ABSTRACT This paper examines how urban spatial structure affects the earnings gap between high‐ and low‐skilled workers in China. We combine individual‐level panel data with satellite‐derived measures of urban form. We find that less compact cities have a wider skill earnings gap. On the worker side, spatial dispersion increases commuting frictions and reduces access to jobs, with larger earnings losses for low‐skilled workers. On the firm side, it shifts entry toward technology‐intensive activities relative to labor‐intensive ones, potentially strengthening demand for skilled labor. Together, these mechanisms widen the skill earnings gap.
This study investigates the effects of financial development on banking risk using a panel of 125 countries (2000-2019), of which 92 are developing economies. However, financial development consists of advances in both financial institutions and financial markets, which may have distinct effects on banking risk. Distinguishing between these two dimensions of financial development allows us to identify which channel is more effective in affecting banking risk, thereby providing valuable insights for policymakers as well as for banking professionals. The findings indicate that financial development consistently reduces banking risk, with stronger effects in developing countries. Disaggregating financial development into financial institution and financial market development reveals that the development of financial institutions plays a stabilizing role, whereas financial markets exhibit more context-dependent effects. The evidence underscores the importance of policies aimed at strengthening financial institutions, particularly in developing economies.
In homogeneous-product markets, changing a price does more than alter a firm's profit margin: it may also determine which competitors can profitably remain active. This paper develops a new static theory of price competition based on this observation. We first establish that, under homogeneous products, unlimited production capacity, and consumer indifference across firms charging the same price, matching a profitable rival price weakly dominates remaining above it (Matching Dominance). Consequently, firms recognize that every feasible price simultaneously determines the corresponding market structure and solve a single optimization problem in which prices and market structure are jointly determined. The solution yields firm-specific threshold prices that balance operating margins against the profitability of alternative market structures. We then show that competition selects the lowest threshold price as the Nash equilibrium of the game (Competitive Selection). Unlike the classical Bertrand model, equilibrium prices may exceed the relevant competitive benchmark-the common marginal cost under cost symmetry, or the marginal cost of the next most efficient rival under cost asymmetry-without relying on product differentiation, capacity constraints, repeated interaction, or collusion. The conventional Bertrand outcome nevertheless arises as a special case when the exclusion threshold is itself the firm's optimal threshold. The framework characterizes how demand and production costs jointly determine threshold prices and endogenous market structures, and explains how continuous changes in economic fundamentals may generate discrete changes in industry concentration. It also provides a different perspective on market power and merger effects by focusing on the firms capable of determining equilibrium prices rather than on market concentration alone.
This study evaluates whether the adoption of inflation targeting (IT) causally enhances real income growth and reduces inflation volatility in 16 middle-income nations (MINs). The analysis employs Bayesian frameworks and dynamic difference-in-differences (DiD) to identify both short-run and long-run policy effects. The research contributes to the literature by reconciling mixed findings on IT through joint modeling of parameter instability and staggered treatment timing, and by providing extensive robustness checks. The principal contribution is an examination of whether IT frameworks serve as effective monetary policy instruments for both per capita GDP growth and price stability in emerging economies. The results indicate that only five countries exhibit transient post-IT improvements in GDP per capita, while pre-IT effects remain negligible. Dynamic DiD estimations corroborate these findings, showing statistically insignificant long-term treatment effects across cohorts, with short-term impacts dissipating within 5 years. The analysis concludes that IT frameworks in MINs fail to generate sustained income growth trajectories, although they effectively mitigate price volatility. These findings align with the theoretical predictions of monetary super-neutrality in the long run, namely, that sustained changes in the rate of inflation, as governed by IT regimes, do not permanently alter real output trajectories.
We determine the optimal tariff in the presence of immigration and public health provision in a factor-abundance-driven trade model, and we prove two results. First, ceteris paribus, a higher value of immigrant output, a more efficient or cheaper public health service, or a lower level of immigration (which occurs if the wage in the recipient country is not significantly higher than that in the sourcing country) may lead to more restrictive trade policies compared to the benchmark of no immigration and no public healthcare provision. Second, contrary to conventional wisdom, all else being equal, trade in goods and factors may be complements under a lower value of output creation by immigrants, a more inefficient or expensive public healthcare system, or a higher level of immigration.
