Estimating local fiscal multipliers using political connections

We use political connections between central and local governments in China to identify the effects of government spending. Our key innovation is using changes of central government ministers as a source of exogenous variation in earmarked transfers received by prefectural city-level governments. The analysis reveals that the increase in earmarked transfers is temporary and local effective tax rates do not respond to such fiscal expansions. Given that using cross-regional analysis for a monetary union can difference out the influence of monetary policy, the fiscal shock we study is a temporary, non-tax financed and no-monetary-policy-response government spending shock. We find the local fiscal multiplier in China is above one and there are no significant spillover effects from local government spending.     

Local Governance: Impacts of Fiscal Decentralization on Government Size and Spending Composition in Vietnam*

The study provides an understanding of the impacts of fiscal decentralization and local governance on government size and spending composition. We use a balanced panel data set of 63 provinces of Vietnam over the 2006–2015 period. By estimating the spatial Durbin model, we find that local public spending and government size grow over time and have spatial spillovers. Fiscal decentralization significantly reduces public spending and government size, which supports the Leviathan hypothesis. More interestingly, combining local governance, the marginal spatial spillover effects of the fiscal decentralization on public spending and government size are intensified. Our findings imply that local governments should enhance interregional collaboration in fiscal management to limit duplicate public spending and promote regional sustainable development.     

Spatial Spillovers from Foreign Direct Investment: Evidence from the Yangtze River Delta in China

This paper examines the spatial externality from foreign direct investment on domestic firms. Using Chinese firm‐level data for 2004, and after accounting for an endogeneity problem, we find that foreign firms generate a significantly positive spillover effect on the regional productivity of domestic firms in similar counties and industries. Estimating a spatial‐autoregressive model, we further show that such local spillovers could transmit to domestic firms in other counties and industries through interactions among domestic firms. However, these spatial multiplier effects decline with distance, thereby reducing the foreign direct investment spillover effects for domestic firms in distant locations.     

Local fiscal multipliers and population aging in Japan

This study examines how the effectiveness of fiscal policy depends on population aging. To this end, this study estimates the local fiscal multipliers in Japan. Results suggest that the estimated local fiscal multiplier on output is larger in non-aged areas than aged areas, and that the effects on the number of workers are not statistically significant in either area type. Additionally, the multipliers on private investment are only higher than one in non-aged prefectures. Results also indicate that the multiplier generated by an increase in government investment is larger than that in government consumption. These results indicate fewer slack resources in aged areas that can be mobilized in response to increased government spending.     

地方财政支出对全要素生产率的空间溢出效应分析———基于空间面板 Durbin 模型

我国各地经济发展水平、产业结构以及劳动力市场特征不同,使得地方财政支出的结构和重点也有差异,但地区间财政支出的空间溢出效应对经济增长的影响不容忽视。本文选取中国31个省市2006年-2011年的面板数据,采用空间面板Durbin模型,从地理权重和经济权重两个方面研究地方财政支出对周边地区全要素生产率及其分解项的空间溢出效应。结果表明,预算内财政支出对周围省市具有正向外溢性;预算外财政支出对周围地区的技术效率变化具有负向外溢性。     

Provincial Output Spillovers in China： Global Vector Autoregressive Approach

The paper uses a global vector autoregressive model to examine provincial output spillover effects in China. We find that there are effective output spillovers from Guangdong, Liaoning and Zhejiang to other provinces in China, but trivial effects from Shanghai, Shandong, Sichuan and Xinjiang, and negative effects from Beijing. Foreign direct investment (FDI) in Guangdong and Liaoning is the main channel for creating provincial output spillovers, compared with domestic investment and exports. However, FDI spillovers tend to decrease, with spillovers from exports and domestic investment rising over time, so that the spillover effects in Guangdong and Liaoning are non‐persistent and highly volatile. Other channels of output spillover, such as domestic investment, should be enhanced. Impacts of shock from government expenditure on GDP vary significantly across time and provinces; inland and western provinces are most negatively affected. The heterogeneous spillover structure shows that regional policies might achieve better results than nationwide policies in reducing regional disparity.     

Spatial spillovers of regional wages: Evidence from Chinese provinces

This study investigates the effects of spatial interactions on local wages based on a panel data from 31 Chinese provinces between 2001 and 2010. Using the Global Moran's I statistic, we provide empirical evidence for the presence of spatial dependencies in provincial wages. Then, we estimate the provincial wage equation using a spatial panel model that controls for spatial heterogeneity and spatial interdependence as well as other regional characteristics. The empirical results show that spatial wage spillover plays an important role in the determination of local wages. Furthermore, we find that human capital and economic growth are two underlying forces strengthening wage spillovers across provinces.     

The Effects of Fiscal Policy in a Small Open Economy with a Fixed Exchange Rate

We study the empirical effects of fiscal policy in Denmark since the adoption of a fixed exchange rate policy in 1982. Denmark’s fixed exchange rate implies that the nominal interest rate remains fixed after a fiscal expansion, facilitating a substantial impact of the fiscal stimulus on the real economy. On the other hand, the large degree of openness of the Danish economy means that a sizeable share of the fiscal stimulus will be directed towards imported goods. Our results suggest that the ‘monetary accomodation channel’ dominates the ‘leakage effect’ in the short run. We demonstrate that fiscal stimulus has a rather large impact on economic activity in the very short run, with a government spending multiplier of 1.1 on impact in our preferred specification. We also find that the effects of fiscal stimulus are rather short-lived in Denmark, with the effect on output becoming insignificant after around two years. The fiscal multiplier is above 1 only in the first quarter, and drops to 0.6 one year after the shock. We also find that in the short run, the government spending multiplier is larger than the tax multiplier. Finally, we demonstrate that exogenous shocks to government spending account for less than 10 % of the movements in output over the business cycle in Denmark.     

Technology spillovers from Chinese outward direct investment: The case of Ethiopia

The present study uses firm survey data of 1033 manufacturing firms operating in Ethiopia in 2011 to examine the impact of Chinese outbound direct investment on the productivity of domestic firms. Particularly, we attempt to answer two questions. Firstly, are Chinese-owned (henceforth foreign) firms more productive than local ones? Secondly, does the presence of foreign firms generate technology spillovers on domestic firms operating in the same industry? Our empirical results show that foreign firms are more productive and that their presence has different spillover effects on the productivity of domestic firms. In particular, we find that domestic firms with higher absorptive capacity experience positive spillovers, while those with low absorptive capacity witness negative spillover. We also find that small firms and non-exporting firms benefit more from spillovers than do other types of domestic firms. In this study, instrumental variables are used to address the potential endogeneity between foreign firm presence and domestic firm productivity.     

China＇s Sustained Economic Growth： Do Direct R＆D Spillovers Matter？

Using data from 1986-2005, the present paper estimates the impact of direct knowledge spilled over from G-7 countries on China＇s economy. We use telephone line penetration rates andpersonnel flows to estimate the direct spillover effect. Our results show that direct knowledge spillovers through telecommunication networks and personnelflows are important components of international R＆D spillovers in China. These direct channels of spillover effectively accelerate China＇s economic growth. Therefore, China should invest more in human capital and in its telecommunication network to enhance the absorptive capacity of direct R＆D spillovers, and to increase communication with other nations, in particular the USA and Japan. More subsidies to domestic R＆D research and purchase of intermediate goods will help to raise China＇s R＆D intensity.     

Sibling spillovers in rural China: A story of sisters

We study sibling spillover effects on the school performance of the elder sibling from the younger sibling using data on multi-children households in rural China. Using a cumulative measure of expected lawful years in school as an instrumental variable, we find a significant increase in school test scores for Chinese language of elder siblings for every year of schooling of the younger sibling. The strongest spillover effects occur when the younger sibling is a girl. Such increases in test scores come from a more intense academic atmosphere within a household when both children enroll in school and are not attributed to differential parental education investments or time inputs. Our findings suggest that policies promoting girls’ education, pre-elementary school age education programs, and after school public resources can have multiplier effects through sibling spillovers.     

财政分权、空间外溢与区域经济增长

分税制改革以后,税收体系被划分为中央与地方两大部分,正式建立起以分税制为中心的财政分权体制。各地区的财政分权程度不仅对本地经济增长有直接影响,还对其他地区的经济增长有间接影响,即存在空间溢出效应。利用我国2005年至2018年31个省（市、自治区）的面板数据,运用空间面板模型,估计和检验财政分权对经济增长的空间效应。研究结果表明：各地区的财政分权不仅促进本地经济增长,还对其他地区的经济增长有显著正向溢出效应。     

FDI行业间溢出与省区产业增长

基于2003-2008年中国省区工业细分产业数据,本文考察了FDI对内资产业增长率的影响。在控制了省区和行业的固定效应及产业间动态外部性的影响后,我们发现FDI对内资产业增长率具有显著的行业间溢出效应。但是所有制和地区的差别导致对溢出吸收效果的不同,非国有企业可以全面地吸收外资的行业间溢出;而国有企业不能利用FDI后向溢出促进自身发展。在直辖市和西藏以外的地区,FDI对国有企业的前向溢出甚至都不再显著。     

地方政府财政支出政策效果差异化分析——基于四川省面板数据

基于四川省1995—2006年面板数据,利用工具变量评估财政支出乘数模型并借鉴分位数模型思想,发现财政支出政策不利于缩小区域内经济发展差距,即对于经济发展水平越高的地方,财政支出效果越好,原因在于其资本利用能力,即财政支出对投资的溢出效应,造成第二产业增长幅度不同,最终呈现出财政支出效果不同.认识这一点对于在经济处于新常态背景下,有利于优化开发财政产业政策的作用空间.     

The origin of FDI and domestic firms’ productivity—Evidence from Vietnam

This study examines how the origin of foreign investors affects the degree of horizontal and vertical technological spillovers, using firm-level panel data from Vietnam in 2002–2011. The results show a positive association between the presence of Asian firms in downstream sectors and the productivity of Vietnamese firms in supply industries, but no significant relationship in the case of European and North American affiliates. Within Asia, we find that foreign direct investment from China and Taiwan generates positive vertical spillovers to local suppliers. We hypothesize that distance, preferential trade agreements, and institutional or technological differences that affect the degree of local sourcing significantly impact vertical spillovers from foreign direct investment. The horizontal spillover effects are in general negative and statistically significant. Various robustness checks are performed.     

Cross-category spillover effects of economic policy uncertainty between China and the US: Time and frequency evidence

This study investigates the connectedness among three types of economic policy uncertainties, namely monetary, fiscal, and trade uncertainties, between China and the US. We used the spillover index measurement and the frequency-domain decomposition approach to detect the spillover effects of these categorical uncertainties from both the time- and frequency-domain perspectives. The results suggest that the spillover effects have time-varying characteristics, and some major events could sharply increase the spillover indices. More spillovers are mainly observed in the short-term, whereas the impacts of the medium- and long-term are limited. Furthermore, the leader of the spillover is monetary policy in China, but fiscal policy in the US, the spillovers of all uncertainties mainly exist domestically, apart from the US trade policy uncertainty. These results provide crucial implications for policymakers and investors, who should pay more attention to short-term spillovers and monetary policy uncertainty, which can mitigate their vulnerability to policy uncertainty shocks.     

Is Exporting a Source of Productivity Spillovers?

This paper investigates whether exporting generates positive productivity spillover effects on other plants in the same industry and on plants in vertically related industries. Using data for Chilean manufacturing plants from 1990 to 1999, we find strong evidence that domestic as well as foreign-owned exporting plants improve productivity of local suppliers. We also find some evidence of horizontal spillovers from exporting but these are mainly generated by plants with foreign ownership. These results suggest that positive productivity spillovers are not only generated by the presence of foreign-owned exporting plants but also by exporting activity of domestic firms. The results are robust to controls for agglomeration of economic activity, the importance of non-exporting foreign-owned plants, and plant unobserved heterogeneity. JEL no.  F10, F23, O3, O54     

市场是否可以换来技术进步？——来自广东省工业部门面板数据的实证分析

本文首先构建了一个考虑FDI的中间产品质量提高型内生经济增长模型，然后运用Panel Data计量方法对广东1997～2002年39个工业行业的数据对理论模型进行了实证检验，检验结果表明：FDI对广东省内资工业部门有正向的技术外溢效应，但效应有限；而负向的竞争效应和人力资本流动效应却大大超过了正向的技术外溢效应。另外对不同所有制结构的企业研究还表明，改制后的国有企业是外资外溢效应的最大受益者。最后是相应的政策建议。     

FDI productivity spillovers and the technology gap in Malaysia's electrical and electronic industries

This study measures the impact of indirect technology transfer through spillovers from foreign direct investment (FDI) on Malaysia's development of a ‘high‐tech’ sector, namely the electrical and electronic (E&E) industries. We estimate the total factor productivity (TFP) of establishments as a function of foreign presence within and across industries. Both the fixed assets and wages share of foreign establishments in a five‐digit ISIC (International Standard Industrial Classification) industry are used as measures of foreign presence. The estimations provide evidence of significantly negative (or insignificant) FDI vertical spillover effects and insignificant horizontal spillover effects on the TFP of domestic establishments. The positive (negative) coefficient of the interaction term between the forward (horizontal) spillover variable and the technology gap supports the ‘catching‐up’ (technology accumulation) hypothesis. The negative impact, even absence, of FDI spillover effects on TFP and the mixed evidence on the effects of interactions between FDI spillovers and the technology gap suggest that fine‐tuning of fiscal incentive schemes for FDI to arrive at positive net benefits may prove to be a daunting task in the Malaysian E&E industries.     

The local economic impact of construction projects in a small and relatively self-contained economy: The case of Lancaster University

Whilst the local multiplier impacts of the annual operation of universities has been the subject of intensive research, the economic impacts of capital construction projects have been almost completely ignored. This paper presents the results of detailed analysis of capital projects at Lancaster University in 1993-The reasons for the radically different annual operation and construction multipliers estimated in the Lancaster study are examined. Despite the smaller size of construction multipliers it is argued that it is a serious mistake to estimate local construction multipliers by making simplifying assumptions on the size of the key parameters in the multiplier equations.