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See detailFirms' locations under demand heterogeneity
Picard, Pierre M. UL; Okubo, Toshihiro

in Regional Science & Urban Economics (2012), 42(6), 961-974

In this paper we build an economic geography model where rms sell product varieties with heterogenous demands. We show that rms selling the products with higher demands select to set up their plants in ... [more ▼]

In this paper we build an economic geography model where rms sell product varieties with heterogenous demands. We show that rms selling the products with higher demands select to set up their plants in larger countries. Larger countries do not only get better access to more varieties but also to the most demanded and valuable ones. The impact of such a spatial selection on fi rms location choice depends on the skewness of the distribution of demand intensity across varieties. In a model where only capital moves across regions, demand heterogeneity generally diminishes the amount of capital invested in the larger country. In a model where the work force moves across regions, demand heterogeneity is shown to eliminate dramatic changes in the location patterns and to result in the asymmetric dispersion of workers, rather their symmetric dispersion or complete agglomeration in a specic region. [less ▲]

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See detailAirport noise pollution : how to regulate efficiently by confronting victims and polluters?
Picard, Pierre M UL; Bréchet, Thierry

in Développement durable et économie environnementale régionale (2012)

Noise-induced pollution constitutes a hot and topical societal problem for all major airports. This paper discusses various issues in the implementation of a market for noise licenses as a solution to ... [more ▼]

Noise-induced pollution constitutes a hot and topical societal problem for all major airports. This paper discusses various issues in the implementation of a market for noise licenses as a solution to solve the noise externality between the residents located around airports and the aircrafts moving in and to airports. [less ▲]

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See detailThe Clean Development Mechanism in a Global Carbon Market
Bréchet, Thierry; Ménière, Yann; Picard, Pierre M. UL

E-print/Working paper (2012)

This paper discusses the role of the Clean Development Mechanism (CDM) on the market for carbon quotas and countries' commitments to reduce their carbon emission levels. We show that the CDM contributes ... [more ▼]

This paper discusses the role of the Clean Development Mechanism (CDM) on the market for carbon quotas and countries' commitments to reduce their carbon emission levels. We show that the CDM contributes to an efficient funding of clean technology investments in least developed countries. However, the CDM is not neutral on the global level of carbon emissions as it entices countries to raise their emission caps. The CDM may also make inappropriate the inclusion of any country that takes no emission abatement commitment. It can even make inefficient a country's decision to commit to an emission target. [less ▲]

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See detailBank secrecy, illicit money and offshore financial centers
Picard, Pierre M. UL; Pieretti, Patrice UL

in Journal of Public Economics (2011), 95(7-8), 942-955

International and national institutions regularly put pressure on offshore financial centers and their clients to enforce compliance with anti-money laundering regulations and that in spite of the ... [more ▼]

International and national institutions regularly put pressure on offshore financial centers and their clients to enforce compliance with anti-money laundering regulations and that in spite of the existence of bank secrecy. This paper discusses the winners and losers of such policies. Surprisingly, aggregate profits and tax revenues can increase under those policies. In addition, we show that offshore banks can be encouraged to comply with rigorous monitoring of the investor's identity and the origin of his/her funds when the pressure creates sufficiently high risk of reputational harm to this investor. Nevertheless, the efficient pressure policy is dichotomous in the sense that a social planner chooses zero pressure or the pressure that just entices offshore banks to comply. By contrast, the implementation of those pressure policies on an onshore institution may be inefficient. Finally, we show that deeper financial integration fosters compliance by the offshore center while it also gives better incentives for delegated organizations to effectively induce compliance. [less ▲]

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See detailNo trade, one-way or two-way trade?
Okubo, Toshihiro; Picard, Pierre M. UL; Thisse, Jacques-François

E-print/Working paper (2011)

We study how the level of trade costs and the intensity of competition can explain the existence of two-way, one-way or no trade within the same industry. As trade costs decrease from very high to very ... [more ▼]

We study how the level of trade costs and the intensity of competition can explain the existence of two-way, one-way or no trade within the same industry. As trade costs decrease from very high to very low values, the economy moves from autarky to a regime of two-way trade, through a regime of one-way trade from the larger to the smaller country. Trade is less likely when the economy gets more competitive. Finally once capital is mobile across countries, the market delivers an outcome in which capital is too much concentrated in the large country. [less ▲]

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See detailRegional and Spatial Economics
Picard, Pierre M. UL

in Manchester School (2011), 79(5), 933-937

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See detailSustainable Migration Policies
Picard, Pierre M. UL; Worrall, Tim

E-print/Working paper (2011)

This paper considers whether countries might mutually agree a policy of allowing free movement of workers. For the countries to agree, the short run costs must outweighed by the long term benefits that ... [more ▼]

This paper considers whether countries might mutually agree a policy of allowing free movement of workers. For the countries to agree, the short run costs must outweighed by the long term benefits that result from better labor market flexibility and income smoothing. We show that such policies are less likely to be adopted for less risk averse workers and for countries that trade more. More surprisingly we find that some congestion costs can help. This reverses the conventional wisdom that congestion costs tend to inhibit free migration policies. [less ▲]

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See detailOn Spatial Equilibria in a Social Interaction Model
Mossay, Pascal; Picard, Pierre M. UL

in Journal of Economic Theory (2011), 146(6), 2455-2477

Social interactions are at the essence of societies and explain the gathering of individuals in villages, agglomerations, or cities. We study the emergence of multiple agglomerations as resulting from the ... [more ▼]

Social interactions are at the essence of societies and explain the gathering of individuals in villages, agglomerations, or cities. We study the emergence of multiple agglomerations as resulting from the interplay between spatial interaction externalities and competition in the land market. We show that the geography of the spatial economy affects significantly the properties of spatial equilibria. In particular, when agents locate on an open land strip (line segment), a single city emerges in equilibrium. In contrast, when the spatial economy extends along a closed land strip (circumference), multiple equilibria with odd numbers of cities arise. Spatial equilibrium configurations involve a high degree of spatial symmetry in terms of city size and location, and can be Pareto-ranked. [less ▲]

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See detailLabor Market Pooling, Outsourcing and Labor Contracts
Picard, Pierre M. UL; Wildasin, David

in Journal of Urban Economics (2011), 70(1), 47-60

This paper considers the interaction between input sharing and labor market pooling in urban areas. In particular, it examines the impact of the size of a city and business risks on the organizational ... [more ▼]

This paper considers the interaction between input sharing and labor market pooling in urban areas. In particular, it examines the impact of the size of a city and business risks on the organizational structures of firms located in urban agglomerations, and it also discusses the impact of organizational structure on incentives to insure workers against income risks. It is shown that manufacturing firms suffer from a coordination game in their decision to outsource production. The existence of idiosyncratic risks causes manufacturers to refrain from outsourcing. The incentives to offer wage and employment protection to workers are more pronounced when manufacturers outsource the production of their inputs to a local market, which mitigates the impact of labor market pooling. [less ▲]

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See detailTransportation, freight rates, and economic geography
Behrens, Kristian; Picard, Pierre M. UL

in Journal of International Economics (2011), 85(2), 280-291

We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping manufactured ... [more ▼]

We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping manufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to the maximum capacity for a round-trip and thus faces a logistics problem as there are opportunity costs of returning empty. These costs increase the freight rates charged to firms located in regions that are net exporters of manufactured goods. Since demand for transport services depends on the spatial distribution of economic activity, the concentration of production in one region raises freight rates to serve foreign markets from there, thus working against specialization and the agglomeration of firms. Consequently, a more even spatial distribution of firms and production prevails at equilibrium when freight rates are endogenously determined than when they are assumed to be exogenous as in the literature. [less ▲]

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See detailPatent Office Governance and Patent System Quality
Picard, Pierre M. UL; Van Pottelsberghe de la Potterie, Bruno

in CEPR Discussion Papers (2011), 11-06

The present paper discusses the role of quality in patent systems from the perspective of patent offices' behavior and organization. After documenting original stylized facts, the paper presents a model ... [more ▼]

The present paper discusses the role of quality in patent systems from the perspective of patent offices' behavior and organization. After documenting original stylized facts, the paper presents a model in which patent offices set patent fees and the quality level of their examination processes. Various objectives of patent offices' governors are considered. We show that the quality of the patent system is maximal for the patent offices that maximises either the social welfare or its own proffit. Quality is lower for the self-funded patent office maximizing the number of patent applications and even smaller for the self-funded patent office maximizing the number of granted patents. A labor union improves examination quality and may compensate for the potentialy inappropriate objectives of patent office management. [less ▲]

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See detailA Harmonization Of First And Second Natures
Picard, Pierre M. UL; Zeng, Dao‐Zhi

in Journal of Regional Science (2010), 50(5), 973-994

This paper investigates the joint impact of the rst nature and the second nature forces on industry location. Towards this aim, we develop a two-region new economic geography model where local factor ... [more ▼]

This paper investigates the joint impact of the rst nature and the second nature forces on industry location. Towards this aim, we develop a two-region new economic geography model where local factor congestion and location advantages compete with demand linkages and product market crowding. In particular we study the case of absolute location advantage in a single industry model and the case of comparative advantages in a two-industry model. We characterize the structure of industries and discuss the possibilities of catastrophic changes, endogenous industrial asymmetries and specialization. We nd that absolute location advantage are associated with a smooth agglomeration process and comparative advantages with a catastrophic process. [less ▲]

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See detailThe Price Of Silence: Markets For Noise Licenses And Airports
Bréchet, Thierry; Picard, Pierre M. UL

in International Economic Review (2010), 51(4), 1097-1125

This article presents a market design for the management of noise pollution created by aircraft traffic around airports. A local market for noise licenses allows noise generators to compensate noise ... [more ▼]

This article presents a market design for the management of noise pollution created by aircraft traffic around airports. A local market for noise licenses allows noise generators to compensate noise victims and to meet social acceptability. We show that the market allows the market designer to implement the social planner's optimal allocation of flights as long as the latter does not put too high a weight in his/her objective function on firms' profits compared to the disutility of noise pollution. The fact that local representatives of noise victims may be strategic players does not fundamentally alter this finding. Because of the market auctioneer's information constraints, noise licenses are likely to distribute windfall gains to residents, which alters the urban structure in the long run. [less ▲]

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See detailThe spatial selection of heterogeneous firms
Okubo, Toshihiro; Picard, Pierre M. UL; Thisse, Jacques-François

in Journal of International Economics (2010), 82(2), 230-237

Empirical research on strategic alliances has focused on the idea that alliance partners are selected on the basis of social capital considerations. In this paper we emphasize instead the role of ... [more ▼]

Empirical research on strategic alliances has focused on the idea that alliance partners are selected on the basis of social capital considerations. In this paper we emphasize instead the role of complementary knowledge stocks (broadly defined) in partner selection, arguing not only that knowledge complementarity should not be overlooked, but that it may be the true causal force behind alliance formation. To marshal evidence on this point, we design a simple model of partner selection in which firms ally for the purpose of learning and innovating, and in doing so create an industry network. We abstract completely from network-based structural and strategic motives for partner selection and focus instead on the idea that firms’ knowledge bases must “fit” in order for joint leaning and innovation to be possible, and thus for an alliance to be feasible. The striking result is that while containing no social capital considerations, this simple model replicates the firm conduct, network structure, and contingent effects of network position on performance observed and discussed in the empirical literature. [less ▲]

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See detailSelf-organized Agglomerations and Transport Costs
Picard, Pierre M. UL; Tabuchi, Takatoshi

in Economic Theory (2010), 42

This paper investigates the number and structure of spatial equilibria in a continuous space for a general class of transport cost functions. The economic space is represented by a circumference on which ... [more ▼]

This paper investigates the number and structure of spatial equilibria in a continuous space for a general class of transport cost functions. The economic space is represented by a circumference on which Þrms and workers-consumers are perfectly mobile. We derive the conditions to be imposed on the transport cost functions under which the distributions of workers and Þrms are stable equilibria. We also derive the conditions under which discrete distributions of workers over equidistant points (cities) are stable equilibria for large and small number of points (cities). [less ▲]

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See detailCity with forward and backward linkages
Picard, Pierre M. UL; Tabuchi, Takatoshi

E-print/Working paper (2010)

This paper considers the spatial structure of a city subject to final demand and vertical linkages. Individuals consume differentiated goods (or services) and firms purchase differentiated inputs (or ... [more ▼]

This paper considers the spatial structure of a city subject to final demand and vertical linkages. Individuals consume differentiated goods (or services) and firms purchase differentiated inputs (or services) in product (or service) markets where forms compete under monopolistic competition. Workers rent their residential lots in an urban land market and contribute to the production of differentiated goods and inputs. We show that firms and workers co-agglomerate and endogenously form a city. We characterize and discuss the spatial distribution of firms and consumers in such cities on one- and twodimensional spaces (linear city and planar city). We show that final demand and vertical linkages raise the urban density and reduce the city spread. We finally show that a city is too much dispersed compared to the social optimum. [less ▲]

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See detailOn zero and asymmetric trade flows
Okubo, Toshihiro; Picard, Pierre M. UL; Thisse, Jacques-François

E-print/Working paper (2010)

In this paper we study how the trade costs and the intensity of competition can explain the existence of bilateral trade, unilateral trade and no trade within an industry. We show as trade costs decrease ... [more ▼]

In this paper we study how the trade costs and the intensity of competition can explain the existence of bilateral trade, unilateral trade and no trade within an industry. We show as trade costs decrease from very high to very low values, the global economy moves from autarky to a regime of bilateral trade, through a regime of unilateral trade from the larger to the smaller country. Bilateral or unilateral trade is less likely when the global economy gets more competitive. Finally, the market delivers an outcome in which capital is too much concentrated in the larger country. [less ▲]

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See detailOn monopolistic competition and optimal product diversity: workers' rents also matter
Picard, Pierre M. UL; Toulemonde, Eric

in Canadian Journal of Economics (2009), 42(4), 1347-1360

In the Dixit-Stiglitz model of monopolistic competition, entry of rms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show ... [more ▼]

In the Dixit-Stiglitz model of monopolistic competition, entry of rms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that workers rents also contribute to explain excess entry through a general equilibrium mechanism. Larger wages indeed raises the aggregate earnings and rms sales and pro ts, which entices too many rms to enter. We discuss the possibility of over-provision of varieties by comparing the equilibrium to unconstrained and constrained social optima and to other regulatory framework where wages are not controlled. [less ▲]

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See detailGovernment Outsourcing: Public Contracting with Private Monopoly
Auriol, Emmanuelle UL; Picard, Pierre M. UL

in Economic Journal (2009), 119

The article studies the impact of the government budget constraint on the regulation of natural monopolies in adverse selection contexts. The government maximises total surplus but incurs some cost of ... [more ▼]

The article studies the impact of the government budget constraint on the regulation of natural monopolies in adverse selection contexts. The government maximises total surplus but incurs some cost of public funds "à la" Laffont and Tirole (1993). Government outsourcing is proposed as an alternative to regulation in which firms freely enter the market and choose their prices and output levels. However the government can contract "ex post" with the private firms. This "ex post" contracting set-up allows more flexibility than regulation where governments commit to both investment and operation cash-flows. This is especially relevant in case of high technological uncertainties. Copyright � The Author(s). Journal compilation � Royal Economic Society 2009. [less ▲]

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See detailCurrency Unions and International Assistance
Picard, Pierre M. UL; Worrall, Tim

E-print/Working paper (2009)

This paper considers a simple stochastic model of international trade with three countries. Two of the tree countries are in an economic union. Comparisons are made between equilibrium welfare for these ... [more ▼]

This paper considers a simple stochastic model of international trade with three countries. Two of the tree countries are in an economic union. Comparisons are made between equilibrium welfare for these two countries under fixed and flexible exchange rate regimes. Within the model it is shown that flexible exchange rate regimes generate greater welfare. However, we then consider comparisons of welfare when the two countries also engage in some international assistance in order to share risk. Such risksharing is limited by enforcement constraints of cross border assistance. It is shown that, when one takes into account risk-sharing and limited commitment, fixed exchange rate regimes associated with a currency area can dominate flexible exchange rate regimes, which reverses the standard result. [less ▲]

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