Research Notes

Scale Economies, Asymmetries, and Product Variety: A Case for Protection

MANUEL NAVARRO AND FRANCISCO LEDESMA University of La Laguna--Spain

The result of generalizing Lancaster's model ["The 'Product Variety' Case for Protection," Journal of International Economics, 31, 1991, pp. 1-26] is that his argument for protection is also well founded in asymmetric contexts. Moreover, in spite of the asymmetries, one finds that a nondiscriminatory tariff is required to correct the market failure. Under conditions of asymmetry between characteristics and import prices, there will always be an interval of fixed cost values which lead to a market failure in a free trade context, with the consequent need for application of an import tariff in order to maximize net national gain from variety.

Lancaster's model is generalized in two cases. First, the local variety is offered in the market precisely where the marginal consumer of both imported varieties is situated. Secondly, consider the case when the local variety is anywhere in the interval between the imported goods. In both cases, Lancaster's results hold, i.e., there is an interval of fixed costs values of the local firm that leads to market failure under free trade. Thus, a tariff will maximize the net gain from variety. Moreover, even where the import prices of the imported varieties differ, it would be optimal to apply a uniform tariff to all imports, regardless of origin.

Spatial Disparity of Unemployment in Poland

DOMANSKI CZESLAW AND BARBARA NOWAKOWSKA University of Lodz--Poland

Changes in the labor market have become one of the most important issues of economic transformation in Central and Eastern European countries. Unemployment in Poland, a phenomenon not known before the year 1989, is caused by the deep economic crisis, structural disequilibrium between demand and supply on the labor market, and small mobility of work forces. The paper discuses spatial disparities in size and structure of unemployment and explains them. In the first part of the paper, all administrative provinces are divided into seven groups according to their economic characteristics. For this purpose, taxonomy methods are used.

The second part of the study presents a correlation between economic characteristics of the groups of regions and intensity of unemployment and the structure of unemployment according to sex, age, and level of education. The highest rates of unemployment are observed in agricultural regions, lower rates are noted in industrial and industrial service-type of provinces, and the lowest rate is recorded in the capital region. The final part of the paper presents some perspectives for reduction of unemployment in terms of the economic character of regions.

Monetary Volatility, Real Volatility, and Real Exchange Rate

NICHOLAS APERGIS AND CONSTANTINOS KATRAKILIDIS University of Macedonia--Greece and University of Thessaloniki--Greece

This paper primarily tests the significance of real and monetary volatility (uncertainty) as fundamental factors in the behavior of the real exchange rate with respect to three bilateral real exchange rates among the U.S., Germany, and Japan. The selection of these three particular countries is based on Koedijk and Schotman [1989], who claimed that the real exchange rate movements for 15 industrial countries could be portioned into groups led by the U.S., Germany, and Japan.

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