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LUC LERUTH, REMI PARIS, and IVAN RUZICKA

This paper examines the role and impact of taxation on sustainable forest management. It is shown that fiscal instruments neither reinforce nor substitute for traditional regulatory approaches and can actually undermine sustainability. The paper uses the reasoning at the root of the Faustmann solution to draw conclusions on the incentives for sustainable tropical forest exploitation. It proposes a bond mechanism as an alternative market-based instrument to encourage sustainable forest logging while reducing monitoring costs.

Mick Silver

Unit value export and import indices compiled from returns to customs authorities are often used as surrogates for price indices in the analysis of inflation transmission, terms of trade (effects), and to deflate import and export value series to derive volume series. Their widespread use is mainly due to their low cost relative to establishment price surveys. This paper provides evidence of substantial errors and bias in their representation of such price changes. Their continued use would mislead economic analysis. The paper considers the efficacy of alternative strategies for their improvement, and argues for a move to establishment-based price surveys.

MICHAEL P. DOOLEY, JEFFREY FRANKEL, and DONALD J. MATHIESON

Miller’s interesting argument is a good example of a class of alternative explanations of saving-investment correlations. The basic idea behind these arguments is that sources of independent shocks to national saving and investment rates that are thought to be important quantitatively are either not independent or are not shocks at all. In this case, it is argued that there arc good reasons to believe that changes in debt-financed government expenditures are fully offset ex ante by changes in an ultrarational private sector’s saving and investment behavior. Thus, from the point of view of international capital markets, no disturbance will be observed. A similar argument is that, although there are various shocks to the system that appear to require net saving flows across countries, these shocks are fully dissipated by changes in relative prices so that no observed intertemporal trade is predicted.

EHSAN U. CHOUDHRI and DALIA S. HAKURA

The paper estimates an empirical relation based on Krugman’s “technological gap” model to explore the influence of the pattern of international trade and production on the overall productivity growth of a developing country. A key result is that increased import competition in medium-growth (but not in low- or high-growth) manufacturing sectors enhances overall productivity growth. The authors also find that a production-share weighted average of (technological leaders’) sectoral productivity growth rates has a significant effect on the rate of aggregate productivity growth. [JEL F10, F43, O10, O40]

J. Marcus Fleming and Robert A. Mundell

INTEREST IN THE PROBLEMS of official intervention in forward exchange markets has received impetus from recent changes of practice on the part of the U.S. monetary authorities. In March 1961, the U.S. Treasury intervened for the first time on the exchange markets in support of the forward dollar; and since February 1962, the Federal Reserve System has concluded a number of swap arrangements with other central banks.1 In view of these developments, it appears timely to consider what, in theory, are the short-run and long-run effects of official transactions in forward exchange, and under what circumstances such transactions are likely to serve a useful purpose. Tentative answers are given in this paper to such questions as the following: Should intervention be “limited” in extent and/or duration, and, if so, in what sense, and why? In what sort of payments situation is official support of the forward exchange appropriate? Need it be confined to meeting “speculative” attacks?

Mr. Shankha Chakraborty and Ms. Era Dabla-Norris

This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost to rent seeking, only wealthy agents choose to engage in it, as it allows them to protect their wealth from expropriation. Hence, the level of rent seeking and economic performance are determined by the initial distribution of income and wealth. When individuals also differ in their productivity, not all wealthy agents become rent seekers, and the social costs of rent seeking are typically lower. In both cases, multiple equilibria with different levels of rent seeking and production are possible.

VITO TANZI

The sensitivity (i.e., elasticity and built-in flexibility) of the U. S. individual income tax to changes in national income is of great interest to researchers and policymakers. However, the direct measurement of this sensitivity—that is, the measurement obtained from time-series observations of the relevant variables—has always been difficult, and even at times impossible, because changes in the legal structure of the tax have been too frequent to provide enough observations that relate to the same legal structure to allow statistically significant coefficients to be determined. This was particularly true in the United States before 1954, when the rates were changed frequently; it has also been true since 1963, when important changes occurred in rates, personal exemptions, deductions, and other features. In contrast, during the period between 1954 and 1963, hardly any significant statutory changes occurred in the tax.

ALBERTO CHONG and LUISA ZANFORLIN

Evidence from historical and epidemiological literatures shows that epidemics tend to spread in the population according to a logistic pattern. We conjecture that the impact of new technologies on output follows a pattern of spread not unlike that of typical epidemics. After reaching a critical mass, rates of growth will accelerate until the marginal benefits of technology are fully utilized. We estimate spline functions using a GMM dynamic panel methodology for 79 countries. We use imports of machinery and equipment as a fraction of gross domestic product as a proxy for the process of technological adoption. Results confirm our hypothesis. [JEL O39, O40, O1]