been observed to be true, or close to true, sufficiently often and in enough different contexts that an economic theory should be consistent with it. Those who present a set of stylized facts typically do not attempt to support them with data, but simply list them so as to motivate their theoretical analysis.

Front 411

Subcontracting

Back 411

Delegation by one firm of a portion of its production process, under contract, to another firm, including in another country. A form of fragmentation.

Front 412

Subgame

Back 412

A portion of a game that is itself a game.

Front 413

Subgame perfect

Back 413

Said of a Nash equilibrium if the portions of the strategies of that equilibrium that pertain to each subgame are also Nash for their subgame. This is a useful refinement of Nash equilibrium in that it rules out strategies that are not credible for subgames.

Front 414

Subsidiary

Back 414

A firm that is owned and ultimately controlled by another firm. Thus a multinational corporation has a parent in once country and one or more subsidiaries in others.

Front 415

Subsidy

Back 415

A payment by government, perhaps implicit, to the private sector in return for some activity that it wants to reward, encourage, or assist. Under WTO rules, subsidies may be prohibited, actionable, or non-actionable.

Front 416

Subsidy equivalent

Back 416

The size of the direct cash subsidy that would have the same effect on behavior -- usually production but sometimes consumption -- as some other policy. See producer subsidy equivalent.

Front 417

Subsistence economy

Back 417

An economy composed mostly of subsistence farmers.

Front 418

Subsistence farmer

Back 418

1. Literally, a farmer who produces mostly only for the consumption of the farmer's own household.

Front 419

Subsistence farmer

Back 419

2. The term also seems to be used for farmers who grow a crop to sell, but whose income from doing so barely allows them to survive. When trade or trade policy is said to hurt subsistence farmers, it must be under this definition.

Front 420

Substitute

Back 420

One good is a substitute for another if an increase in demand for one (or a fall in its price) causes a decrease in demand for the other.

Front 421

Substitute in production

Back 421

One good is a substitute for another in production if an increase in output of one (or a rise in its price) causes a decrease in output of the other.

Front 422

Substitution effect

Back 422

That portion of the effect of price on quantity demanded that reflects the changed tradeoff between the good and other alternatives. Contrasts with income effect.

Front 423

Sunk cost

Back 423

A cost that has already been incurred and cannot be reversed, which therefore cannot be avoided by current or future action. Sunk costs should therefore be irrelevant to current decisions.

Front 424

Sunset clause

Back 424

A provision within a piece of legislation providing for its expiration on a specified date unless it is deliberately renewed.

Front 425

Sunset industry argument

Back 425

The argument, in contrast to the infant industry argument, that a mature industry should be provided protection, either to help it restore its competitiveness, or to cushion its exit from the economy.

Front 426

Super 301

Back 426

A U.S. law authorizing USTR to identify the most significant unfair trade practices confronting U.S. exports and to seek to eliminate them. In contrast to Section 301, this does not require a private party to initiate the action.

Front 427

Superior good

Back 427

A good the demand for which is income elastic.

Front 428

Supernatural trading bloc

Back 428

A trading bloc among countries that are natural trading partners but that, because its tariff preferences are too extreme or transport costs with the outside world are too low, reduces world welfare. Due to Frankel (1997).

Front 429

Supply

Back 429

1. The act of offering a product for sale.

Front 430

Supply

Back 430

2. The quantity offered for sale.

Front 431

Supply

Back 431

3. The quantities offered for sale at various prices; the supply curve.

Front 432

Supply chain

Back 432

The sequence of steps, often done in different firms and/or locations, needed to produce a final good from primary factors, starting with processing of raw materials, continuing with production of perhaps a series of intermediate inputs, and ending with final assembly and distribution.

Front 433

Supply curve

Back 433

The graph of quantity supplied as a function of price, normally upward sloping, straight or curved, and drawn with quantity on the horizontal axis and price on the vertical axis. Supply curves for exports and for foreign exchange usually have the same qualitative properties as supply curves for labor, being potentially backward bending.

Front 434

Supply elasticity

Back 434

The elasticity of a supply function, usually with respect to price.

Front 435

Supply function

Back 435

The mathematical function explaining the quantity supplied in terms of its various determinants, including price; thus the algebraic representation of the supply curve.

Front 436

Supply price

Back 436

The price at which a given quantity is supplied; the supply curve viewed from the perspective of price as a function of quantity.

Front 437

Supply shock

Back 437

A shock on the supply side of a market. Thus an unexpected shift, up or down, in the supply curve.

Front 438

Supply side

Back 438

Anything that contributes to supply, as opposed to demand, in a market or, especially, in the aggregate economy; aggregate supply.

Front 439

Supply side constraint

Back 439

This typically refers to any of a list of reasons why a developing country may find it hard to exploit its comparative advantage if there is trade liberalization. The list includes inadequate infrastructure, low productivity, and lack of information about markets. Some reflect legitimate needs for trade facilitation, but others are just excuses for protectionism.

Front 440

Support price

Back 440

The price guaranteed by a government price support program. Typically it requires that the government buy the product at that price. If the market clearing price is lower, this raises the price to that level and causes the government to acquire the resulting excess supply.

Front 441

Supranational

Back 441

Transcending nations, especially through organizations that encompass more than one nation, such as the European Union

Front 442

Surplus

Back 442

In the balance of payments, or in any category of international transactions within it, the surplus is the sum of credits minus the sum of debits. Also called simply the "balance" for that category. Thus the balance of trade is the same as the surplus on trade, or the trade surplus, and similarly for merchandise trade, current account, and capital account.

Front 443

Sustainable development

Back 443

Economic development that is achieved without undermining the incomes, resources, or environment of future generations.

Front 444

Swan diagram

Back 444

A diagram illustrating the conflict between internal balance and external balance as they respond to its fiscal deficit and its costs relative to the world (and thus its exchange rate.) Due to Swan (1955).

Front 445

Swap

Back 445

1. In exchange markets, this is a simultaneous sale of a currency on the spot market together with a purchase of the same amount on the forward market. By combining these two transactions into a single one, transactions costs may be reduced.

Front 446

Swap

Back 446

2. An arrangement between central banks whereby they each agree to lend their currency to the other.

Front 447

Swap rate

Back 447

The difference between the spot and forward exchange rates. Thus the price of a swap.

Front 448

Sweatshop

Back 448

A manufacturing workplace that treats its workers inhumanely, paying low wages, imposing harsh and unsafe working conditions, and demanding levels of performance that are harmful to the workers.

Front 449

Swiss formula

Back 449

A formula devised during the Tokyo Round for reducing tariffs in a manner that would harmonize them. The formula is tnew=(toldM)/(told+M), where the t's are the new and old tariffs, in percent, and M is a number that turns out to be the maximum possible new tariff. Somebody, presumably Swiss, was very clever!

Front 450

TAA

Back 450

Trade adjustment assistance

Front 451

Takeover

Back 451

The acquisition by one firm of another.

Front 452

Target

Back 452

1. Any objective of economic policy.

Front 453

Target

Back 453

2. The value of an economic variable that policy makers regard as ideal and use as the basis for setting policy. Contrasts with instrument.

Front 454

Target

Back 454

3. The level of an exchange rate that guides exchange market intervention by a central bank or exchange stabilization fund.

Front 455

Tariff

Back 455

A tax on trade, usually an import tariff but sometimes used to denote an export tax. Tariffs may be ad valorem or specific.

Front 456

Tariff Act of 1930

Back 456

Smoot-Hawley Tariff.

Front 457

Tariff-and-retaliation game

Back 457

The game of countries setting tariffs knowing that by doing so they alter the terms of trade to their own advantage. This is one very specific form of trade war.

Front 458

Tariff binding

Back 458

A commitment, under the GATT, by a country not to raise the tariff on an item above a specified level, called the bound rate or bound tariff.

Front 459

Tariff classification

Back 459

See tariff heading.

Front 460

Tariff Commission

Back 460

The name of what is today the International Trade Commission as of its founding in 1916, until it was renamed the ITC in 1975.

Front 461

Tariff dispersion

Back 461

The inequality of the tariffs levied by a country. It is generally the case that, for a given average level of a country's tariffs, greater dispersion causes greater distortion.

Front 462

Tariff equivalent

Back 462

The level of tariff that would be the same, in terms of its effect, usually on the quantity of imports, as a given NTB.

Front 463

Tariff escalation

Back 463

In a country's tariff schedule, the tendency for tariffs to be higher on processed goods than on the raw materials from which they are produced. This causes the effective rate of protection on these goods to be higher than the nominal rate and puts LDC producers of primary products at a disadvantage.

Front 464

Tariff factory

Back 464

A production facility established by a foreign firm through FDI in a country in spite of its higher production costs, in order to serve its market without paying a tariff.

Front 465

Tariff heading

Back 465

The descriptive name attached to a tariff line, indicating the product to which it applies. Same as tariff classification.

Front 466

Tariff items 806 & 807

Back 466

Lines 806.30 and 807.00 of the U.S. tariff schedule, which permit goods that have been sent abroad for processing or assembly to be admitted subject to duty only on the value added abroad.

Front 467

Tariff jumping

Back 467

The establishment of a production facility within a foreign country, through FDI or licensing, in order to avoid a tariff.

Front 468

Tariff line

Back 468

A single item in a country's tariff schedule.

Front 469

Tariff peak

Back 469

In a tariff schedule, a single tariff or a small group of tariffs that are particularly high, often defined as greater than three times the average nominal tariff.

Front 470

Tariff preference

Back 470

A lower (or zero) tariff on a product from one country than is applied to imports from most countries. This violation of the MFN principle is permitted in special cases, including some preferential trade arrangements and the GSP.

Front 471

Tariff protection

Back 471

Protection provided by a tariff.

Front 472

Tariff quota

Back 472

A tariff rate quota.

Front 473

Tariff rate quota

Back 473

A combination of an import tariff and an import quota in which imports below a specified quantity enter at a low (or zero) tariff and imports above that quantity enter at a higher tariff. Also called a tariff quota.

Front 474

Tariff redundancy

Back 474

See redundant tariff.

Front 475

Tariff revenue

Back 475

See revenue.

Front 476

Tariff schedule

Back 476

The list of all of a country's tariffs, organized by product.

Front 477

Tariff Schedule of the United States

Back 477

The official product nomenclature for specifying tariffs in the United States used until 1988, when it was replaced with the harmonized system.

Front 478

Tariff wall

Back 478

A tariff, presumably a high one, perhaps in lots of industries. The term is used to highlight the difficulty foreign sellers have in getting their products past the tariff, often in the context of the incentive therefore provided for FDI. See foreign investment argument for protection.

Front 479

Tariffication

Back 479

Conversion of NTBs to tariffs at the level of their tariff equivalents. In the Uruguay Round, agricultural NTBs were tariffied and bound, the purpose being to replace unwieldy NTBs with tariffs that can then become the subject of negotiation.

Front 480

Tariffs and retaliation

Back 480

The process of one country raising its tariff to secure some advantage, to which another country responds by raising its tariff, the first raises its tariff still further, etc. See retaliation, trade war. Classic treatment is Johnson (1954).

Front 481

Tastes

Back 481

In economics, this is usually a synonym for preferences, in the sense of attitudes toward different goods.

Front 482

Tax base

Back 482

The amount on which a taxpayer pays taxes, as for example their taxable income in the case of an income tax, or the taxable value of their property in the case of a property tax.

Front 483

Tax break

Back 483

Any provision of the tax code, such as a tax credit or tax deduction, that reduces the amount of tax that a firm or individual will pay, perhaps in return for behavior that the government wishes to encourage.

Front 484

Tax buoyancy

Back 484

A measure of how rapidly the actual revenue from a tax rises (including that due to any change in the tax law) as the tax base rises. It is defined, like an elasticity, as %DR / %DB where R is the real revenue from the tax, B is the real tax base, and %D is percent change. It differs from tax elasticity in not holding the tax law constant.

Front 485

Tax compliance

Back 485

The extent to which economic agents pay the taxes that their government has levied. In developing countries, a low rate of tax compliance is often a significant hindrance to economic development.

Front 486

Tax concession

Back 486

A special provision for a firm not to pay a tax that it would otherwise owe, provided by a local, state, or national government as an inducement to invest. Competition among governments, seeking to attract investment, to some extent undermines the benefits that countries might otherwise receive from FDI.

Front 487

Tax credit

Back 487

A provision of the tax code that specifies an amount by which a taxpayer's taxes will be reduced in return for some behavior.

Front 488

Tax cum subsidy

Back 488

This phrase is used to indicate a policy that may be either a tax or a subsidy, depending on which will achieve the stated objective, which is usually to alter or set a relative price. The word "cum" here is Latin for "with," which is slightly in appropriate, since in this context what is usually meant is "or."

Front 489

Tax deduction

Back 489

A provision of the tax code that specifies an amount by which a taxpayer's tax base will be reduced in return for some behavior, resulting in a lowering of the amount of tax paid that depends on their tax rate.

Front 490

Tax elasticity

Back 490

The elasticity of the real revenue from a tax with respect to the real tax base, for a given tax law.

Front 491

Tax haven

Back 491

A location, usually a country, where either rates of taxation or levels of enforcement are low, so that high taxes in other countries can be avoided by moving or locating there.

Front 492

Tax incidence

Back 492

How the burden of a tax (or tariff) is distributed between buyers and sellers. A tax typically both raises the price to buyers and lowers it to sellers, by amounts that sum to the tax.

Front 493

Tax rebate

Back 493

The refund of a tax that has been overpaid. Some countries rebate certain taxes that have been paid on goods that are then exported.

Front 494

TBT

Back 494

Technical barrier to trade

Front 495

TEC

Back 495

Transatlantic Economic Council

Front 496

Technical barrier to trade

Back 496

A technical regulation or other requirement (for testing, labeling, packaging, marketing, certification, etc.) applied to imports in a way that restricts trade.

Front 497

Technical change

Back 497

Usually a synonym for technological progress.

Front 498

Technical inefficiency

Back 498

See X-efficiency.

Front 499

Technical progress

Back 499

Same as technological progress.

Front 500

Technical regulation

Back 500

A requirement of characteristics (such as dimensions, quality, performance, or safety) that a product must meet in order to be sold on a country's market. See standards.

Front 501

Technique

Back 501

1. A specific method of production, using a particular combination of inputs.

Front 502

Technique

Back 502

2. A point on an isoquant.

Front 503

Technique of analysis

Back 503

A method used for displaying or manipulating economic models.

Front 504

Technological change

Back 504

A change in a production function that alters the relationship between inputs and outputs. Normally it is understood to be an improvement in technology, or technological progress, and it is of interest in international economics for its implications for trade and economic welfare.

Front 505

Technological difference

Back 505

A difference in production functions, usually for the same industry compared between two countries, such that one country has higher output for any given input than the other.

Front 506

Technological progress

Back 506

A technological change that increases output for any given input.

Front 507

Technology

Back 507

1. The complete set of knowledge about how to produce in an economy at a point in time, including techniques of production that are available but not economically viable.

Front 508

Technology

Back 508

2. The set of production functions available to an economy.

Front 509

Technology

Back 509

3. Referring to industries that are experiencing, or recently have experienced, technological progress.

Front 510

Technology gap

Back 510

The presence in a country of a technology that other countries do not have, so that it can produce and export a good whose cost might otherwise be higher than abroad.

Front 511

Technology intensive

Back 511

Referring to an industry in which technology is advancing rapidly, and thus where successful operation requires heavy expenditure on R&D.

Front 512

Technology spillover

Back 512

Same as technology transfer, though usually not done intentionally by the transferor.

Front 513

Technology transfer

Back 513

The communication or transmission of a technology from one country to another. This may be accomplished in a variety of ways, ranging from deliberate licensing to reverse engineering.

Front 514

Temporary admission

Back 514

Permission to import a good duty free for use as an input in producing for export. See drawback, export processing zone.

Front 515

Temporary producer movement

Back 515

A mode of supplying a traded service through the temporary movement of persons employed by the supplier into the buyer's country.

Front 516

Tender

Back 516

To offer a product for sale at a specified price, usually in response to a specific request from a potential purchaser. Government procurement, for example, that is not open to international tendering is a form of nontariff barrier.

Front 517

Tequila Crisis

Back 517

Refers to the economic and financial crisis that began in late 1994 when the Mexican peso devalued, causing disruption in the Mexican economy that then spread through other countries of Latin America. Peso crisis.

Front 518

Term structure of interest rates

Back 518

Yield curve

Front 519

Terms of trade

Back 519

1. The relative price, on world markets, of a country's exports compared to its imports. See improve the terms of trade.*

Front 520

Terms of trade

Back 520

2. Outside of the economics of international trade, this expression often refers more broadly to the policies, facilities, and other arrangements that characterize the trade between one country or group of countries and another.

Front 521

Terms of trade argument

Back 521

Same as the optimal tariff argument, which works by restricting the quantity of trade in order to improve the terms of trade.

Front 522

Terms of trade controversy

Back 522

Disagreement over the validity of the Prebisch-Singer Hypothesis.

Front 523

Terms of trade effect

Back 523

The effect of a tariff on the terms of trade. By reducing the demand for imports, a tariff levied by a large country causes the prices of those imported goods to fall on the world market relative to the country's exports, improving its terms of trade.

Front 524

Tertiary sector

Back 524

The portion of an economy producing services, in contrast to the primary sector and the secondary sector.

Front 525

Textbook Heckscher-Ohlin Model

Back 525

The 2x2x2 model.

Front 526

Textiles

Back 526

Cloth. The textile sector is important for trade, along with apparel, because with some exceptions (synthetics) it is a very labor intensive sector, and it is therefore a likely source of comparative advantage for developing countries. See textiles and apparel.

Front 527

Textiles and apparel

Back 527

These largely labor intensive sectors are often the first manufactured exports of developing countries. Because of the threat to employment in developed countries, however, they have long been protected there. This is only now changing under the WTO's ATC.

Front 528

TFP

Back 528

Total Factor Productivity

Front 529

Theoretical proposition

Back 529

A property of an economic model that is derived (deduced) from its assumptions. It usually takes the form of a prediction about something that would be true in the world if the world conformed to the model's assumptions, and perhaps also to additional assumptions specified in the proposition.

Front 530

Theory of second best

Back 530

See second best.

Front 531

Third best

Back 531

Even further from optimal than second best.

Front 532

Third World

Back 532

Refers to all less developed countries as a group. Term originated during the Cold War, when the "first world" was the developed capitalist countries and the "second world" was the communist countries, although these terms were seldom used.

Front 533

Tied aid

Back 533

Aid that is given under the condition that part or all of it must be used to purchase goods from the country providing the aid.

Front 534

Tiger economy

Back 534

Any one of several economies that have developed extremely rapidly over a period of years. Especially the Four Tigers, but also a number of others who began to grow more recently.

Front 535

Tight money

Back 535

A monetary policy that is contractionary, thus with high interest rates for borrowing. Contrasts with easy money.

Front 536

Time inconsistency

Back 536

The problem that arises when a decision maker, especially a policy maker, prefers one policy in advance but a different one when the time to implement arrives. Knowing this, others will not find the commitment to the first policy credible.

Front 537

Time series variation

Back 537

The changes in an economic variable that occur over time for a given economic unit such as a consumer, firm, industry, or country. Often used to seek evidence of effects of macroeconomic and financial policies. Contrasts with cross sectional variation.

Front 538

TLC

Back 538

Tratado de Libre Comercio (Spanish for Free Trade Agreement)

Front 539

TNC

Back 539

Transnational corporation.

Front 540

Tobin tax

Back 540

A small tax on international currency transactions, proposed by James Tobin in 1978 to discourage destabilizing short-term international capital movements. Advocates suggest a tax of 0.1-0.25% with revenue used for urgent global priorities. Others question enforceability.

Front 541

Tobin's Q

Back 541

The ratio of a firm's market value to the replacement cost of its assets. Used as a guide to investment. Due to Tobin (1969).

Front 542

Tokyo Round

Back 542

The 7th round of multilateral trade negotiations that took place under GATT auspices, commencing 1973 and completed in 1979. This was the first trade round to deal with NTBs, by negotiating the Tokyo Round Codes.

Front 543

Tokyo Round Codes

Back 543

The codes of behavior negotiated in the Tokyo Round covering several NTBs, arising from customs valuation, standards, government procurement, etc. Participation was optional, each code covering only those countries that chose to sign.

Front 544

Torquay Round

Back 544

The third (1950-51) of the trade rounds conducted under the auspices of the GATT, initiated at the town of Torquay, U.K.

Front 545

TOT

Back 545

Terms of trade

Front 546

Total Aggregate Measurement of Support

Back 546

Same as aggregate measurement of support.

Front 547

Total factor productivity

Back 547

A measure of the output of an industry or economy relative to the size of all of its primary factor inputs. The term, and its acronym TFP, often refers to the growth of this measure, as measured by the Solow residual. See also Hicks-neutral technical progress.

Front 548

TPA

Back 548

Trade Promotion Authority

Front 549

TPRM

Back 549

Trade Policy Review Mechanism

Front 550

Tradable

Back 550

1. Capable of being traded among countries.

Front 551

Tradable

Back 551

2. A good or service that is tradable; with tradables referring to an aggregate of such goods and services.

Front 552

Trade

Back 552

1. To exchange one item for another, one person or firm providing an item (good, service, asset, etc.) to another person or firm, with the latter providing a different item to the first in return, as payment.

Front 553

Trade

Back 553

2. To export and/or import.

Front 554

Trade

Back 554

3. The quantity or value of exports and/or imports.

Front 555

Trade Act of 1974

Back 555

Actually signed on Jan. 3, 1975, this major piece of trade legislation not only renewed and revised the authority to negotiate trade agreements, it also dealt with an expanded list of issues including tariff preferences, unfair trade, the escape clause, and adjustment assistance, and it introduced fast track authority.

Front 556

Trade adjustment assistance

Back 556

A program of adjustment assistance for workers and firms in industries that have suffered from competition with imports. In the U.S., TAA began with the Trade Expansion Act of 1962, and it has been renewed and expanded since then, including as part of the NAFTA.

Front 557

Trade agreement

Back 557

A negotiated agreement among two or more countries to limit or alter their policies with respect to trade. A common type in recent years has been agreements to form preferential trading arrangements.

Front 558

Trade and investment

Back 558

The interactions between, and the rules and policies governing, international trade and foreign direct investment. One of the Singapore Issues.

Front 559

Trade-and- transformation- curve diagram

Back 559

One of the most frequently used diagrams of trade theory, using a transformation curve together with one or more price lines and sometimes community indifference curves to illustrate production, consumption, and trade and the effects on them of tariffs and other exogenous changes.

Front 560

Trade and Wages Debate

Back 560

The debate between and among trade economists and labor economists as to the reason for the increase in the relative wages of skilled labor, compared to unskilled labor, in the U.S. starting in the 1980s. A central issue was the importance of "trade" as a contributing cause.

Front 561

Trade balance

Back 561

Balance of trade.

Front 562

Trade barrier

Back 562

An artificial disincentive to export and/or import, such as a tariff, quota, or other NTB.

Front 563

Trade bias

Back 563

See bias of a trade regime.

Front 564

Trade bloc

Back 564

Trading bloc.

Front 565

Trade cost

Back 565

Any cost incurred in order to engage in international trade, including transport cost, insurance, etc.

Front 566

Trade creation

Back 566

Trade that occurs between members of a preferential trading arrangement that replaces what would have been production in the importing country were it not for the PTA. Associated with welfare improvement for the importing country since it reduces the cost of the imported good. Concept due to Viner (1950).

Front 567

Trade credit

Back 567

1. An amount that is loaned to an exporter to be repaid when the exports are paid for by the foreign importer.

Front 568

Trade credit

Back 568

2. Credit extended by an exporter to an importer, permitting them to pay at some time after they take delivery.

Front 569

Trade deficit

Back 569

Imports minus exports of goods and services. See deficit.

Front 570

Trade deflection

Back 570

Entry, into a low-tariff member of a free trade area, of imports intended for a purchaser in its higher-tariff partner.

Front 571

Trade dependency

Back 571

See dependency theory.

Front 572

Trade dispute

Back 572

Any disagreement between nations involving their international trade or trade policies. Today, most such disputes appear as cases before the WTO dispute settlement mechanism, but prior to the WTO, some were handled by the GATT while others were dealt with bilaterally, sometimes precipitating trade wars.

Front 573

Trade distortion

Back 573

A policy that alters the amount of trade, up or down, from what it would otherwise be. Agricultural subsidies, even if not based on quantity of exports, are trade distorting unless they are paid independently of whether and how much farmers produce.

Front 574

Trade diversion

Back 574

Trade that occurs between members of a preferential trading arrangement that replaces what would have been imports from a country outside in the PTA. Associated with welfare reduction for the importing country since it increases the cost of the imported good. Concept due to Viner (1950).

Front 575

Trade Expansion Act of 1962

Back 575

The legislation authorizing US participation in the Kennedy Round, replacing the Reciprocal Trade Agreements Act of 1934. It also established Trade Adjustment Assistance.

Front 576

Trade facilitation

Back 576

One of the Singapore Issues, this refers in the Doha Declaration to "expediting the movement, release and clearance of goods, including goods in transit." This includes customs procedures and other practices that may add to the cost or time requirements of trade.

Front 577

Trade finance

Back 577

The mechanisms by which firms engaged in trade cover its costs, including borrowing, forfaiting, etc.

Front 578

Trade flow

Back 578

The quantity or value of a country's bilateral trade with another country.

Front 579

Trade imbalance

Back 579

A trade surplus or trade deficit.

Front 580

Trade in services

Back 580

The provision of a service to buyers within or from one country by a firm in or from another country. Because such transactions do not involve a physical product crossing borders, they were not regarded as "trade" and were not covered by GATT. In the mid-1980s they were recognized as a form of trade and were incorporated into the WTO's GATS.

Front 581

Trade in tasks

Back 581

International fragmentation

Front 582

Trade indicator

Back 582

A trade indicator can be any sort of data, or even an anecdote, that suggests how the volume or composition of trade compares across time or across countries. Trade indicators are published by the World Bank and the OECD, among others.

Front 583

Trade indifference curve

Back 583

In a diagram measuring quantities of exports and imports, a curve representing amounts of trade among which a freely trading country is indifferent, based on its community indifference curves and its transformation curve. Due to Meade (1952).

Front 584

Trade integration

Back 584

The process of increasing a country's participation in world markets through trade, accomplished by trade liberalization.

Front 585

Trade Integration Mechanism

Back 585

A policy introduced in 2004 by the IMF to make resources more "predictably available" to member countries meeting balance of payments problems due to multilateral trade liberalization.

Front 586

Trade intensity index

Back 586

For a group or bloc of countries, usually in a PTA, the ratio of the bloc's share of intra-bloc trade to the bloc's share in world trade. If greater than one, this is said to suggest that the bloc displays trade diversion. Index seems to be due to Frankel (1997).

Front 587

Trade liberalization

Back 587

Reduction of tariffs and removal or relaxation of NTBs.

Front 588

Trade minister

Back 588

The government official, at the ministerial or cabinet level, primarily responsible for issues of international trade policy; the minister of international trade. In the U.S. that is the USTR.

Front 589

Trade mission

Back 589

1. An office or other facility maintained in one country by the government of another to help residents of both to engage in international trade between them.

Front 590

Trade mission

Back 590

2. A group of persons from business and government of a country that travels to another country to promote its exports.

Front 591

Trade model

Back 591

An economic model that explains certain causes, effects, and/or characteristics of international trade.

Front 592

Trade negotiation

Back 592

A negotiation between pairs of governments, or among groups of governments, exchanging commitments to alter their trade policies, usually involving reductions in tariffs and sometimes nontariff barriers.

Front 593

Trade openness

Back 593

See openness.

Front 594

Trade-parity pricing

Back 594

This refers to setting prices -- or allowing prices to be set by the market -- at levels determined by world prices. In countries such as India, where prices of certain products such as oil have been traditionally controlled by government, trade parity pricing may be a radical change for producers and consumers.

Front 595

Trade pattern

Back 595

What goods and services a country trades, with whom, and in what direction. Explaining the trade pattern is one of the major purposes of trade theory, especially which goods a country will export and which it will import. This may be done directly, as the commodity pattern of trade, in indirectly as the factor content pattern of trade.

Front 596

Trade policy

Back 596

Any policy affecting international trade, including especially tariffs and nontariff barriers.

Front 597

Trade Policy Review Mechanism

Back 597

The periodic review of the trade policies and practices of the member countries of the WTO, conducted and published by the WTO. The review may, if appropriate, call for reform, but there is no immediate consequence of a determination that a member is out of compliance.

Front 598

Trade preference

Back 598

A policy of admitting imports from one or more countries at lower (perhaps zero) tariffs than apply to otherwise comparable imports from other countries. See preferences and Preferential Trading Arrangement.

Front 599

Trade Promotion Authority

Back 599

New (in 2000) name being used for Fast Track.

Front 600

Trade regime

Back 600

The rules and practices prevailing in a country's international trade relationships.

Front 601

Trade-related intellectual property rights

Back 601

This was the term used for bringing intellectual property protection into the Uruguay Round of trade negotiations under the pretense that only trade-related aspects of the issue would be included. In practice, that did not constrain the coverage of the resulting agreement.

Front 602

Trade-related investment measure

Back 602

Any policy applied to foreign direct investment that has an impact on international trade, such as an export requirement. The Uruguay Round included negotiations on TRIMs.

Front 603

Trade remedy

Back 603

Protection provided by any of the following: anti-dumping duties, countervailing duties, or safeguards protection.

Front 604

Trade restriction

Back 604

Any policy that reduces the amount of exports or imports, such as a tariff, quota, or other nontariff barrier.

Front 605

Trade Restrictiveness Index

Back 605

A theoretically consistent index of the restrictiveness of trade policy -- both tariffs and NTBs -- developed by Anderson and Neary (1996).

Front 606

Trade round

Back 606

A set of multilateral negotiations, held under the auspices of the GATT and WTO, in which countries exchange commitments to reduce tariffs and agree to extensions of the GATT rules. Most recent were the Kennedy, Tokyo, Uruguay, and Doha Rounds.

Front 607

Trade sanction

Back 607

Use of a trade policy as a sanction, most commonly an embargo imposed against a country for violating human rights.

Front 608

Trade sector

Back 608

1. The portion of the economy that produces tradable goods, and thus exports and/or competes with imports.

Front 609

Trade sector

Back 609

2. The portion of the economy that actually engages in international trade, exporting and/or importing or providing trade services.

Front 610

Trade service

Back 610

A service that is an input to an act of international trade. Examples include transportation to, from, or between ports; insurance; or the provision of trade credit.

Front 611

Trade share

Back 611

This can mean a variety of things, but most commonly it refers either to imports or exports as a percentage of GDP.

Front 612

Trade surplus

Back 612

Exports minus imports of goods and services, or balance of trade. See surplus.

Front 613

Trade theory

Back 613

The body of economic thought that seeks to explain why and how countries engage in international trade and the welfare implication of that trade, encompassing especially the Ricardian Model, the Heckscher-Ohlin Model, and the New Trade Theory.

Front 614

Trade triangle

Back 614

In the trade-and-transformation-curve diagram, the right triangle formed by the world price line and the production and consumption points, the sides of which represent the quantities exported and imported.

Front 615

Trade war

Back 615

Generally, a period in which each of two countries alternate in further restricting trade from the other. More specifically, the process of tariffs and retaliation.

Front 616

Trade-weighted average tariff

Back 616

The average of a country's tariffs, weighted by value of imports. This is easily calculated as the ratio of total tariff revenue to total value of imports.

Front 617

Trade-weighted exchange rate

Back 617

The weighted average of a country's bilateral exchange rates using bilateral trade -- exports plus imports -- as weights. Also called an effective exchange rate.

Front 618

Traded good

Back 618

A good that is exported or imported or -- sometimes -- a good that could be exported or imported if it weren't for those pesky tariffs.

Front 619

Traded/nontraded good price ratio

Back 619

One definition of real exchange rate.

Front 620

Trademark

Back 620

A symbol and/or name representing a commercial enterprise, whose right to the exclusive use of that symbol is, along with patents and copyrights, one of the fundamental intellectual property rights that are the subject of the WTO TRIPS agreement.

Front 621

Trading arrangement

Back 621

An agreement between two or more countries concerning the rules under which trade among them will be conducted, either in a particular industry or more broadly.

Front 622

Trading bloc

Back 622

A group of countries that are somehow closely associated in international trade, usually in some sort of PTA.

Front 623

Trading partner

Back 623

A trading partner of one country is any other country with which it trades. Sometimes restricted, not very rigorously, to countries with which it trades a lot, or countries in the same preferential trading arrangement.

Front 624

Traditional economy

Back 624

1. This term is used somewhat variously to describe a very poor country, a subsistence economy, a primitive agricultural economy, or a pre-industrial economy.

Front 625

Traditional economy

Back 625

2. More formally, in a traditional economy resources are allocated based on the historical roles of individuals and families, passed down across generations, and markets play little role.

Front 626

Tragedy of the Commons

Back 626

The tendency of a publicly available resource to be overused, because individual users do not bear the full cost of their use, which is instead shared by everybody. This is particularly a problem when a resource, such as an ocean fishery, is not in the jurisdiction of a single government. Term first used by Hardin (1968).

Front 627

Tranche

Back 627

1. French for "slice," in finance it usually refers to the pieces of a security that has been divided into parts for sale to different parties.

Front 628

Tranche

Back 628

2. In the IMF, each member can draw upon or borrow amounts that are set as 25% of its IMF quota, the first called the gold tranche and each subsequent one called a credit tranche.

Front 629

Transaction cost

Back 629

On the foreign exchange markets, this includes broker's fees and/or the bid/ask spread.

Front 630

Transaction value

Back 630

The actual price of a product, paid or payable, used for customs valuation purposes.

Front 631

Transatlantic Economic Council

Back 631

A political body in which the US and EU seek to cooperate to advance economic integration between the two.

Front 632

Transfer paradox

Back 632

A transfer that makes the recipient worse off (i.e., an immiserizing transfer) and/or that makes the donor better off.

Front 633

Transfer payment

Back 633

Payment made by the government or private sector of one country to another as a gift or aid, not as payment for any good or service nor as an obligation. Also called a unilateral transfer.

Front 634

Transfer price

Back 634

Literally this only refers to the price charged on goods and services that are traded between subsidiaries of a multinational corporation. However, the term usually connotes the setting of such prices high or low so as to minimize the total taxes paid to different governments, in response to differences in corporate tax rates.

Front 635

Transfer problem

Back 635

Made famous in a debate between Keynes (1929a,b,c) and Ohlin (1929a,b), this is the question of whether a financial transfer from one country to another will cause, at an unchanged real exchange rate, an equal change in the countries' bilateral trade balance, thus "effecting" the transfer in real terms.

Front 636

Transfers

Back 636

Transfer payments.

Front 637

Transformation curve

Back 637

Same as production possibility frontier. The name comes from the idea that, by devoting resources to producing one good instead of another, it is as though one good is being transformed into another.

Front 638

Transhipment

Back 638

See transshipment.

Front 639

Transition

Back 639

The process of converting from a centrally planned, non-market economy to a market economy. During that process, it is a transition economy.

Front 640

Transition indicator

Back 640

An index of the progress that a country has made in the process of transition, produced by the EBRD.

Front 641

Translog function

Back 641

The transcendental logarithmic production function, a flexible functional form due to Christensen et al. (1973). With output Y and inputs Xi, it takes the form ln Y = ?0 + Si ?i ln Xi + 1/2 Si Sj ?ij ln Xi ln Xj.

Front 642

Transmission mechanism

Back 642

See monetary transmission mechanism.

Front 643

Transnational corporation

Back 643

1. Same as multinational corporation, though for some reason this term seems to be preferred by those who don't like them.

Front 644

Transnational corporation

Back 644

2. A corporation whose national identity is a matter of convenience only, and that will move its headquarters readily in response to incentives.

Front 645

Trans-Pacific Strategic Economic Partnership Agreement

Back 645

The "P4" agreement among four countries -- Brunei Darussalam, Chile, New Zealand and Singapore -- that provides a "framework on which relationships between the Parties can be strengthened." Began in 2002 with three countries, adding Brunei in 2005.

Front 646

Transparency

Back 646

The clarity with which a regulation, policy, or institution can be understood and anticipated. Depends on openness, predictability, and comprehensibility. Lack of transparency can itself be a NTB.

Front 647

Transport cost

Back 647

The cost of transporting a good, especially in international trade.

Front 648

Transportation cost

Back 648

See transport cost.

Front 649

Transshipment

Back 649

1. The transfer of a cargo from one ship or other form of transport to another.

Front 650

Transshipment

Back 650

2. The routing of a shipment through an intermediate port that is neither the origin nor the destination, especially if in a different country than both.

Front 651

Treasury bill

Back 651

A short-term bond issued by a government, usually referring to those issued by the U.S. government. Considered to carry close to zero risk, countries other than the U.S. often hold a large portion of their international reserves in the form of U.S. treasury bills.

Front 652

Treaty of Rome

Back 652

The 1957 agreement among six countries of Western Europe to form the European Economic Community, which went into effect January 1, 1958.

Front 653

Trend

Back 653

The long-term movement of an economic variable, such as its average rate of increase or decrease over enough years to encompass several business cycles.

Front 654

TRI

Back 654

Trade Restrictiveness Index

Front 655

Triad

Back 655

1. Europe, North America, and Japan.

Front 656

Triad

Back 656

2. The EU, the U.S., and Japan.

Front 657

Triangular arbitrage

Back 657

Arbitrage among three currencies. For example (letting x/y be the currency x per unit of currency y exchange rate), if $/¥ > ($/£)(£/¥), then an arbitrager can make a profit buying £ with $; buying ¥ with those £; and then selling those ¥ for $.

Front 658

Triffin's Dilemma

Back 658

A flaw in the dollar-based international monetary standard created by the IMF: To provide the growing reserves that other central banks needed to sustain growing economies, the U.S. needed to run balance of payments deficits that would undermine confidence in the dollar as a reserve asset. Due to testimony before Congress by Robert Triffin in 1960.

Front 659

Trigger price

Back 659

See minimum price system.

Front 660

TRIMs

Back 660

Trade-Related Investment Measures

Front 661

TRIPs

Back 661

Trade-Related Intellectual Property Rights

Front 662

TRIPs Agreement

Back 662

The agreement negotiated in the Uruguay Round that incorporated issues of intellectual property into the WTO. It provides a set of minimum standards for intellectual property protection to which all but the poorest member countries of the WTO must conform.

Front 663

Trough

Back 663

The point in the business cycle when an economic contraction reaches its lowest level before turning up. Contrasts with peak.

Front 664

TRQ

Back 664

Tariff rate quota

Front 665

Trust

Back 665

An arrangement in which the stock of several companies is controlled by a single entity. When the companies compete in the same industry and together constitute a significant share of that market, the trust can exercise monopoly power. Such arrangements are illegal in most industrialized countries, subject to competition policies or anti-trust policy.

Front 666

TSUS

Back 666

Tariff Schedule of the United States

Front 667

Tuna-dolphin case

Back 667

Actually a pair of cases, resulting from the U.S. ban on imports of tuna, under the Marine Mammal Protection Act, from countries that did not effectively prohibit tuna fishers from killing dolphins by catching them together with whole schools of tuna in large ("purse seine") nets. Cases filed under GATT in 1991 and 1994 led to panel decisions against the U.S.

Front 668

Tunnel

Back 668

See snake in the tunnel.

Front 669

Twin deficits

Back 669

Refers to the budget deficit and trade deficit of a country (in spite of the fact that, although they are related, they are far from being the same or necessarily equal).

Front 670

2x2x2 Model

Back 670

The Heckscher-Ohlin Model with 2 factors, 2 goods, and 2 countries.

Front 671

Two cone equilibrium

Back 671

A free-trade equilibrium in the Heckscher-Ohlin Model in which prices are such that all goods cannot be produced within a single country, and instead there are two diversification cones. This, or a multi-cone equilibrium, will arise if countries' factor endowments are sufficiently dissimilar compared to factor intensities of industries. Contrasts with one cone equilibrium.

Front 672

Two gap model

Back 672

A model of economic development that focuses on two constraints: the need for savings to finance investment, and the need for foreign exchange to finance imports.

Front 673

Two-ness

Back 673

The property of simple versions of many trade models that they have two of everything: goods, factors, and countries especially. An important issue, addressed by Jones (1977), who coined the term, and by Jones and Scheinkman (1977) is the extent to which the results of these models depend on this two-ness.

Front 674

UN

Back 674

United Nations

Front 675

Unbundling

Back 675

Fragmentation.

Front 676

Uncertainty

Back 676

Failure to know anything that may be relevant for an economic decision, such as future variables, details of a technology, or sales. In models, uncertainty usually appears as a random variable and corresponding probability density function. But in practice, most international models, especially of trade, assume certainty.

Front 677

UNCITRAL

Back 677

United Nations Commission on International Trade Law

Front 678

Uncovered interest arbitrage

Back 678

The act of borrowing one currency and lending another without using the forward market to protect against change in the exchange rate. Because of the risk of exchange-rate change, this can result in a loss and is therefore not truly a form of arbitrage. Sometimes called the carry trade.

Front 679

Uncovered interest parity

Back 679

Equality of expected returns on otherwise comparable financial assets denominated in two currencies, without any cover against exchange risk. Uncovered interest parity requires approximately that i = i* + a where i is the domestic interest rate, i* the foreign interest rate, and a the expected appreciation of foreign currency at an annualized percentage rate.

Front 680

UNCTAD

Back 680

United Nations Conference on Trade and Development

Front 681

Under-invoicing

Back 681

The provision of an invoice that states price as less than is actually being paid. This might be done on an import in order to reduce the amount that will be collected by an ad valorem tariff. Or it might be done on an export to reduce apparent profit and thus taxes.

Front 682

Underdeveloped country

Back 682

A synonym, not usually used today, for less developed country.

Front 683

Underemployment

Back 683

The employment of workers for fewer hours or in less desirable jobs than they would prefer and are qualified for.

Front 684

Undertaking

Back 684

See price undertaking or single undertaking.

Front 685

Undervalued currency

Back 685

The situation of a currency whose value on the exchange market is lower than is believed to be sustainable. This may be due to a pegged or managed rate that is below the market-clearing rate, or, under a floating rate, it may be due to speculative capital outflows. Contrasts with over-valued currency.

Front 686

Undistorted

Back 686

The absence of any distortion.

Front 687

UNDP

Back 687

United Nations Development Program

Front 688

Unemployed

Back 688

Willing and able to work, looking for work, and without a job.

Front 689

Unemployment

Back 689

1. The condition of being unemployed. Types of unemployment include frictional unemployment, structural unemployment, and cyclical unemployment.

Front 690

Unemployment

Back 690

2. A measure of the number of workers who are unemployed. Contrasts with employment.

Front 691

Unemployment rate

Back 691

The ratio of unemployment to the labor force of a country.

Front 692

Unequal exchange

Back 692

Trade in which the labor used to produce a country's exports is more than the labor used to produce its imports, as in the exchange between low-wage developing countries and high-wage developed countries.

Front 693

Unfair trade

Back 693

1. Under the GATT this refers only to exports that are subsidized or dumped

Front 694

Unfair trade

Back 694

2. Under U.S. law, this also includes various actions that interfere with U.S. exports. See Section 301 and Super 301.

Front 695

Unfair trade

Back 695

3. Also used to refer to almost any trade that the speaker objects to, sometimes including that based on low wages or weak regulations.

Front 696

Unilateral transfer

Back 696

Transfer payment.

Front 697

Unit elastic

Back 697

Having an elasticity equal to one. For a price elasticity of demand, this means that expenditure remains constant as price changes. For an income elasticity it means that expenditure share is constant. Homothetic preferences imply unit income elasticities. Contrasts with elastic and inelastic.

Front 698

Unit isocost line

Back 698

An isocost line along which cost is equal to one unit of the numeraire, such as one dollar.

Front 699

Unit isoquant

Back 699

The isoquant for a quantity equal to one unit of a good. The unit isoquant is useful for relating the price of a good to the prices of factors employed in its production.

Front 700

Unit labor cost

Back 700

The cost of labor per unit of real output.

Front 701

Unit labor requirement

Back 701

The amount of labor used per unit of output in an industry; the ratio of labor to output. In a Heckscher-Ohlin Model this varies along an isoquant as different techniques are chosen in response to different factor prices. But in a Ricardian model, these are the constant building blocks for defining comparative advantage and determining behavior.

Front 702

Unit of account

Back 702

A basic function of money, providing a unit of measurement for defining, recording, and comparing value. I.e., one dollar signifies not only a one dollar bill, but also a dollar's worth of money in other forms (deposits), of wealth in other forms than money, and of any good or service with a market value.

Front 703

Unit tariff

Back 703

Specific tariff.

Front 704

Unit-value isoquant

Back 704

The isoquant for a quantity of a good worth one unit of value. This is meaningful only if the nominal price of the good is given, for some specified currency or numeraire. Unit-value isoquants are central to the Lerner diagram for analyzing the Heckscher-Ohlin Model.

Front 705

United Nations

Back 705

An organization of countries established in 1945 with 51 members, expanded to 192 countries as of June 2007. Its purpose is "to preserve peace through international cooperation and collective security."

Front 706

United Nations Commission on International Trade Law

Back 706

A legal body created in 1966 to formulate and harmonize national rules on international commercial transactions. It includes 36 member states elected by the UN General Assembly, representing various geographic regions and economic and legal systems. It differs from the WTO in its more technical focus and its broad representation.

Front 707

United Nations Conference on Trade and Development

Back 707

An intergovernmental body established in 1964 within the United Nations, responsible for trade and development. Historically it has often been the international voice of developing countries.

Front 708

United Nations Development Programme

Back 708

The "development network" of the United Nations, operating in 166 countries (as of June 2007) "advocating for change and connecting countries to knowledge, experience and resources to help people build a better life."

Front 709

United Nations Organizations

Back 709

The complex and extensive system of organizations that exist under the umbrella of the United Nations. Several of these, like the WTO and the IMF, play critical roles in the international economy.

Front 710

United Nations Statistics Division

Back 710

The United Nations agency that collects and maintains various statistical databases, including extensive data on international trade.

Front 711

United States Court of International Trade

Back 711

The U.S. court in which matters involving international trade are adjudicated. These include determinations of the customs service and findings of the ITC.

Front 712

United States Customs Service

Back 712

The agency of the U.S. government that monitors the border to prevent illegal goods from crossing it and to collect tariffs -- customs duties -- on legal goods that are subject to them.

Front 713

United States International Trade Commission

Back 713

An independent, quasi-judicial federal agency of the U.S. government that provides information and expertise to the legislative and executive branches of government and directs actions against unfair trade practices. In trade policy, its commissioners assess injury in cases filed under the escape clause, anti-dumping, and countervailing duty statutes.

Front 714

United States Trade Representative

Back 714

The cabinet-level official of the U.S. government "responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and leading or directing negotiations with other countries on such matters."

Front 715

Unity

Back 715

One. For example, "an elasticity greater than unity" means an elasticity (defined so as to be a positive number) greater than 1.00.

Front 716

Unnatural trading bloc

Back 716

A trading bloc among countries that are not natural trading partners.

Front 717

Unregistered exports and imports

Back 717

See registered exports and imports.

Front 718

UNSD

Back 718

United Nations Statistics Division

Front 719

Unskilled labor

Back 719

Labor with a low level of skill or human capital. Identified empirically as labor earning a low wage, with a low level of education, or in an occupational category associated with these; sometimes crudely proxied as production workers.

Front 720

Unstable

Back 720

Not stable, by either of its definitions. Unstable equilibrium arises when there are multiple equilibria, as in the case of inelastic offer curves that intersect three times instead of once. The middle equilibrium is unstable.

Front 721

UPF

Back 721

Utility possibility frontier

Front 722

Upstream subsidization

Back 722

Export of a good one of whose inputs has been subsidized.

Front 723

Uruguay Round

Back 723

The round of multilateral trade negotiations under the GATT that commenced in 1986 and was completed in 1994 with the creation of the WTO. In addition it broke new ground by negotiating over agriculture, textiles and apparel, services, and intellectual property.

Front 724

US-Central American Free Trade Agreement.

Back 724

A free trade agreement signed in 2004 between the United States, the Dominican Republic, and a number of countries in Central America. As of January 2006, the agreement had been ratified by all but Costa Rica.

Front 725

USITC

Back 725

United States International Trade Commission

Front 726

USTR

Back 726

United States Trade Representative

Front 727

Utility function

Back 727

A function that specifies the utility (well being) of a consumer for all combinations goods consumed (and sometimes other considerations). Represents both their welfare and their preferences.

Front 728

Utility possibility frontier

Back 728

In a diagram with levels of individual utility on the axes, a curve showing the maximum attainable levels of utility in a given situation, such as free trade or autarky. Used by Samuelson (1962) to demonstrate the gains from trade.

Front 729

Value added

Back 729

The value of output minus the value of all intermediate inputs, representing therefore the contribution of, and payments to, primary factors of production.

Front 730

Value added tax

Back 730

A tax that is levied only on the value added of a firm. A VAT is usually subject to border tax adjustment.

Front 731

Value chain

Back 731

The sequence of activities that a firm undertakes to create value, including the various steps of the supply chain but also additional activities, such as marketing, sales, and service. Term due to Porter (1990) and used by Krugman in slicing up the value chain.

Front 732

Value marginal product

Back 732

Marginal value product.

Front 733

Value product

Back 733

Price times quantity produced, as in marginal value product.

Front 734

Value quota

Back 734

A quota specifying value -- price times quantity -- of a good.

Front 735

Variable cost

Back 735

The portion of a firm or industry's cost that changes with output, in contrast to fixed cost.

Front 736

Variable levy

Back 736

A tax on imports that varies over time so as to stabilize the domestic price of the imported good. Essentially, the tax is set equal to the difference between the target domestic price and the world price.

Front 737

Variable returns to scale

Back 737

The property of a production function that returns to scale may be increasing or decreasing, at different rates, at different levels of output.

Front 738

Variance

Back 738

A measure of how much an economic or statistical variable varies across values or observations. Its calculation is the same as that of the covariance, being the covariance of the variable with itself.

Front 739

Variety

Back 739

Refers to the multiplicity of differentiated products that are available in some industries, a multiplicity that tends to become larger with trade.

Front 740

VAT

Back 740

Value added tax

Front 741

Vehicle currency

Back 741

The currency used to invoice an international trade transaction, especially when it is not the national currency of either the importer or the exporter.

Front 742

Velocity of money

Back 742

The rate at which money changes hands in an economy, usually defined by the equation of exchange.

Front 743

Vent for surplus

Back 743

The concept that a country -- especially a developing country -- may be able to gain by exporting the products of factors that would not be employed at all without trade. This "vent for surplus" theory of trade was developed especially by Myint (1958), who attributed the term to Williams (1929) and before that to Mill (1848) and the idea to Smith (1776).

Front 744

Venture capital

Back 744

A pool of money used to fund startup firms in exchange for shares of ownership that are expected to be cashed out within a few years as the successful startups go public or are acquired. The greater availability of venture capital in the U.S., compared to other countries, is said to contribute to its success in innovation.

Front 745

VER

Back 745

Voluntary export restraint

Front 746

Vernon product cycle

Back 746

See product cycle.

Front 747

Vertical FDI

Back 747

Foreign direct investment by a firm to establish manufacturing facilities in multiple countries, each producing a different input to, or stage of, the firm's production process. Contrasts with horizontal FDI.

Front 748

Vertical integration

Back 748

Production of different stages of processing of a product within the same firm.

Front 749

Vertical intraindustry trade

Back 749

Intraindustry trade in which the exports and imports are at different stages of processing. Contrasts with horizontal IIT.

Front 750

Vertical specialization

Back 750

Another term for fragmentation. Used by Hummels, Rapoport, and Yi (1998).

Front 751

VIE

Back 751

Voluntary import expansion.

Front 752

Vinerian

Back 752

Associated with the work of economist Jacob Viner, as in the Vinerian concept of trade diversion.

Front 753

Visible

Back 753

In referring to international trade, used as a synonym for "good." "Visibles trade" is trade in goods. Contrasts with invisible.

Front 754

Volatility

Back 754

The extent to which an economic variable, such as a price or an exchange rate, moves up and down over time.

Front 755

Voluntary export restraint

Back 755

A restriction on a country's imports that is achieved by negotiating with the foreign exporting country for it to restrict its exports.

Front 756

Voluntary import expansion

Back 756

The use of policies to encourage imports, in response to pressure from trading partners. Due to Bhagwati (1987).

Front 757

Voluntary restraint agreement

Back 757

Same as a VER.

Front 758

VRA

Back 758

Voluntary restraint agreement, same as a VER.

Front 759

Wage

Back 759

The payment for the service of a unit of labor, per unit time. In trade theory, it is the only payment to labor, usually unskilled labor. In empirical work, wage data may exclude other compensation, which must be added to get the total cost of employment.

Front 760

Wage insurance

Back 760

A program to pay displaced workers, when they become re-employed and for a limited period of time, a specified fraction of the difference between their old wage and their lower new wage. As of 2002, the US provides wage insurance to a limited number of workers as part of Alternative Trade Adjustment Assistance.

Front 761

Wage-rental ratio

Back 761

The ratio of the wage of labor to the rental price of either capital or land, whichever is the other factor in a two-factor Heckscher-Ohlin model. The ratio plays a critical role in this model since it determines the ratios of factors employed in both industries.

Front 762

Waiver

Back 762

An authorized deviation from the terms of a previously negotiated and legally binding agreement. Many countries have sought and obtained waivers from particular obligations of the GATT and WTO.

Front 763

Walras' Law

Back 763

The property of a general equilibrium that if all but one of the markets are in equilibrium, then the remaining market is also in equilibrium, automatically. This follows from the budget constraints of the market participants, and it implies that any one market-clearing condition is redundant and can be ignored.

Front 764

Walrasian adjustment

Back 764

A market adjustment mechanism in which price rises when there is excess demand and falls when there is excess supply. Strictly speaking, these excess supplies and demands are those that would obtain without any history of disequilibrium, as with a Walrasian auctioneer.

Front 765

Walrasian auctioneer

Back 765

A hypothetical entity that facilitates market adjustment in disequilibrium by announcing prices and collecting information about supply and demand at those prices without any disequilibrium transactions actually taking place.

Front 766

WARP

Back 766

Weak axiom of revealed preference.

Front 767

Warsaw Pact

Back 767

A "treaty of friendship, co-operation, and mutual assistance" including the Soviet Union and its satellite states in Central Europe. Signed in 1955, it included eight countries.

Front 768

Washington Consensus

Back 768

A set of economic practices and reforms deemed by international financial institutions (located in Washington, D.C.) to be helpful for financial stability and economic development; often imposed as conditions for economic assistance by these institutions. Phrase coined by John Williamson (1990).

Front 769

Water in the tariff

Back 769

The extent to which a tariff is higher than necessary to be prohibitive.

Front 770

Weak axiom of revealed preference

Back 770

The assumption that a consumer who reveals strict preference for one bundle of goods over another will not, in other circumstances, reveal their preference for the second over the first. That is, if qi, qj are the vectors of goods purchased at prices pi, pj respectively, then piqi>piqj Þ pjqi>pjqj. Used in proving correlation results.

Front 771

Wealth

Back 771

The total value of the accumulated assets owned by an individual, household, community, or country.

Front 772

Welfare

Back 772

Refers to the economic well being of an individual, group, or economy. For individuals, it is conceptualized by a utility function. For groups, including countries and the world, it is a tricky philosophical concept, since individuals fare differently. In trade theory, an improvement in welfare is often inferred from an increase in real national income.

Front 773

Welfare criterion

Back 773

A basis, usually quantitative, for judging whether one state of the world or of an economy is better than another, for use in welfare economics and in evaluation of policies.

Front 774

Welfare economics

Back 774

The branch of economic thought that deals with economic welfare, including especially various propositions relating competitive general equilibrium to the efficiency and desirability of an allocation. See the first and second theorems of welfare economics.

Front 775

Welfare proposition

Back 775

In trade theory, this usually refers to any of several gains from trade theorems.

Front 776

Welfare state

Back 776

A set of government programs that attempt to provide economic security for the population by providing for people when they are unemployed, ill, or elderly.

Front 777

Welfare triangle

Back 777

In a partial equilibrium market diagram, a triangle representing the net welfare benefit or loss from a policy or other change. In trade theory it often means the triangle or triangles representing the deadweight loss due to a tariff.

Front 778

Western Hemisphere Free Trade Area

Back 778

Name sometimes proposed for a preferential trading arrangement including most or all of the countries of the western hemisphere. Now called FTAA.

Front 779

WFOE

Back 779

Wholly foreign owned enterprise

Front 780

WHFTA

Back 780

Western Hemisphere Free Trade Area

Front 781

White knight

Back 781

An person or firm that attempts to thwart a hostile takeover of another firm, often by offering to acquire it on more favorable terms. In attempted cross-border takeovers, the white knight is usually from the same country as the firm being acquired.

Front 782

Wholly foreign owned enterprise

Back 782

While logically this term could apply to any foreign-owned enterprise in any country, it is used primarily for such enterprises in China.

Front 783

Willingness to pay

Back 783

The largest amount of money that an individual or group could pay, along with a change in policy, without being made worse off. It is therefore a monetary measure of the benefit to them of the policy change. If negative, it measures its cost.

Front 784

WIPO

Back 784

World Intellectual Property Organization

Front 785

Withholding tax

Back 785

A tax on income that is levied at the source, thus diverted to the government before the recipient of the income ever sees it. Used in international tax treaties to assist tax collection.

Front 786

Worker rights

Back 786

Labor rights.

Front 787

Working party

Back 787

A group that is delegated to study an issue. Used by the WTO as a first step in considering a new issue that may later become the subject of negotiations.

Front 788

World Bank

Back 788

A group of five closely associated international institutions providing loans and other development assistance to developing countries. The five institutions are IBRD, IDA, IFC, MIGA, and ICSID. As of June 2007, the largest of these, IBRD, had 185 member countries.

Front 789

World Fact Book

Back 789

An excellent source of information about the countries of the world, including basic economic data.

Front 790

World Intellectual Property Organization

Back 790

The United Nations organization that establishes and coordinates standards for intellectual property protection.

Front 791

World market

Back 791

See world price.

Front 792

World price

Back 792

The price of a good on the "world market," meaning the price outside of any country's borders and therefore exclusive of any trade taxes or subsidies that might apply crossing a border into a country but inclusive of any that might apply crossing out of a country.

Front 793

World production possibility frontier

Back 793

The aggregate production possibility frontier for all of the countries of the world. Usually depicted for a two-good, two-country model.

Front 794

World Trade Organization

Back 794

A global international organization that specifies and enforces rules for the conduct of international trade policies and serves as a forum for negotiations to reduce barriers to trade. Formed in 1995 as the successor to the GATT, it had 152 member countries as of June 2008.

Front 795

World transformation curve

Back 795

The world production possibility frontier.

Front 796

WTO

Back 796

World Trade Organization

Front 797

X

Back 797

In economic models involving international trade, X is usually chosen to represent exports, and M to represent imports, perhaps because E and I have too many other uses.

Front 798

X-efficiency

Back 798

The ability of a firm to get maximum output from its inputs. Failure to do so, called X-inefficiency or technical inefficiency, may be due to lack of incentives provided by competition. Improvement in X-efficiency is one hypothesized source of gain from trade. Term is due to Leibenstein (1966).

Front 799

Year-on-year

Back 799

Compared to the corresponding data from one year previously. For example, if a firm's 2nd-quarter profit rose 12% y/y, then its 2nd-quarter profit this year was 12% higher than its 2nd quarter profit the year before. Same as year-over-year.

Front 800

Yield

Back 800

The amount of return on an investment, normally expressed as percent per year; the interest rate.

Front 801

Yield curve

Back 801

The variation of asset yields as the maturity of the asset rises. Also called the term structure of interest rates. Normally, the yield on otherwise comparable assets rises with their time to maturity.

Front 802

Yield spread

Back 802

The difference between the yield on a particular bond and the yield on an otherwise comparable bond that is considered, like a U.S. treasury bill, to have essentially zero risk. The spread is an indicator of the risk of the bond and thus, as in the case of bonds issued by emerging market governments, the economic strength of those governments.

Front 803

YOY

Back 803

Year-on-year

Front 804

Yuan

Back 804

The principal unit of the renminbi, the currency of China. Each yuan is subdivided into ten jiao, which are in turn subdivided into ten fen.

Front 805

Y/Y

Back 805

Year-on-year

Front 806

Zero degree homogeneous

Back 806

Homogeneous of degree zero.

Front 807

Zero profit

Back 807

A situation in which profit in an industry is zero, usually as a result of free entry and exit. It may, if firms are not identical, refer only to the marginal firm. And it always means zero excess profit, not that all returns to capital invested in the industry are zero.

Front 808

Zero substitution

Back 808

An elasticity of substitution of zero. In a production function, this means a Leontief technology.

Front 809

Zero sum game

Back 809

A game in which the payoffs to the players add up to zero, so that a gain for one is necessarily equaled by loss to others. Contrasts with positive sum game.

Front 810

Zeroing

Back 810

The practice used by the U.S. in calculating dumping margins of treating individual prices that are above the fair price as being instead equal to that fair price, so that the average price is necessarily at or below the fair price and the dumping margin is positive.

Front 811

Zipf's Law

Back 811

The regularity noticed by Zipf (1949) that, within any country, the populations of cities are close to proportional to 1/r, where r is the population rank of the city. Thus the largest city has about twice the population of the second largest, three times the population of the third largest, etc.