Distributional national accounts for the Netherlands and a comparison with 12 other countries

Most inequality studies rely on micro data that do not capture a substantial share of income identified in the national accounts. In the Netherlands, almost one fifth of household disposable income is missed by current inequality statistics. In this paper, we present inequality statistics for the Netherlands that capture all of household income, so-called distributional national accounts. Compared to the current inequality statistics, the Gini coefficient for disposable income increases substantially from 0.289 to 0.337. Cross-country comparisons show that such a change between Gini coefficients based on micro-data versus Gini coefficients based on distributional national accounts does not apply to all countries. The difference between both Gini coefficients varies not only between countries in the size, but also in the sign of the difference.     

AN EXAMINATION OF THE FEASIBILITY OF USING MONETARY DATA FOR NATIONAL INCOME ESTIMATES

In a number of underdeveloped countries today, adequate statistics for estimating national output by traditional national accounting methods are unavailable or unreliable. However, many of these same countries do publish data on monetary variables at an early stage in their development. These data can now be used to estimate national income.
In this study the money supply was defined to include all currency in circulation, private deposits subject to check at all banks and postal systems, all government deposits, and unused overdrafts less float. The national accounts data were taken from United Nations sources and data supplied by various foreign statistical offices. To make the accounts more comparable in terms of coverage and to limit reported income to the monetized sector of the economy, non-monetary imputations were deleted.
The monetary and national accounts data were combined in a multiple, stepwise regression. National income was used as the dependent variable and money supply and other data were used as the independent variables. The final estimating equations explained about 96 per cent of the variation in income between countries. Other tests were conducted using the currency ratio, transactions velocity, population, and per capita consumption. However, these variables did not augment the explanatory power of the regression equations.
When the equations were used to estimate national income for twenty-two under-developed countries, the derived estimates showed a high degree of concordance with reported income where it existed for comparative purposes. The results indicate that monetary data can be used to estimate national income for underdeveloped countries with a relatively high degree of accuracy, between countries, and from year to year within a country.     

The permanent income hypothesis in an underdeveloped economy

After a concise but critical survey of several tests of the permanent income hypothesis (PIH), the authors advance their own test for India using annual data from 1919–1960. It employs Friedman's technique for calculating the permanent value of a variable. Two different specifications of the model are tested, using different values of the consumer's ‘horizon.’ In almost all cases it is found that the marginal propensity to consume out of transitory income is very similar to the marginal propensity to consume out of permanent income. The authors conclude that even a looser variant of the PIH is not valid for India. However, no valid generalization with respect to the appropriate planning horizon can be made, for the PIH was almost equally invalid with a horizon of one, two and two-and-a-half years. The authors briefly discuss the policy implications of their results for the savings efforts in underdeveloped countries.     

How Information Quality of Macro Aggregates Affects Sovereign Risk: An Empirical Investigation

This paper looks at the relationship between data quality of macro aggregates and the repayment ratio for debt payments due in a given year after a country defaults. We find empirical evidence that good information of macro aggregates reduces sovereign risk by enhancing the repayment ratio conditional on default, while having an insignificant effect on the default probability. The estimation accounts for selection bias by using a cross-country panel data of 69 developing countries for 1989–2002. Careful consideration is taken to establish information quality of macro aggregates as an exogenous institutional variable. Results are robust to controlling for various governance factors, income levels, and regional factors, etc. Linking information quality to creditors' bargaining power is more consistent with our findings than linking poor information quality to information asymmetry.     

Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China

At the center of the pollution haven debate is the claim that foreign investors from industrial countries are attracted to weak environment regulations in developing countries. Some recent location choice studies have found evidence of this attraction, but only for inward FDI in industrial countries. The few studies of inward FDI in developing countries have been hampered by weak measures of environmental stringency and by insufficient data to estimate variation in firm response by pollution intensity. This paper tests for pollution haven behavior by estimating the determinants of location choice for equity joint ventures (EJVs) in China. Beginning with a theoretical framework of firm production and abatement decisions, we derive and estimate a location choice model using data on a sample of EJV projects, Chinese effective levies on water pollution, and Chinese industrial pollution intensity. Results show EJVs in highly-polluting industries funded through Hong Kong, Macao, and Taiwan are attracted by weak environmental standards. In contrast, EJVs funded from non-ethnically Chinese sources are not significantly attracted by weak standards, regardless of the pollution intensity of the industry. These findings are consistent with pollution haven behavior, but not by investors from high income countries and only in industries that are highly polluting. Further investigation into differences in technology between industrial and developing country investors might shed new light on this debate.     

Interactions between economic growth and environmental quality in Shenzhen,China's first special economic zone

The relationship between economic development and environmental quality is a debated topic. Environmental Kuznets curve (EKC) is one prominent hypothesis, positing an inverted U-shaped development–environment relationship. Here we test this hypothesis using data from Shenzhen, People's Republic of China. Established in 1980 as the first special economic zone in China, Shenzhen has developed from a small village into a large urban-industrial agglomeration with the highest income level in the country. The enormous expansion of infrastructure, industrial sites and urban settlements has profoundly changed the local environment. We utilize environmental monitoring data from Shenzhen on concentration of pollutants in ambient air, main rivers, and near-shore waters from 1989 to 2003. The results show that production-induced pollutants support EKC while consumption-induced pollutants do not support it.     

Intertemporal consumer behaviour in developing countries

This paper explores aggregate consumption behaviour in four developing countries under the assumption that consumers' planning horizons do not extend over their expected lifetime. Under certain conditions, the resulting ‘moving planning horizon model’ suggests that changes in current income would exert considerably more influence over current consumer spending than is predicted by forward-looking theories of consumption which typically assume that consumers' planning horizons coincide with expected lifetime. Estimation of the model for the group of developing countries provides empirical support for the role of changes in current income in influencing the consumption process. The results also reveal that consumers are relatively short-sighted sinced the length of the planning period of consumers ranges from just over ten months. An important implication of these findings is that policy measures can be effective not only if they influence consumers' permanent incomes but also if they affect changes in current income.     

Testing the permanent-income hypothesis: new evidence from West-German states (Länder)

This paper investigates whether time-series data from 11 West-German states (L?nder) provide evidence in accord with the implication of the permanent-income hypothesis (PIH) for the stochastic relationship between consumption and income innovations. The empirical results do not support this hypothesis, in the sense that the response of consumption to income innovations is found to be much weaker than is predicted by the PIH. Moreover, for each individual state as well as for Germany as a whole, the response was found to be asymmetric, being stronger for negative than positive income innovations. This evidence of asymmetry is consistent with a model in which consumers are liquidity constrained.

Import prices,income, and inequality

We compare three theoretical explanations for the positive empirical relationship between importer income per capita and traded goods prices. A first explanation is that consumers with higher incomes demand higher quality goods with higher prices. A second explanation is that wealthier people exhibit an increased willingness to pay for necessary goods as more goods enter the consumption set in a hierarchic demand system, and can thus be charged higher markups. A third explanation is that consumers with higher incomes are more finicky regarding their preferred variety in an ideal variety framework and can thus be charged higher markups. We discriminate between these three theories by focusing on the effect of income inequality on trade prices. Based on a large dataset with bilateral HS6 level data on 1260 final goods categories from more than 100 countries between 2000 and 2004, we find a highly significant negative effect of income inequality on unit values. This contradicts both the demand for quality and finickyness theories, while providing support for the increased willingness to pay theory linked to hierarchic demand. These findings on income inequality do not falsify the quality expansion model and the ideal variety model per se. However, the results do argue for place of importance of hierarchic demand.     

持久收入假说与我国城镇居民消费——基于省级面板数据的实证分析

运用基于持久收入和暂时收入的两种分解方法的省际面板模型检验持久收入假说的三个假设.结果发现,我国城镇居民消费与持久收入和暂时收入均存在显著的相关关系,暂时收入的边际消费倾向不为零;就诸省份而言,暂时收入的边际消费倾向不同.进一步探讨了持久收入假说不能完全解释我国城镇居民消费行为的原因."λ假说"检验表明,城镇居民消费对当期收入过度敏感,其呈现理性化趋势.     

我国居民收入不平等的主要原因：市场还是政府政策？

市场因素和政府收入再分配政策是决定一国居民收入不平等程度的两个重要因素。本文采用中国家庭收入调查（China Household Income Project ,CHIP）住户数据,计算出我国居民市场收入基尼系数与可支配收入基尼系数,并同发达国家进行比较,借此探讨目前我国居民收入不平等是由市场力量造成的,还是政府收入再分配政策力度不足的结果。研究发现,从市场收入基尼系数来看,我国与发达国家之间的差距并不大。由此认为,政府收入再分配政策效果不明显是导致我国居民收入分配不平等状况较发达国家严重的主要原因。加大转移支付等再分配政策力度是缓解和改善目前我国居民收入不平等的主要途径。     

THE UNITED NATIONS SYSTEM OF NATIONAL ACCOUNTS IN THE MIDDLE EAST

After an introduction setting out the general state of work on the national accounts in the Middle East the author considers the principal uses of national accounts statistics in less developed countries. The first group of uses discussed is in connexion with the measurement of growth and the making of international comparisons. The author is of the opinion that in many cases the primary statistical series are so weak that the fact they they are combined together into a series called national income or gross domestic product lends to them a significance which they do not really possess. The real problem is to improve the quality of the primary series. A second use of national accounts statistics is in connexion with fiscal and budgetary policy. In the statistically advanced countries this is one of the most important uses but in the less developed countries budgetary policy has not yet reached a level of sophistication which would call for the use of national accounts data. Moreover, the time factor involved in assembling accurate national accounts estimates militates against their effective use for short term forecasting. The author considers that the most important use for national accounts statistics is to provide a framework for development planning. The United Nations system is not altogether appropriate for this purpose. It grew up primarily as a system for recording income flows but in development planning one is concerned equally with commodity flows with a great deal of attention being focussed upon intermediate products. The proposals of the working group of African Statisticians for an adaptation of the S.N.A. to African countries represents a most important advance in this respect. In the final section of the paper the author advocates a broader definition of capital formation to include developmental expenditure which is not properly defined as fixed capital formation. Education expenditure is cited as an example. It is suggested that in the national accounts it would be desirable to operate with gross concepts. However, the growth of the capital stock is obviously important in less developed countries and it is suggested that statistical techniques be devised to measure it directly wherever possible. Finally, attention is drawn to the ambiguities and weaknesses in the concept of residence as used at present in the S.N.A.     

Do channels of financial integration matter for FDI’s impact on growth? Empirical evidence using a panel

This paper adds to the debate on the relationship between foreign direct investment (FDI) and economic growth which suggest that the link between FDI and economic growth is rather the consequence of both FDI and growth responding endogenously to economic integration. We investigate if the impact of FDI on growth is dependent on the channel of integration used to attract FDI. We use four different indexes of economic integration including Trade Openness, Chinn-Ito, and KOF and our newly constructed index of financial integration. We employ these four indexes to investigate the role played by economic integration in linking FDI and growth. We use a panel consisting of 134 developing countries and data spanning the period 1989-2017 estimated using the generalized method of moments (GMM) technique. The results show that FDI is an important determinant of growth. The results also suggest that at least some of the integration variables do matter and work as channels to attract FDI leading to growth. However, after stratifying countries by income level, we also find that integration matters mainly for high income countries. Integration variables for other income groups do not show much significance. These are interesting results and may have important policy implications.     

Industrial development in Malaysia and Singapore: Empirical analysis with multiple‐cone Heckscher–Ohlin Model

This paper employs the multiple‐cone Heckscher–Ohlin model to analyze industrial development in Malaysia and Singapore. In particular, we focus on industrial upgrading along with capital accumulation as a key determinant for the cross‐country difference in production technology and income. By pooling two countries’ data on factor endowment and sectoral output in manufacturing from 1990 to 2008, we estimate the common industrial development paths of the two‐cone Heckscher–Ohlin model, the Rybczynski linear relationship between capital–labor ratio and sectoral output per capita. Our results demonstrate that, after controlling for quality of workers (by educational attainment), the two countries resided in different cones during our sample period, implying that Singapore succeeded in accumulating capital steadily with the support of foreign investment and upgrading its industry mix to make it more capital‐intensive. The separation of cones is also consistent with the observed gap in gross domestic product per capita between the two countries. Furthermore, we implement a factor‐augmenting productivity test to see the gaps in efficiency of capital and human‐capital‐augmented labor and confirm no significant difference between the two countries.     

Growth of developing countries and world interest rates

On the basis of aggregate data covering the period 1973–1982, this note argues that the rate of growth of non-oil developing countries is influenced significantly by the growth performance of industrial countries and by the level of the real rate of interest on world markets. At the same time, no evidence was found to support the hypothesis that the nominal rate of interest has an effect on growth in non-oil developing countries.     

A reexamination of the consumption function using frequency domain regressions

This paper reexamines the permanent income hypothesis (PIH) in the frequency domain. In contrast to some time domain tests, our frequency domain approach provides an explicit and natural test ofboth the permanentand transitory implications of the PIH for jointly nonstationary consumption and income data. Using a simple theoretical model, we demonstrate that the PIH implies the marginal propensity to consume (MPC) out of zero frequency income is unity. The PIHalso implies that the theoretical MPC out of transitory (or high frequency) income is smaller than the long-run MPC. These theoretical restrictions are natural implications of Friedman's hypothesis that agents consume out of permanent or low frequency income and (dis)save out of transitory or high frequency income. We test this full set of restrictions directly using spectral regression techniques. Under our set of assumptions, the derived disposable income process is shown to have a unit root and to be cointegrated with consumption. We therefore employ a systems spectral regression procedure that accommodates stochastic trends in the consumption and income series as well as the joint dependence in these series. In view of the relatively recent development of these systems spectral estimators, we also conduct Monte Carlo simulations across both low and high frequencies to assess properties of the estimator relative to established single equation techniques. New empirical estimates of the consumption function and tests of the PIH based on systems spectral regression methods are reported for U.S. aggregate consumption and income data over the period 1948–1993. The empirical results provide some evidence for the theoretical implications of the PIH.     

Integration of current account imbalances in the OECD

The Glick and Rogoff (1995) hypothesis suggests that common or global shocks do not influence current accounts of countries which are symmetric. This is tested for 37 pairs of current account imbalances out of 17 OECD countries. Using time series data that spans the pre-Global crisis period but including several sub-samples recognizing the advent of the Euro, this study shows that for nine pairs of countries common shocks do matter for current account imbalances. Results obtained from the Granger causality test do not support the presence of spillovers in some of these pairs. Therefore, this study documents some empirical evidence which departs from the Glick and Rogoff proposal.     

Valuing The Beneficts of Air Pollution Abatement Using a Health Production Function A Case Study of Panipat Thermal Power Station, India

The Indian economy today is highly prone to industrial pollution and ismaking compliance decisions in order to meet environmental standards.Environmental regulations impose significant costs upon industry that arefairly high and, therefore, require economic justification. This justificationcan be given by estimating the benefits associated with these costs. Whilethe scientific rationale behind air quality preservation is well understood,its economic rationale for a developing country like India, has to beverified. The objective of the present paper is to estimate the economicvalue that people in an urban area in India (Panipat Thermal Power Station(PTPS) Colony in Panipat, Haryana) place upon improving the air quality.The dose-response method, based on the Gerking and Stanley (1986) model,is used to estimate the economic benefits of air quality improvement. Theseestimates range from one to two percent of monthly income. Income andhealth status variables were significant determinants of peoples'willingness to pay (WTP) for air quality improvements. This lends supportto the neo-conventional wisdom `act now to protect the environment beforeit is too late'. These people are ready to pay for environmentalimprovements. We do believe, however, that the relatively successfulapplication of the dose response method at PTPS colony suggests that thetechnique can be more widely applied in developing countries like India.     

Reconciling the WTO Effects on Trade at the Extensive and Intensive Margins

Empirical studies examining the impact of World Trade Organization (WTO) membership have produced disparate results. These studies, however, have focused on total aggregate trade flows. In this paper, we utilize disaggregated product level data to examine the impact of WTO membership on the product level extensive and intensive margin of imports. Utilizing the Poisson Pseudo-Maximum Likelihood (PPML) estimation that allows for heteroskedasticity in trade data and accounting for several estimation issues, we do not find a positive impact on either margins between WTO member country-pairs. Once we examine asymmetries in trade flows across countries based on their level of development, we find that developing WTO members experience an increase in the extensive margin from industrial member countries. Additionally, the industrial WTO members also experience an increase in the extensive margin from developing WTO members. Results suggest that WTO facilitates the North–South trade relationship, which has been largely absent in trade literature.     

EXCESS SMOOTHNESS OF CONSUMPTION IN JAPAN*

The purpose of this paper is to test whether excess smoothness of consumption, which is not consistent with the permanent income hypothesis (PIH), is observed in Japan. Two simple testing procedures are employed and several measures of Japanese aggregate consumption are used in the analysis. Further, for purposes of comparison, US aggregate data and Japanese income quintile group data are also used. The findings of the paper are the following: all estimates of the consumption variability ratio indicate an excess smoothness of consumption in Japan; the results of tests of PIH differ depending on the testing procedures and the measures of consumption used, in contrast to the results for the US; and the consumption variability ratio is likely to be smaller in lower income groups. This suggests the possible existence of significant liquidity constraints or transactions costs in Japan.