<p>This thesis seeks to provide an extensive theoretical framework for the potential incentive</p><p>effects from debt relief. The objective is achieved by integrating the positive incentive</p><p>model by Krugman with a negative incentive framework developed by drawing on the</p><p>theories of a soft budget constraint. The analysis shows that the existence of bailouts</p><p>offers the possibility that debt relief can produce negative incentives for the debtor</p><p>instead of positive incentives for improved performance. Taking on a game theoretical</p><p>perspective suggests that strategic behavior in the interaction between the debtor and the</p><p>creditor can increase the likelihood of a specific incentive effect to prevail. Such an</p><p>interactive game also highlights the importance for the creditor to obtain reliable</p><p>information about the behavior of the debtor.</p>

The main purpose of this essay is to investigate if Latvia´s pattern of trade has become more similar to the mature market economies, after Latvia´s independence 1991. Today, the intra-industry trade (IIT) dominates the trade of mature market economies. One of the pioneers of intra-industrial trade is Paul Krugman, who was the first to emphasize the importance "of scale and consumers' desire for variety" in explaining the basis for modern commerce. Customers get more variety and usually cheaper goods when the market gets bigger. I mainly use the modern trade theories to explain the trade pattern in Latvia. To measure how Latvia has developed its intra-industry trade, and thereby is approaching the mature market economies´ trade pattern, I use the Grubel-Lloyd index (GL-index). I can by my calculation of a weighted average of the GL-index, note that the share of IIT both has decreased and increased during the investigated years 1993 to 2004. The reduction took place during the 90s and the increase took place during the 2000s. I also use Balassa Index (BI) to calculate the “comparative advantage” for a number of Latvia's major export products. My calculations show that Latvia's main comparative advantage lies in semi-precious and basic metals. A comparison of the export flows from Latvia to Russia and to the EU15 from 1993 to 2004 shows two distinct trading changes. First, the trade has shifted primarily from Russia to EU countries. Second, many important export goods to Russia, (such as vehicles, machinery, electrical equipment and chemical products) have reduced its share of the total export. Instead we see a concentration to fewer export goods. Wood-, textile industry is the major export to the EU15. I note in the analysis, that the Foreign Direct Investment (FDI) is large in these areas. It seems to be a connection between the FDI to Latvia and the concentration of trade. In the conclusion of the essay I note that there are a trend that shows that Latvia is coming nearer the western modern economies’.

This thesis seeks to provide an extensive theoretical framework for the potential incentive effects from debt relief. The objective is achieved by integrating the positive incentive model by Krugman with a negative incentive framework developed by drawing on the theories of a soft budget constraint. The analysis shows that the existence of bailouts offers the possibility that debt relief can produce negative incentives for the debtor instead of positive incentives for improved performance. Taking on a game theoretical perspective suggests that strategic behavior in the interaction between the debtor and the creditor can increase the likelihood of a specific incentive effect to prevail. Such an interactive game also highlights the importance for the creditor to obtain reliable information about the behavior of the debtor.

This paper investigates the effect of the reduction of transport cost Oresundsbron has caused between the two subregions of the Oresund-region. The paper utilizes the the Helpman (1998) model and the procedure used by Hanson (2005) for estimating this equation. The paperbrings a clear inside into the method and thus provides an excellent start-ing position.

In this paper the Helpman-Hanson model is estimated using Swedish municipality level data. The Helpman-Hanson model builds on Krugman’s contributions to the NEG theory but makes use of a housing sector instead of the usual agricultural sector. The Helpman-Hanson equation is optimized both in levels and in first differences and the results confirm a positive relationship between wages and market potential, although the effect of transport costs on the distribution of wages turns out to be non-existent. Additionally, all of the estimated structural parameter values end up within the consistency ranges required by theory and most of them, except for a very large estimate for the elasticity of substitution, fall in line with previous research.

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