Trade, convergence, and globalisation: The dynamics of the international income distribution, 1950-1998

This paper investigates the evidence for convergence in per capita incomes across 115 economies during the period 1950-1998 and examines the impact that international trade had on this process. Drawing on trade-conditioning within a distribution dynamics framework, that explicitly models frequency distributions of the cross sections of economies over time, this study suggests that trade patterns in the Golden Age were conducive to the formation of middle and high income groups or clubs of economies, but similar trade patterns (dominated by the rich economies) do not seem to explain the perpetuation of these group formations in the post-Golden Age period. If foreign trade is a key aspect of globalisation, why does it matter in accounting for the observed dynamics of the international income distribution during the Golden Age, but not during the decades since the first oil-shock? Further, the evidence from the ergodic (long-run equilibrium) distribution suggests that in the long term the established trade patterns favoured the growth of the rich at the expense of the poor economies across the world.     

Technological Diffusion and Productivity Convergence: A Study for Manufacturing in the OECD

In this article is investigated the issue of total factor productivity convergence through international technological diffusion on disaggregate manufacturing panel data from 1970 to 1995 with respect to a set of OECD countries. Estimates of alternate growth equations imply conditional convergence in all industries. Leaving out the conditioning variables still implies a significant catch-up effect in a great majority of industries. These same industries are also characterized by σ-convergence and by a tendency toward a unimodal distribution of relative productivity levels. These results suggest that, during the period of investigation, total factor productivity growth performances in OECD manufacturing were dominated by transitional dynamics. Evidence in favor of the presence of a unit root in the technology gap between frontier and non-frontier countries is, therefore, misleading.     

Unsustainable sovereign debt—is the Euro crisis only the tip of the iceberg?

As a direct effect of the financial crisis in 2008, public debt began to accumulate rapidly, eventually leading to the European sovereign debt crisis. However, the dramatic increase in government debt is not only happening in European countries. All major G7 countries are experiencing similar developments. What are the implications of this kind of massive deficit and debt policy for the long term stability of these economies? Are there limits in debt-ratios that qualitatively change policy options? While theory can easily illustrate these limits, where are these limits in real economies? This paper examines the relationship between sovereign debt dynamics and capital formation, and accounts for the effects of the 2008 financial crisis on debt sustainability for the four largest advanced economies. We contribute to the literature on fiscal sustainability by framing the problem in an OLG model with government debt, physical capital, endogenous interest rates, and exogenous growth. For the calibration exercise we extract data from the OECD for Germany as a stabilization anchor in Europe, the US, the UK, and Japan for almost two decades before the 2008 crisis. Except for intertemporal preferences, all parameters are drawn or directly derived from the OECD database, or endogenously determined within the model. The results of the calibration exercise are alarming for all four countries under consideration. We identify debt ceilings that indicate a sustainable and unsustainable regime. For 2011 all four economies are either close to, or have already passed the ceiling. The results call for a dramatic readjustment in budget policies for a consolidation period and long-term fiscal rules that make it possible to sustain sufficient capital intensity so that these economies can maintain their high income levels. Current conditions are already starting to restrict policy choices. However, the results also make it very clear that none of these economies would survive a second financial crisis such as the one in 2008.     

Has China Crowded out Foreign Direct Investment from Its Developing East Asian Neighbors？

This paper applies a gravity model to investigate the determinants of foreign direct investment (FDI) in East Asia. Economic fundamentals, such as market size, per capita income and country risk indicators, economic and cultural ties, exchange rate volatilities and information asymmetry are found to be important determinants for FDI. Globally, the inward FDI among high-income OECD economies declined significantly on average over the period of 1990-2003, whereas the inward FDI of the high-income OECD economies in emerging market economies gained substantially. In the East Asian region, the ASEAN-4 (Indonesia, Malaysia, the Philippines and Thailand) received above-average inward FDI from the high-income OECD economies after controlling for their economic fundamentals. By contrast, China's FDI from the high-income OECD economies is below average relative to its economic fundamentals. Therefore, it is difficult to establish that China has crowded out FDI from its developing ASEAN neighbors.     

The Small Open-Economy New Keynesian Phillips Curve: Empirical Evidence and Implied Inflation Dynamics

In this paper we apply GMM estimation to assess the relevance of domestic versus external determinants of CPI inflation dynamics in a sample of OECD countries typically classified as open economies. The analysis is based on a variant of the small open-economy New Keynesian Phillips Curve derived in Galí and Monacelli (Rev Econ Stud 72:707–734, 2005), where the novel feature is that expectations about fluctuations in the terms of trade enter explicitly. For most countries in our sample the expected relative change in the terms of trade emerges as the more relevant inflation driver than the contemporaneous domestic output gap.     

Crises in Asia: Recovery and policy responses

The goal of this paper is to provide stylized facts on recovery from economic downturns and to evaluate the role of macroeconomic policies in promoting recovery. In particular, we examine gross domestic product (GDP) recessions and financial downturns (credit contractions and stock price declines) using data from 21 Organisation for Economic Co-operation and Development (OECD) economies and 21 developing Asian economies. We find, in general, recovery from a GDP recession in the Asian economies is somewhat slower than in the OECD economies. However, recovery from a financial downturn is not much different between Asia and the OECD. We also find the OECD economies have been more active and effective in using counter-cyclical policies than the Asian economies in the face of GDP recessions and financial downturns. Recent evidence, however, suggests the Asian economies may have better success in the current global crisis.     

Technological Shifts and Convergence in a European Perspective since 1950

Abstract

The paper analyses the behaviour of convergence/divergence primarily within Western Europe and the OECD in relation to market integration and to major technological shifts such as the second and the third industrial revolution. It also relates the behaviour to traditional growth theory and endogenous growth theory as well as to historical generalisations based on structural analysis. The empirical focus is on an econometric analysis of convergence/divergence since 1950 in order to develop measures of these forces as continuous processes over time. The analysis indicates trend shifts from convergence to divergence with the appearance of stronger divergent forces in combination with the major technological shifts. There is as well a cyclical variation between divergence/convergence from the 1970s. It also indicates a pronounced structural divergence from 1990 in combination with accelerated growth in mainly English-speaking economies.     

Geographical location and urbanisation of the Swedish manufacturing industry, 1900–1960: evidence from a new database

Abstract

This article introduces a new database, based on official statistics, of regional manufacturing industries in Sweden. We employ this database to examine the distribution of manufacturing activity across Swedish regions and cities, 1900–1960. Over this period we observe an increasing concentration of manufacturing activities, reaching a peak around 1940, across the northern, southern and western parts (NUTS-I areas) of Sweden. Over the same period, the North-South divide in terms of manufacturing employment grew larger. Across counties (NUTS-III) and cities we, however, observe two shorter periods of convergence of manufacturing activities, in the early twentieth century and in the post-war period, whereas the inter-war period was characterised by divergence. These developments occurred to the backdrop of the urbanisation of industry in Sweden, as the rural share of manufacturing employment declined from roughly 60 to 25% between 1900 and 1960. We also find that the regional patterns of individual industries over time followed different trajectories, suggesting that that the determinants of industry location differed significantly across industries.     

The great realignment: How factor-biased innovation reshaped comparative advantage in the U.S. and Japan, 1970–1992

Recent changes in comparative advantage in the largest OECD economies contradict static Heckscher–Ohlin–Vanek theory. Japan's rising share of machinery exports and the improved comparative advantage of the USA in heavy industry were accompanied by growing scarcities of factors used intensively in these sectors. We show that under factor-price equalization, directed technical change leads to increasing specialization in goods intensive in each country's abundant factor. Testing this hypothesis with 1970–1992 export data from 14 OECD countries, we find that international comparative advantage was reshaped by biased innovation in the largest economies that increased the effective stocks of their abundant factors.     

RELATIVE FACTOR PRICES IN THE PERIPHERY DURING THE FIRST GLOBAL CENTURY: ANY LESSONS FOR TODAY?

Globalisation before 1939 had profound effects on factor prices and income distribution, especially between the industrialising core economies and the economies of periphery. Jeffrey Williamson reflects briefly on: the impact of globalisation on relative factor price convergence; the interaction between commodity market convergence and convergence in labour and capital markets; and whether the nineteenth history of the periphery was a different history from that of the industrialising European core. Williamson concludes with observations on why the blacklash against globalisation is less severe today than it was during the first global century.     

Regional disparity,transitional dynamics and convergence in China

Most of the earlier studies on the convergence of income in China are based on provincial level data with a few papers focusing on intra-provincial units’ transitional dynamics. The objective of this study is to fill the void in the literature by using county-level data which cover 1485 counties and county-level cities in 22 provinces for the period of 1997–2007. This paper makes several contributions to the literature. The findings in this paper show high persistence in income distribution among many spatial groupings. Thus the poor county-level units may remain relatively poor over time. This study provides very little evidence of convergence to the mean income in various spatial groupings. Furthermore, the empirical analysis highlights differences in transitional dynamics between cities and counties.     

Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Sub‐Saharan Africa

The paper examines the monetary policy actions through which central banks in sub‐Saharan Africa have tried to eliminate the negative impacts of the shocks facing their economies. We compare two different monetary policy regimes: a currency board regime (in the CFA zone) and an inflation targeting policy regime (Ghana and South Africa) when central banks respond to demand, supply, and fiscal shocks. We extend the usual forecasting and policy analysis system models to replicate the economic features of these economies during the period 2002–12 and to evaluate the impact of several policies in response to these shocks. We find that both policies are inappropriate in helping the economies escape from the effects of negative demand shocks, both are essential when negative shocks to primary balance occur, while inflation targeting dominates the currency board regime as a strategy to cope with positive shocks to inflation.     

CENTRAL BANK INDEPENDENCE, WAGE-BARGAINING STRUCTURE, AND MACROECONOMIC PERFORMANCE IN OECD COUNTRIES

The impact of central bank independence and wage-bargainingstructure on inflation and unemployment is explored theoreticallyand tested empirically for a sample of 17 OECD countries overtwo separate periods. The results suggest that inflation islower in economies with greater central bank independence andthat the equilibrium unemployment rate depends on the structureof the labour market. Greater central bank independence doesnot appear to be associated with higher unemployment.     

The Dynamics of International Trade Patterns

This paper introduces new dynamic measures for examining changes in international trade patterns. Using data for 20 OECD countries over the 1980–2000 period, we show that inter-industry trade changes contrary to countries’ previous specialization are frequently the dominant form of trade expansion. The econometric analysis indicates that the observed changes in trade patterns were explained by initial endowments of human-capital and industry-specific changes in labour productivity and labour costs. The results also suggest that trade liberalization induced an increase in the previous specialization of larger OECD economies in industries with increasing returns to scale. JEL no. F1, O33, O50     

Effectiveness and commitment to inflation targeting policy: Evidence from Indonesia and Thailand

The chief objective of our paper is to highlight basic features of the Information Technology (IT) policies adopted by Indonesia and Thailand, and to evaluate the commitment of the monetary authorities and the overall performances of the IT regime. The results demonstrate that the IT regime in these two economies has had some success, but not during the immediate aftermath of the Lehman Brothers’ collapse in the last quarter of 2008. Furthermore, the implementation IT policy in these economies has largely been “flexible” during the stable period, seeking the balance between narrowing the output gap, managing exchange rate volatility, and anchoring inflationary pressure. However during the turbulent period, there had been a heightened focus on anchoring inflationary expectations.     

Has China displaced the outward investments of OECD countries?

As China has rapidly emerged as one of the world's largest investors abroad, there has been a hectic debate in the literature on whether its emergence as a major foreign investor may have undermined the importance of western industrialised economies, including those in the Organisation for Economic Cooperation and Development (OECD). This paper aims to investigate whether this is the case. The study uses a panel dataset covering 155 countries, including 33 in the OECD, where China had invested during 2003–09. This is by far the most comprehensive dataset of China's outward foreign direct investment (OFDI). A two-stage least squared (TSLS) regression approach is adopted for our econometric models according to an established augmented gravity model in the literature. The empirical results show clear evidence that China's OFDI displaces that of the OECD countries, but the argument that China's emergence is a ‘new colonialism’ is not supported as OECD countries' OFDI in resource abundant host countries, particularly that in Africa and Latin America, does not appear to have been displaced by China's OFDI.     

日本农协融资经验与启示

日本农协战前战后融资来源大同小异,一个共同显著特征是成员存款占据及其重要的位置。通过分析2010年的资产负债表得知,日本农协更依赖债务融资特别是成员存款。而日本严密的合作金融体系为成员存款提供了基本保障,其特有的合作金融模式促进了融资活动了顺利开展。     

Convergence in Revealed Preferences for Automobiles as Differentiated Goods: U.S. and OECD Countries: 1970–1999

Attributes of differentiated goods in personal consumption have both conceptual and policy importance in macroeconomic applications that include obsolescence rates of capital stock, the savings rate, and environmental issues. While there is both direct and indirect evidence of variation in preferences for these attributes across countries, there is also conjecture that recent global integration has reduced this variation. We examine convergence between the U.S. and four OECD countries in the levels of automobile attributes over the 1970–1999 period. Results of panel unit root tests with the U.S. as the comparison country showed convergence in the constructed measures of size, performance and efficiency. In pairwise comparisons between the U.S. and OECD countries, results of our model estimations indicated convergence in size and efficiency with estimated half lives to convergence of between four to six years. Disaggregating the definitional components of performance, results show convergence in horsepower when selected economic variables are controlled. We find that measures of trade, per capita income and price appear to be among the mechanisms through which increasing global integration relates to convergence. Directions for further study of convergence preferences for attribute profiles across countries are discussed.     

Exports,Product Differentiation and Knowledge Spillovers

Empirical studies on aggregate export behavior have recently emphasized the role played by innovation as the main force driving product differentiation and competitiveness for developed countries. These studies treat foreign innovation as a variable that affects negatively national export shares. We incorporate the impact of foreign innovation in a standard new trade theory model and find that, if knowledge spillovers exist, foreign knowledge accumulation could even have a positive effect on national exports. We then test the model using aggregate export data for a set of 21 OECD economies and find that the foreign stock of knowledge affects exports positively for the less advanced countries in the sample and negatively for the G7 economies. JEL Classification Numbers: F12, O31, C22, C23