Economic recession, skilled unemployment and welfare

The paper develops a three-sector, specific factor, general equilibrium model with two high-skill sectors and unemployment of skilled labor. One of the two high-skill sectors produces a non-traded commodity whose aggregate demand consists of both domestic demand and an exogenously given foreign demand. The consequences of a decline in the foreign demand for the non-traded good resulting from worldwide economic recession on the skilled and unskilled labor markets in a developing economy have been examined. The analysis finds that the effects on the labor markets crucially hinge on the relative factor intensities of the two high-skill sectors and that through the adoption of appropriate fiscal measures; the country can shield its workforce from the rage of global economic downturn.     

Estimating domestic content in exports when processing trade is pervasive

For many questions, it is crucial to know the extent of domestic value added (DVA) in a country's exports, but the computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By applying our framework to Chinese data, we estimate that the share of domestic content in its manufactured exports was about 50% before China's WTO membership, and has risen to nearly 60% since then. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly low domestic content (about 30% or less).     

Artificially Low Interest Rates as Export Promotion Policy

We reconsider the effects of a policy that sets an artificially low interest rate. Such a policy involves a combination of an interest rate ceiling and a rationing rule that assigns a priority‐lending status to export sectors over domestic service sectors. We demonstrate that the policy works as an export‐promotion policy, and improves national income. Furthermore, under some conditions, the policy expands the domestic service sector, despite the reduced amount of funds owing to the rationing rule. Finally, the artificially low interest rate improves national welfare.     

FDI and domestic investment in Germany: crowding in or out?

This paper estimates the effects of outward FDI on domestic business investment in Germany at the industry level for a panel of 19 industry and 10 services sectors. We pay particular attention to the different motivations behind FDI, and distinguish between FDI to high-versus low-wage countries, to Europe versus the rest of the world, and FDI in services and industry sectors.We find that, in industry, FDI to low-wage countries crowds out domestic investment, whereas FDI to high-wage countries outside Europe crowds in domestic investment. In services, FDI to Western Europe crowds in domestic investment.     

Industry structure and the dynamics of price adjustment

Using annual US data for gross domestic product originating by sector between 1947 and 1997 it is shown that a negative long-run relationship between inflation and the markup is present across the sectors as well as in the aggregate data. A preliminary explanation based on industry structure is explored for the relative sizes of the impact of inflation on the markup in the long-run for the various sectors.     

An Input–Output Analysis: Linkages versus Leakages

Resorting to input–output analysis, the relationships between production sectors are investigated. For such assessment, the distinction between imported and domestically supplied inputs, which has been disregarded so far in empirical analysis, is crucial. Besides an accurate measurement of domestic linkages, it also allows us to evaluate the importance of international trade in the production process. Moreover, the interaction between domestic linkages and leakages resulting from international trade can also be analysed. The study of such links improves our knowledge on the economic production structure and how it has evolved over time, which is essential for policy making. Using as a case study a small open European economy, the Portuguese one, we assess sectoral interdependence and trade effects for individual sectors as well as for the economy as a whole.     

Knowledge-intensive Services and International Competitiveness: A Four Country Comparison

The nature and consequences of services innovation remains a woefully under-researched topic. The paper calls into question two statements that are frequently repeated in the political-economic discourse on services. The first concerns the suggestion that Germany is a 'services laggard' that needs to restructure its domestic economy if it is to remain internationally competitive. By contrast, the UK is frequently held up as an example of a successfully restructured 'services economy'. The paper draws an important distinction between the quantity of services in a domestic economy and the degree of connectivity between services and other economic activities. The latter, it is argued, is far more important in determining the size of spill-overs from services innovation enjoyed within a domestic economy and, hence, to international competitiveness. Particular attention is paid to the role and impact of knowledge-intensive service sectors in this regard. In addition to the UK and Germany, data is drawn from the Netherlands and Japan. Using these four comparative cases we explore the distinction between a high representation of services in the domestic economy, and the innovation spill-overs facilitated by a high degree of connectivity between services and other economic sectors within a domestic economy.     

Offshoring and Trade Balance in Developed and Emerging Economies

This paper analyzes the effects of off‐shore outsourcing for international trade, especially for the emerging and poor economies, in a two‐sector specific factor model, with a nontraded good being one of the sectors. The phenomenon of offshoring is modeled by incorporating the reduced use of domestic labor in the production function. This is regarded as a characteristic feature of offshoring in the literature. We find that increased offshoring leads to an increase in the relative price of the nontraded good. Given that this relative price can be interpreted as the real exchange rate, increased offshoring leads to exchange rate appreciation. This suggests that offshoring actually makes the goods and services from the emerging economies more competitive in the world market, and thus can be a contributory factor in the positive trade balance experienced by many emerging economies since early 2000s.     

FDI spillovers in new EU member states

Using an unbalanced panel of firm‐level data in Bulgaria, Poland and Romania, we examine the impact of foreign firms on domestic firms’ productivity. In particular, we try to answer the following research questions: (1) Are there any spillover effects of foreign direct investments (FDI), and if so, are they positive or negative? (2) Are spillover effects more likely to occur within or across sectors? (3) Are the existence, the direction and the magnitude of spillovers conditioned by sector and firm‐specific characteristics? Our findings show that FDI spillovers exist both within and across sectors. The former arise when foreign firms operate in labour‐intensive sectors, while the latter occur when foreign firms operate in high‐tech sectors. Moreover, we find that domestic firm size conditions the exploitation of FDI spillovers even after controlling for absorptive capacity. We also detect a great deal of heterogeneity across countries consistent with the technology gap hypothesis.     

The demand for skills and labour costs in partner countries

We analyse the consequences of trade integration in Europe (1995–2005) detecting how the labour costs in partner countries affect the domestic demand for high‐ and low‐skilled labour in ‘Old’ (EU‐15) and five ‘New’ EU member states. In general, independently of the skill level of workers, the results suggest complementarity between domestic and foreign labour. However, when we take into account the typology of sectors, the demand for the high skilled in low skill intensive sectors in ‘New’ EU members is boosted by the increase of the average labour cost in ‘Old’ EU members. Thus in low skill intensive sectors, the high skilled in ‘New’ member countries can substitute for employment in EU‐15 countries.     

Japanese manufacturing facing post-Fukushima power crisis: a dynamic computable general equilibrium analysis with foreign direct investment

The Great East Japan Earthquake and the subsequent tsunami that hit and severely damaged the Fukushima Daiichi Nuclear Power Station resulted indirectly in the shutdown of most of the nuclear power plants in Japan. To compensate for the lost nuclear power supply, more fossil fuels were used. People became concerned that this could be disadvantageous for domestic manufacturing industries and accelerated their offshoring to Asia, especially China, through foreign direct investment (FDI). We used a world trade computable general equilibrium (CGE) model with endogenous FDI from Japan to China to quantify the impact of the power crisis on the Japanese manufacturing sectors. We found that the power crisis as well as FDI would adversely affect several sectors that use power intensively, but would benefit the transportation equipment (TEQ), electric equipment (EEQ) and machinery sectors, despite the common expectation that these sectors would undergo a so-called ‘hollowing-out.’     

FDI对中国农产品加工业竞争力影响的实证分析——基于钻石模型与民族产业视角

基于钻石理论,本文构建了FDI对中国农产品加工业竞争力影响的模型并进行实证分析,结果发现,FDI的流入有利于中国农产品加工业国际竞争力的提高,其中原料密集型、劳动密集型行业表现最为明显,但技术密集型产业相对较小;民族农产品加工业国际竞争力因FDI的流入而受到不利影响,但劳动密集型、原材料密集型、资本与技术密集型行业却因此受益;同时,民族农产品加工业的国内竞争力也受到了FDI的冲击。     

中国银行业引进境外战略投资者的绩效分析

引进境外战略投资者是近几年中国银行业改革的一项重要措施。自2001年加入世界贸易组织后,已先后有十几家中资银行引入了境外战略投资者。中国银行业引进境外战略投资者这一改革措施的选取是正确的,但外资持股比例与银行绩效没有必然联系的实证检验结果提示我们,银行绩效的提升不一定非要以外资控股为前提。对于中国这样一个大国来说,保持国内力量的银行控股权应该具有重要战略意义。     

Knowledge-intensive Services and International Competitiveness: A Four Country Comparison

The nature and consequences of services innovation remains a woefully under-researched topic. The paper calls into question two statements that are frequently repeated in the political-economic discourse on services. The first concerns the suggestion that Germany is a 'services laggard' that needs to restructure its domestic economy if it is to remain internationally competitive. By contrast, the UK is frequently held up as an example of a successfully restructured 'services economy'. The paper draws an important distinction between the quantity of services in a domestic economy and the degree of connectivity between services and other economic activities. The latter, it is argued, is far more important in determining the size of spill-overs from services innovation enjoyed within a domestic economy and, hence, to international competitiveness. Particular attention is paid to the role and impact of knowledge-intensive service sectors in this regard. In addition to the UK and Germany, data is drawn from the Netherlands and Japan. Using these four comparative cases we explore the distinction between a high representation of services in the domestic economy, and the innovation spill-overs facilitated by a high degree of connectivity between services and other economic sectors within a domestic economy.     

Environmental Pollution in an Open Economy*

This paper attempts to analyze an interaction between international trade and domestic environmental pollution. A country engaging in international trade biases its domestic economic structure toward exportable sectors. The bias thus caused has a significant impact on the quality of the environment. It will be shown that a country can and should control international trade activities as a means of dealing with pollution problems. One of the paper's main purposes is to give a warning to a country which expands its international trade activities without taking serious consideration of its domestic environment.     

Local financial development and constraints on domestic private-firm exports: Evidence from city commercial banks in China

We show that the development of city commercial banks (CCBs) across China has alleviated the constraints from China’s domestic financial-market inefficiency on the export activity of domestic private firms. Considering the export behavior of 260 cities between 1997 and 2012, we confirm the well-established under-performance of domestic private firms in financially more vulnerable sectors compared to foreign affiliates in China. We show that a greater number of CCB branches raises domestic private-firm exports disproportionately more in financially-dependent sectors, which is in line with improved financing conditions for these companies. This improvement in export performance appears to result from both an increase in the number of destination countries and a decline in prices. CCB development is moreover associated with a reduction in the systematic disadvantage of domestic private firms relative to foreign-owned firms in export markets resulting from their greater financial exclusion. We, however, also find that private-firm export performance has deteriorated relative to that of state-owned firms, casting doubt on the ability of CCBs to end the systematic bias of lending in favor of the state sector.     

ESTIMATION ERROR IN SECTORAL EMPLOYMENT REQUIREMENTS IN THE ABSENCE OF A DOMESTIC COEFFICIENTS MATRIX IN THE INPUT-OUTPUT ANALYSIS

The objective of the paper is to develop various estimation methods for allocating imports according to their end-use and to make use of the derived domestic transactions for the estimation of gross domestic output and employment by sectors. The standard design in the construction of input-output tables is to provide imports of a sector in the form of a column. These imports are not allocated according to their final use and therefore, total intermediate inputs consist of both domestic and imported inputs. The input-output tables for 12 European countries distinguish three types of transactions: (a) domestically produced inputs; (b) imported inputs; and (c) total inputs. We have made use of these tables assuming that the information on import allocation by end-use and domestically produced and imported inputs separately are not available. The allocations of imports are made under various assumptions and a comparison is made of employment based on artificially generated domestic coefficients with employment based on actual coefficients. The sectors are ranked on the basis of both sets of results. In addition, the ratio of indirect to direct employment for the estimators and actual is derived. The sectors are ranked and the rank correlations between alternative estimators and actual are calculated. Although the ratios differ markedly from method to method, the ranks do not alter.     

Trade Liberalization and the Efficiency of Firms in Indian Manufacturing

Has the efficiency of firms in India improved since its liberalization in 1991? The authors attempt to answer this question by analyzing the determinants of firm‐level efficiency in six manufacturing sectors in India while focusing on the effects of liberalization and domestic competition. They find that there was an increase in overall efficiency in the post‐reform period in India in five out of the six sectors. While imports do not seem to improve efficiency, liberalization did increase efficiency in four of the sectors.     

OWNERSHIP AND SECTOR PERFORMANCE IN PRESENT-DAY CHINA: A REGIONAL STUDY

Abstract.  Using the latest provincial data to investigate the different performance of different ownership sectors, we found that there are significant differences in both production technology and the determinants of performance at provincial level between state controlling sectors, collectives, domestic private enterprises, Hong Kong, Macau and Taiwan funded firms and foreign invested firms. Cobb–Douglas functions fit the production technologies of the state-controlled, collective and overseas Chinese funded sector very well. However, the production technologies of the domestic private and foreign funded sector are better represented by translog function. In addition, the determinants of economic performance change substantially from one ownership sector to another.     

Do inter-sectoral flows of services matter for productivity growth? an input/output analysis of OECD countries

This article investigates the impact of technology-intensive services sectors on direct and indirect labour coefficients in a sample of OECD countries. We find that both domestic and imported services contribute to increase productivity. We also find that different service industries (transport, communication, financial, and business services) have a different impact on technological change in non-service sectors classified according to the Pavitt taxonomy.