Publications

We study the canonical Krugman (1979) trade model with non-CES preferences that yield autarky at finite trade costs. We prove a non-monotone impact of gradual trade liberalization. At first, near autarky, emerging trade reduces world welfare, while at free trade it becomes large enough to be beneficial (Krugman's result). This non-monotonicity persists under heterogenous firms. The harmful small-scale trade is explained by variable markups and underpriced imports, which become socially excessive. Unlike protectionists, we argue that “liberalization should go far”. On the other hand, we show that anti-dumping measures can be viewed as a remedy for the aforementioned imports distortion.

Background:
Achieving universal health coverage (UHC) has recently received attention in response to calls from international organisations to expand health coverage to hard-to-reach segments of the population (eg, informal workers, and unemployed and poor people). Despite the strong commitment to achieving UHC, its implementation continues to spark vigorous debate among policy makers, scholars, and the international health community. Much of the recent debate has focused on the macro-fiscal challenges that many developing countries face in implementing and sustaining UHC-oriented reforms, and there has also been debate in relation to challenges of the micro-behavioural sphere (at the level of the individual). Some of these challenges pertain to the structure of the labour market in developing countries, which is characterised by the large size of non-contributory segments of the population, mainly informal workers and unemployed individuals. This raises the important policy questions of the feasibility of expanding health coverage to the informal sector and the unemployed on a contributory basis.
Methods:
We assessed the feasibility of UHC using a dynamic general equilibrium approach while accounting for heterogeneity across households in terms of their employment and socioeconomic status. The model was calibrated using the Palestinian Expenditures and Consumption Survey (PECS, 2011), and the Social Accounting Matrix (SAM, 2011). We assessed alternative health insurance designs proposed to target the informal workers. Fiscal sustainability of the reforms was examined using the debt-to-GDP ratio and the microeconomic impact was assessed using the concept of consumption equivalent variation (CEV), defined as the amount of additional consumption a household would give up to move from the pre-insurance to the post-insurance level of welfare. A positive CEV value indicates that individuals are willing to pay for the health insurance. The higher the CEV value, the higher the gains of health insurance.
Findings:
A simultaneous expansion of UHC coverage of the population and health-care costs would enhance welfare for all households. However, such an expansion would reduce government expenditure that is allocated to other sectors; for example, it was estimated that the reduction would have been approximately 10% in 2020. To finance this UHC-driven debt, we examined the impact of a tax-financed UHC-oriented reform and a low-premium, low-coverage government-sponsored health insurance that targets informal workers. Although both policies would generate additional revenues to serve the UHC debt, government-sponsored health insurance targeting informal workers seems to be more feasible in terms of its impact on household welfare. That is, the informal workers would be better off under the government-sponsored health insurance scheme.
Interpretation:
In the absence of precise information on the ability to pay of informal workers, which in some cases might be comparable to that of formal workers, it is reasonable for the government to charge better-off informal workers rather than naively exempting them. The findings corroborate previous evidence suggesting that informal workers are willing to join health insurance schemes that charge them lower premiums for a slightly less generous benefit package than the health insurance schemes of formal workers. This health insurance might be deemed equitable in terms of the degree of financial protection that informal workers can obtain compared with the scenario in which they are left to bear high out-of-pocket health-care costs.

A durable good monopolist faces a continuum of heterogeneous customers who make purchase decisions by comparing present and expected price-quality offers. The monopolist designs a sequence of price-quality menus to segment the market. We consider the Markov perfect equilibrium (MPE) of a game where the monopolist is unable to commit to future price-quality menus. We obtain the novel results that: (a) under certain conditions, the monopolist covers the whole market in the first period (even when a static Mussa–Rosen monopolist would not cover the whole market), because this is a strategic means to convince customers that lower prices would not be offered in future periods and that (b) this can happen only under the stage-wise Stackelberg leadership assumption (whereby consumers base their expectations on the value of the state variable at the end of the period). Conditions under which MPE necessarily involves sequentially trading are also derived.

We estimate the yield curve gap in Japan and examine whether it has contributed to the sustained low growth and low inflation rates observed since the beginning 2000s. We use a semi-structural empirical model that generalizes Laubach and Williams’ approach, considering the entire range of maturities of the interest rates and dealing with the issue of mixed frequency sampling. An important result is that, even in the absence of a zero lower bound, monetary and fiscal policies proved ineffective in bringing the Japanese economy out of a situation of prolonged stagnation and low inflation. This happened even when the yield curve moved below its natural level.